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PRESCRIBES THE GUIDELINES IN THE CLAIM OF INPUT VAT ON PURCHASES OR IMPORTATIONS OF CAPITAL GOODS PURSUANT TO SECTION 110 OF THE TAX CODE, AS AMENDED BY RA NO. 10963 (TRAIN LAW)

PRESCRIBES THE GUIDELINES IN THE CLAIM OF INPUT VAT ON PURCHASES OR IMPORTATIONS OF CAPITAL GOODS PURSUANT TO SECTION 110 OF THE TAX CODE, AS AMENDED BY RA NO. 10963 (TRAIN LAW) (Revenue Memorandum Circular No. 21-2022, February 21, 2022)

  • Claim of Input VAT on Purchases or Importations of Capital Goods pursuant to Section 110 of the National Internal Revenue Code of 1997 (“Tax Code”), as amended by Republic Act No. 10963, otherwise known as the “Tax Reform for Acceleration or Inclusion (“TRAIN”) Law (RMC No. 21-2022)
  •  In line with Sec. 35 of the TRAIN Law, amending certain provisions of Section 110 of the Tax Code, and as implemented under Sec. 4-110-3(c) of Revenue Regulation (“RR”) No. 13-2018, which reads:

 

“SEC. 110. Tax Credits. –

 

“A. Creditable Input Tax –

“(1) xxx

“(2) xxx

“(a) xxx

“(b) xxx

 

“Provided, that the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (P1,000,000): Provided, however, that if the estimated useful life of the capital good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, further, that the amortization of the input VAT shall only be allowed until December 31, 2021 after which taxpayers with unutilized input VAT on capital goods purchased or imported shall be allowed to apply the same as scheduled until fully utilized: Provided, finally, that in the case of purchases of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee, or licensee upon payment of the compensation, rental, royalty or fee.”

  • Thus, the following work-around procedures and guidelines are prescribed while the BIR Form Nos. 2550Q and 2550M pertaining to Quarterly Value-Added Tax (“VAT”) Declaration and Monthly VAT Declaration, respectively, are undergoing revisions to effect the above-cited provisions:

 

BIR FORM NO. Affected Fields Description Remarks
2550M Schedule 3(A) Purchases/Importation of Capital Goods (Aggregate Amount exceeds P1 Million) Instead of the actual useful life in terms of months, place number “1” under columns “E” and “F” and encode the input tax claimed from purchase/s of capital goods exceeding P1M in Column “G”
2550Q Schedule 3(A) Purchases/Importation of Capital Goods (Aggregate Amount exceeds P1 Million) Instead of the actual useful life in terms of months, place number “1” under columns “E” and “F” and encode the input tax claimed from purchase/s of capital goods exceeding P1M in Column “G”

 

  • Under EFPS and eBIR Forms, the balance of input tax to be carried to the succeeding period is computed automatically by the system. Hence, for purposes of implementing the provisions in the Tax Code, effective January 1, 2022 all input tax on purchases of capital goods shall already be allowed upon purchase/payment, and shall no longer be deferred, the taxpayer shall indicate Roman numeral “1” as the estimated useful and recognized useful life and encode the total input taxes claimed from purchase/s of capital goods exceeding P1M under column “G” in order to show a nil amount of “Balance of Input Tax to be Carried to Next Period” under column “H” of the monthly and quarterly VAT returns.

Moreover, taxpayers with unutilized input VAT on capital goods purchased or imported prior to January 1, 2022 shall be allowed to amortize the same as scheduled until fully utilized. Hence, Schedule 3(B) shall still be filled out. However, if the depreciable capital good is sold/transferred within the period of five (5) years or prior to the exhaustion of the amortizable input tax thereon, the entire unamortized input tax on the capital goods sold/transferred can be claimed as input tax credit during the month/quarter when the sale or transfer was made.

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GUIDANCE ON THE FILING OF REQUEST FOR CONFIRMATION, TAX TREATY RELIEF APPLICATIONS AND TAX SPARING APPLICATIONS

GUIDANCE ON THE FILING OF REQUEST FOR CONFIRMATION, TAX TREATY RELIEF APPLICATIONS AND TAX SPARING APPLICATIONS (Revenue Memorandum Circular No. 20-2022, February 17, 2022)

  • Taxpayers already issued with Certificate of Entitlement to Treaty Benefit (“COE”), with the tenor thereof allowing the ruling to be applied to subsequent or future income payments, shall no longer need to file a Request for Confirmation (“RFC”) or Tax Treaty Relief Application (“TTRA”) every time an income of a similar nature is paid to the same non-resident.
  • In applying the confirmed treaty benefit to future income payments, the income payor or withholding agent shall always be guided by the requisites mentioned in the COE. Thus, if the COE mentions tax residency as a requisite for continuous enjoyment of the treaty benefit, the income payor must require the non-resident to submit first a Tax Residency Certificate (“TRC”) for such relevant year before making any payments.
  • The same rule applies to the Certificate of Entitlement to the Reduced Dividend Rate for tax sparing applications.
  • A new RFC, TTRA or tax sparing application shall only be filed if any of the requisites mentioned in the certificate is absent.
  • During tax audits, the income payor shall submit or present a copy of the duly issued COE and proof of satisfaction of the requisites cited therein.
  • Regular Filing of RFCs and TTRAs
    • For business profits, income from services, capital gains, income derived by teachers, and such other income from non-recurring transactions, the RFCs or TTRAs shall still be filed following the procedures and requirements under RMO No. 14-2021, as amended by RMC No. 77-2021
    • For the annual updating of long-term contract of services, taxpayer shall only submit the following:
      • TRC of the non-resident for the relevant year;
      • Sworn Certification stating services provided by the foreign enterprise, place of performance of such services, individuals who rendered the services on behalf of the foreign enterprise (positions, designations, and professional background), duration of stay in the Philippines.
      • Certified true copy of their passports or a certification duly issued by the Bureau of Immigration stating their dates of arrival and departure from the Philippines;
      • Certificate of Completion of the project duly signed by the income recipient and duly accepted by the domestic income payor, if applicable;
      • Invoice(s) duly issued by the income recipient in accordance with the invoicing requirements of the country of residence, if applicable; and

Bank documents/certificate of deposit/telegraphic transfer/telex/money transfer evidencing the payment/remittance of income, if applicable.

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TAX UPDATE (02/03/2022)

BIR RULINGS

    • To be classified as capital assets for taxation purposes 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. Also, if the property is merely held for capital appreciation and investment purposes and remains vacant and idle, it is deemed a capital asset.
      • 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. VAT-334-2021, September 23, 2021).
    • The transfer of the legal title of the shares from the former trustee-appointee to the new trustee-appointee, is not subject to capital gains tax (CGT) considering that the transfer involves neither monetary consideration nor change in beneficial ownership.
      • Furthermore, if there is no transfer or conveyance to the new trustee of the beneficial ownership of or any right, claim or interest over the share or over the assets, transfers cannot be subject to documentary stamp tax and shall not be subject to donor’s tax. (BIR Ruling No. OT-467-2021, December 14, 2021).
    • A foreign corporation, whether or not engaged in trade or business in the Philippines, is subject to income tax only with respect to income derived from sources in the Philippines. With respect to value-added tax (VAT), payments for the sale or exchange of services, including the use or lease of properties are subject to VAT only if the services are performed in the Philippines.
      • Thus, where if a foreign corporation enters a maintenance agreement with the Philippine entity where despite the computer system is located in Manila, the maintenance and repair of the system are to be performed abroad using internet-based remote computer repair technology and no services will be performed in the Philippines and no personnel will be sent herein, the service fees are exempt from income tax and VAT. (BIR Ruling No. OT-340-2021, September 28, 2021).
    • The value of the gross estate of the decedent shall be determined by including the value at the time of his death all properties to the extent of any interest therein.
      • If the decedent prior to his death relinquished his right over ownership over his inheritance, the property shall no longer be included in the gross estate.
    • In order to support the claim that the decedent died without an heir, an affidavit to this effect must also be submitted.
    • A Certificate Authorizing Registration is not a proof of ownership that only a proof that taxes have been paid. (BIR Ruling No. OT-034-2021, September 30, 2021)
    • A non-stock and non-profit residential homeowner association duly registered with the Housing and Land Use Regulatory Board and performs the delivery of basic community services, the income derived from association dues, membership fees, other assessments and charges collected in a purely reimbursement basis and rentals of facilities is exempt from income tax, VAT or percentage tax, whichever is applicable. Provided that such income and dues shall be used for the cleanliness, safety, security and other basic services needed by the members, including the maintenance of the facilities of their respective subdivisions or villages.
      • However, it shall be subject to the applicable internal revenue taxes on its other income from trade, business or other activities. (BIR Ruling No. OT-344-2021, October 04, 2021).
    •  The retirement benefits to be received by a qualified employee-member of the Plan shall continue to be exempt from income tax provided:
      • Employee has been in the service of the same employer for at least 10 years; and
      • 50 years old at the time of retirement.
      • Income of the Plan’s fund from its investments shall continue to be exempt from income tax and withholding tax, provided:
        • Contributions are made to the trust by such employer, or employees, or both, for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan;
        • If under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of employees;
      • Provided further: any amount actually distributed to any employee or distributee shall be taxable to him in the year in which so distributed to the extent that exceeds the amount contributed by such employee.
      • The contributions of Participating Companies to the retirement fund are deductible from the Participating Companies’ gross income, and shall continue to qualify through all the years that it shall be in operation, provided that any modification or amendment in the Retirement Plan Rules and Regulations should be submitted to the BIR for certification that such modification or amendment does not affect the qualification of the Plan.
      • However, portions of the fund of the Plan in excess of the amount actuarially determined to cover the benefits of the covered employees may be reverted to the company without terminating the Plan but the same shall be declared as income and applicable taxes thereon shall be paid (BIR Ruling No. OT-450-2021, December 9, 2021; OT-480-2021, December 24, 2021).
    • A tax assumption mechanism expressed through an Exchange of Notes between the Republic of the Philippines and the Government of Japan, is binding through executive action without need of a vote by the Senate or Congress.
      • Marubeni Corporation, a non-resident foreign corporation that is licensed to do business in the Philippines entered into a Consortium Agreement (“UC”) with D.M. Consunji, Inc. (“DMCI”) for the limited purpose of submitting a tender to the Department of Transportation (“DOTr”), to perform the contract relating to the Exchange of Notes between the Philippines and Japan for the improvement of “Mass Transit Systems in Metro Manila”.
      • UC, after having been awarded the Project, sought confirmation from the BIR of its tax liabilities in view of the tax assumption mechanism expressed under the Exchange of Notes. Accordingly, the BIR ruled:
      • UC, having been formed solely for the purpose of bidding and implementing the Project, is subject to corporate income tax, through the UC members, provided that the lead partner is Marubeni and that its share of work is more than 50% of the contract amount. However, pursuant to the Exchange of Notes, the said income tax on the Japanese company shall be assumed by DOTr;
      • By reason of such tax assumption scheme, the UC, through its members, is still required to file quarterly and annual income tax returns with the BIR;
      • On the VAT aspect of the project, pursuant to the case of Mitsubishi Corporation – Manila Branch v. Commissioner of Internal Revenue, and Revenue Memorandum Circular No. 8-2017, the VAT-registered suppliers and sub-contractors of the UC shall bill and pass on 12% VAT to the UC, which in turn, will include in its billing and pass on to DOTr. The Japanese contractors shall file the prescribed VAT returns on gross receipts derived from the project, claim its input taxes from its purchases of goods, properties, and services, and shall pay the output tax thereon, after offsetting the creditable or allowable input taxes, considering that the amount intended for the payment of the VAT has already been collected and received by UC from DOTr.
      • As the importer, the DOTr shall be liable for the 12% VAT on the importation of materials and equipment under Section 107(A) of the Tax Code, as amended.
      • The Japanese personnel employed by the UC and its Japanese contractors performing work in the Philippines are required to file income tax returns but the DOTr shall assume payment of the taxes due thereunder. Accordingly, the said Japanese personnel are not subject to withholding tax on compensation under Section 57 of the Tax Code, as amended, pursuant to the tax assumption provisions under the Exchange of Notes and the Mitsubishi case.
      • In connection with the tax assumption scheme and pursuant to the Exchange of Notes, the Government of the Philippines or its executing agency (i.e. DOTr) shall be responsible for the liquidation or settlement of such fiscal levies, duties, taxes, and other similar charges. (BIR Ruling No. OT-471-2021, December 21, 2021)
    • Merger of Wawona Holdings, Inc. (“WHI”) as the absorbed corporation, and Abaya Investments Corporation (“AIC”) as the surviving corporation, qualifies as a tax-free merger under Section 40(C)(2) of the National Internal Revenue Code of 1997 (“NIRC”), as amended.
      • Because the acquisition and assumption by AIC of all the assets and liabilities of WHI will result in specific benefits to both corporations, such as but not limited to increased financial strength through pooling of resources, a more diversified and stable capital base, increased operating economies and efficiencies, and reduction of overall business expenses, the merger is being undertaken for a bona fide business purpose.
      • The transaction is also not subject to donor’s tax as there is no intention on the part of any of the parties to donate since the transaction is purely for a legitimate business purpose.
      • Also, the transfer of properties as a consequence of the merger shall not be subject to any output tax, pursuant to Section 4.106-8(b)(3) of Revenue Regulations (“RR”) No. 16-2005, as amended by RR No. 4-2007, and as further amended by RR No. 10-2011, since the conveyance of the property to effectuate the merger is not made in the course of business but by operation of law.
      • The excess and unexpired Minimum Corporate Income Tax (“MCIT”) of the absorbed corporation shall be carried forward and credited against the normal income tax due of the surviving corporation for the three (3) years immediately succeeding taxable years pursuant to Section 27(E)(2) of the NIRC, as amended. Also, any excess and unutilized creditable withholding taxes (“CWT”), if any, which form part of the assets to be transferred may be utilized by the surviving corporation against its income tax liabilities for the succeeding years or may be the subject of claim for refund or issuance of a tax credit certificate.
      • However, net operating loss carry-over (“NOLCO”) is not one of the assets that can be transferred and absorbed.
      • Lastly, in order for the above transaction to be considered as a merger under Section 40 (C)(2) and (6)(b) of the NIRC, as amended, the parties to the merger should, among others, comply with the requirements set forth under RR No. 18-2001 (BIR Ruling No. OT-474-2021, December 22, 2021)
    • Transfer or conveyance of real properties representing the common areas of the condominium corporation, without consideration, does not generate taxable income, and therefore, not subject to Capital Gains Tax or creditable withholding tax.
      • The purpose of the conveyance is for the management of the project for the common benefit of the unit owners.
      • It is also exempt from imposition of documentary stamp tax based on Sec. 185 of Regulation No. 26, otherwise known as the Revised Documentary Stamp Tax Regulations, which provides that “conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable.” (BIR Ruling No. OT-483-2021, December 23, 2021)
    • The transfer of subdivided lots in favor of the qualifies socialized housing member-beneficiaries is not subject to either the capital gains tax imposed under Section 27(D)(5) of the National Internal Revenue Code (Tax Code) of 1997, as amended, or the creditable withholding tax (“CWT”) imposed under Revenue Regulations (“RR”) No. 2-98, as amended, considering that the transfer is only a formality to finally effect the transfer of the subject property to its member-beneficiaries who actually bought the same from the form owner through the association. In other words, the association is merely transferring the ownership of the property to its member-beneficiaries who actually own the same.
      • Moreover, the said transfer is not subject to the donor’s tax imposed under Section 99 of the Tax Code of 1997, as amended, since there is no donative intent on the part of the association to donate the property to its member-beneficiaries, considering that it could not donate property the ownership of which already belongs to the members-beneficiaries themselves.
      • Also, the deeds or documents covering the transfer of the subdivided lots in favor of the beneficiaries is not subject to documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling Nos. OT-381-2021 and OT-484-2021, December 24, 2021)
    • The tax exemption under Republic Act No. 7459, otherwise known as the “Inventors and Inventions Incentives Act of the Philippines” is only for the exclusive benefit of the inventor and not for any other entity that commercially produces and distributes the invented product.
      • Any income received by the company from such production/distribution/marketing is subject to the payment of appropriate taxes.
      • Moreover, the inventor is still subject to the following taxes:
      • 20% final withholding taxes on interest from currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements and 15% percent final withholding tax on interest from foreign currency deposit;
      • Capital gains tax on sale of shares of stock prescribed under Section 24(c) of the National Internal Revenue Code of 1997, as amended;
      • Capital gains tax on sale of property prescribed under Section 24(D) of the National Internal Revenue Code of 1997, as amended;
      • Income tax on income not arising from the inventor’s productive activity such as interest, royalties, prizes, winnings and dividends;
      • Value-Added Tax (“VAT”) on the gross receipts/revenues derived from the sale of the said invention products, and also VAT for which the inventor is not directly liable, e.g. VAT on his purchases of raw materials, supplies, and equipment/machinery, which may be shifted to him as part of the cost of goods sold or for services rendered; and
      • Other percentage taxes under Title V of the National Internal Revenue Code of 1997, as amended;
      • Excise taxes directly payable in connection with the sale of invention products; and
      • Documentary Stamp Tax on documents, instruments and papers. (BIR Ruling No. OT-485-2021, December 24, 2021, OT-486-2021, December 21, 2021)
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PERSONS ON WHOSE BEHALF THE CORPORATION IS REGISTERED, NOMINATORS/PRINCIPALS OF THE NOMINEE INCORPORATORS/FIRST DIRECTORS/TRUSTEES AND SHAREHOLDERS APPLYING FOR REGISTRATION MUST BE DISCLOSED TO THE SEC.

  • The SEC prescribes guidelines in Preventing the Misuse of Corporations for Illicit Activities through Measures Designed to Promote Transparency of Beneficial Ownership.
  • The SEC provides among others:
    • Issuance, sale or offer of bearer shares and bearer share warrants are prohibited.
    • Sale/transfer of shares of stock shall be disclosed and recorded in the Stock and Transfer Book of the issuing corporation within 30 days from the date of sale/transfer. Unless disclosed and recorded, the sale/transfer shall not be effective and binding on the issuer.
      • Exempt in this transaction are sales/transfers of shares of publicly listed companies through Philippine Stock Exchange but beneficial ownership information in the GIS shall remain to be disclosed.
    • Dividends shall be paid when the name of the stockholders appears in the records of the corporation as the owner of the shares of stock for which dividends are being paid.
      • Exempt in this transaction are dividend payments made by publicly listed companies to the PCD Nominee or similar entity authorized to act as depository and custodian of shares
    • Incorporators must disclose the person/s on whose behalf the registration of the corporation was applied for. Timeline: 30 days from the issuance of the company’s SEC registration.
      • Nominee incorporators or applicants for registration, as well as the nominee directors/trustees and nominee shareholders of the applicant corporation shall disclose to the SEC their respective principals or nominators. Otherwise, they shall submit to the SEC a declaration within the same period that they are not nominee incorporators/ nominee applicants/ nominee directors/ nominee subscribers, if such is the fact, and that they are not acting as such for and on behalf of another person.
      • Requirement is not applicable to PCD Nominee
    • Nominee’s period to submit disclosure statement:
      • Those became nominees before the effectivity of this Circular: 30 days from the effectivity.
      • Those became nominees on or after the effectivity of the Circular: 30 days from the time they assumed the role/started acting as nominee.
    • Exemption from Disclosure Requirements:
      • Covered institutions under Section 3(A) of the AMLA
      • SEC MC No. 16, series of 2018
      • Scope of exemption: nominee arrangements on products and services
    • Manner of submission: Online – in such form and manner as the Commission deems practicable.
      • The SEC shall:
        • Electronically acknowledge receipt of the disclosure;
        • Provide access to AMLC;
        • Maintain updated database
        • Not upload the information to the SEC’s accessible database but will be readily available upon request by the authorities.
      • Corporations must keep and preserve in its principal office the information relating to the beneficial owner.
      • Penalty ranges from P5,000 to P2,000,000, suspension or revocation of the certificate of incorporation, other penalties which the SEC may impose, including filing of criminal charges.
      • For your easy reference, the Circular may be accessed HERE. (SEC Memorandum Circular No. 1, 27 January 2021).

 

OFFER TO PUBLIC OF FRANCHISE PARTNERSHIP PROGRAM PARTAKES OF THE NATURE OF SECURITIES IN THE FORM OF INVESTMENT CONTRACT. (EIPD-2020-0073, 08 January 2021).

 

CEBU SATELLITE OFFICE IS NOW OPEN. For your easy reference, the Notice may be accessed HERE. (SEC Notice, 02 February 2021).

 

BUREAU OF INTERNAL REVENUE

 

BIR DEADLINES FROM FEBRUARY 8 TO 14, 2021 . A gentle reminder on the following deadlines, as may be applicable:

 

DATE FILING/SUBMISSION
 

February 8, 2021

 · Submission of All Transcript Sheets of ORBs used by Dealers of Automobiles/Manufacturers/Toll Manufacturers/Assemblers/Importers of Alcohol Products, Tobacco Products, Petroleum Products, Non-Essential Goods, Sweetened Beverage Products, Mineral Products & Automobiles – Month of January 2021

· E-Submission of Monthly e-Sales Report of All Taxpayers using CRM/POS with TIN ending in Even Number – Month of January 2021
 

February 10, 2021

 Submission of the following (For the Month of January 2021)· Transcript Sheets of 2222-ORB

· List of Buyers of Sugar Together with a Copy of Certificate of Advance Payment of VAT Made by Each Buyer appearing in the List by a Sugar Cooperative

· Information Return on Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill

· Monthly Report of DST Collection and Remitted by the Government Agency

E-submission – Monthly e-Sales Report of All Taxpayers using CRM/POS with TIN ending in Odd Number

E-FILING/FILING & e-PAYMENT/PAYMENT (For the month of January 2021)

· 1600 (VT/PT Withheld) and Monthly Alphalist of Payees (MAP) – eFPS & Non-eFPS Filers

· 1606 – Withholding Tax Remittance Return For Onerous Transfer of Real Property Other Than Capital Asset (including Taxable and Exempt)

· 0620 (Monthly Remittance Form of Tax Withheld on the Amount withdrawn from the Decedent’s Deposit Account) – eFPS & Non-eFPS Filers

e-FILING & e-PAYMENT/REMITTANCE – Month of January 2021

· 1600 (VT/PT Withheld) and 1601-C National Government Agencies (NGAs)

· FILING & PAYMENT Month of January 2021

· 1601-C, 0619-E and 0619-F – Non-eFPS Filers

· 2200-C (Excise Tax Return for Cosmetic Procedures) with Monthly Summary of Cosmetic Procedures Performed

FILING & PAYMENT/REMITTANCE – Month of January 2021

· 2200-M Excise Tax Return for the Amount of Excise Taxes Collected from Payment Made to Sellers of Metallic Minerals

 
 

February 11, 2021

 · E-FILING of 1601-C, 0619-E and 0619-F – eFPS Filers under Group E for the Month of January 2021
 

February 12, 2021

 · E-FILING of 1601-C, 0619-E and 0619-F – eFPS Filers under Group D for the Month of January 2021
February 13, 2021 · E-FILING of 1601-C, 0619-E and 0619-F – eFPS Filers under Group C for the Month of January 2021
February 14, 2021 · E-FILING of 1601-C, 0619-E and 0619-F – eFPS Filers under Group B for the Month of January 2021

 

THE BIR ANNOUNCES THE AVAILABILITY OF THE BIR MOBILE TAXPAYER IDENTIFICATION NUMBER VERIFIER APPLICATION.

  • The BIR Mobile TIN Verifier App is a service channel for taxpayers to send online TIN validation and TIN inquiry using their mobile phones with real-time response from the concerned BIR Office.
  • However, acceptance of walk-in taxpayers to get the service shall still be available in all RDOs to serve our taxpayers with no access to the said mobile service.
  • For your easy reference, the Circular may be accessed HERE. (Revenue Memorandum Circular No. 13-2021, 27 January 2021).

 

VAT REFUNDS FILED ON OR AFTER JANUARY 19, 2021 SHALL BE PROCESSED PURSUANT TO REVENUE MEMORANDUM ORDER NO. 47-2020.

  • The BIR clarifies the effectivity date of Revenue Memorandum Order No. 47-2020 which imposed new documentary requirements for the processing of VAT Refund Claims pursuant to Section 112 of the Tax Code of 1997, as amended.
  • It clarifies:
    • VAT refund claims filed prior to January 19, 2021 shall be filed and processed following the guidelines and procedures set forth in Revenue Memorandum Circular No.47-2019 and RMO No. 25-2019; and
    • VAT refund claims filed on or after January 19, 2021, the effectivity date of RMO No. 47-2020, shall be filed and processed in accordance with the guidelines and procedures indicated thereto.
  • For your easy reference the issuance may be accessed HERE. (Revenue Memorandum Circular No. 14-2021, 27 January 2021).

 

THE BIR ANNOUNCES THE AVAILABILITY OF CENTRAL BUSINESS PORTAL (CBP)

  • CBP is an online system which serves a a central system to receive applications and captures application data involving business-related transactions from difference government agencies (SEC, BIR, SSS, PhilHealth, and Pag-Ibig)
  • Features:
    • Registration of Corporations with SEC  and issuance of the corresponding Company Registration Number
    • Issuance of Tax Identification Number of new corporations
    • Identification of the national internal revenue taxes which the new corporation will be liable to
    • Payment of the Annual Registration Fee of P500 and Loose Documentary Stamp Tax of P30 through the ePayment facilities or manually at the Revenue District office
    • Generation of BIR electronic Certificate of Registration (COR). The electronic COR bears a QR Code that serves as a security feature to prove authenticity of the COR
      • After securing the BIR electronic COR through CBP. The taxpayer shall proceed to the RDO indicated in the electronic COR, to buy its BIR Printed Receipts/Invoices in order to start its business operation immediately after its registration. Otherwise, it may apply for Authority to Print its own receipts/invoices to be printed by the BIR Accredited Printers
    • For its initial implementation, the CBP shall be available to the following domestic corporations:
      • Corporations with 2 to 4 incorporators
      • Regular corporations whose incorporators are juridical entities and/or the capital structure is not covered by 25%-25% rule; and
      • One Person Corporation.
    • For your easy reference, the issuance may be accessed HERE. (Revenue Memorandum Circular No. 15-2021, 27 January 2021).

 

THE BIR EXTENDS THE DEADLINE FROM JANUARY 31, 2021 TO FEBRUARY 28, 2021 OF THE FILING OF BIR NOS. 1604-C AND 1604-F INCLUDING 4TH QUARTER AND ANNUAL ALPHABETICAL LIST OF EMPLOYEES/PAYEES FROM WHOM TAXES WERE WITHHELD (ALPHALIST) USING THE ALPHALIST DATA ENTRY AND VALIDATION MODULE VERSION 7.

  • Resubmission of alphalist that were already submitted prior to the issuance of this MRC using the old version of the module is no longer required.
  • For easy reference, the issuance may be accessed HERE (Revenue Memorandum Circular No. 17-2021, 26 January 2021).

 

COPIES OF CERTIFICATE OF COMPENSATION PAYMENT/TAX WITHHELD FOR COMPENSATION PAYMENT WITH OR WITHOUT TAX WITHHELD (BIR FORM NO. 2316) WITHOUT THE SIGNATURE OF THE CONCERNED EMPLOYEE SHALL BE ACCEPTED BY THE BIR, PROVIDED THAT THE CERTIFICATES ARE DULY SIGNED BY THE AUTHORIZED REPRESENTATIVE OF THE TAXPAYER-EMPLOYER; TAXPAYERS WHO HAVE ALREADY FILED THEIR TAX RETURNS ONLINE THRU THE FACILITIES OF EFPS AND OFFLINE E-BIR FORMS PACKAGE NEED NOT SUBMIT HARD COPIES THEREOF TO THE RDO WHERE THEY ARE DULY REGISTERED.

  • The BIR clarifies on the filing of BIR Form Nos. 1604-CF, 1604-E and Other Matters
  • The BIR also provides type of forms and version of forms depending on the filing facility.
  • For easy reference, the issuance may be accessed HERE. (Revenue Memorandum Circular No. 18-2021, 27 January 2021).

 

 

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THE BIR EXTENDS THE PERIOD OF AVAILMENT OF TAX AMNESTY ON DELINQUENCIES UNTIL JUNE 30, 2021

  • The BIR further amends Revenue Regulations No. 4-2019, as amended, by extending the period of availment of Tax Amnesty on Delinquencies until June 30, 2021.
  • This applies to all persons, whether natural or juridical, with internal revenue tax liabilities covering taxable year 2017 and prior years.
  • The date may be extended if the circumstances warrant an extension such as in case of country-wide economic or health reasons.
  • For your reference, the regulation may be accessed (Revenue Regulations No. 32-2020, December 17, 2020)

 

THE BIR EXTENDS THE AVAILABILITY OF VOLUNTARY ASSESSMENT AND PAYMENT PROGRAM (VAPP) UNTIL JUNE 30, 2021; EFFECTS OF APPLICATION OF VAPP; GROUNDS AND EFFECT OF DENIAL/INVALIDITY OF VAPP APPLICATION.

  • The BIR amends certain provisions of the Voluntary Assessment and Payment Program under RR No. 21-2020.
  • It provides:
    • The period of availment is extended until June 30, 2021, unless extended further by the Secretary of Finance.
    • No Audit – A taxpayer with a duly issued Certificate of Availment shall not be audited for 2018 for the tax types covered by the availment. Consequently, taxpayers who avail of the VAPP on withholding tuxes shall be allowed to claim deduction on the corresponding income payment.
    • In case the taxpayer’s tax returns for the covered taxable period are currently being audited, the conduct of the audit shall be suspended upon availment of the VAPP while the availment is under evaluation. It shall resume if the availment has been found invalid. If the taxpayer’s availment has been determined to be valid, a Certificate of Availment shall be issued and the Letter of Authority, Tax Verification Notice, Discrepancy Notice, Notice of Discrepancy, Preliminary Assessment Notice, Final Assessment Notice previously issued for pending cases shall be consequently withdrawn and canceled.
    • Despite the Certificate of Availment is issued, the availment shall be rendered invalid and the taxpayer shall be subject to audit or investigation, upon prior authorization and approval of the Commissioner, in the following cases:
      • Under-declaration of sales, receipts or income or overstatement of deductions by more than 30%;
      • When there is verifiable information that the taxpayer has withheld tax but failed to remit the same.
        • Denial/invalidation is valid when the taxpayer is formally notified by the Division Chief or the Revenue District Officer where the taxpayer is registered, stating the factual reasons therefor.
        • Denial can be appealed to the Assistance Commissioner-Large Taxpayer Service (ACIT-LTS) or Regional Director within 30 days from receipt of such notice.
        • The payment may be applied against the deficiency tax due that may be assessed against the taxpayer after the audit/investigation.
      • For your reference, the regulation may be accessed (Revenue Regulations No. 33-2020, December 21, 2020)

 

THE BIR LIMITS THE TAXPAYERS REQUIRED TO FILE AND SUBMIT RELATED-PARTY TRANSACTION (RPT) FORM TO (A) LARGE TAXPAYERS, (B) TAXPAYERS ENJOYING TAX INCENTIVES,  (C) TAXPAYERS REPORTING NET OPERATING LOSSES FOR THE CURRENT TAXABLE YEAR AND THE IMMEDIATELY PRECEDING 2 CONSECUTIVE YEARS AND (C) A RELATED PARTY WITH TRANSACTION WITH THE FOREGOING; BIR ALSO SETS MATERIALITY THRESHOLDS FROM PHP15 MILLION TO PHP150 MILLION DEPENDING ON TRANSACTIONS; TRANSFER PRICING DOCUMENTATION NEED NOT BE ATTACHED TO THE RPT FORM BUT SHALL BE SUBMITTED WITHIN 30 DAYS UPON REQUEST ON AUDIT; OTHER MATTERS.

  • The BIR prescribes the guidelines and procedures on the submission of BIR Form No. 1709, Transfer Pricing Documentation (TPD) and other supporting documents, amending pertinent provisions of Revenue Regulations (RR) Nos. 19-2020 and 21-2002, as amended by RR No. 15-2010, by providing safe harbors and materiality thresholds.
  • The following are required to file and submit RPT Form, together with the Annual Income Tax Return:
  1. Large Taxpayers;
  2. Taxpayers enjoying tax incentives, i.e.Board of Investments (BOI)-registered and economic zone enterprises, those enjoying Income Tax Holiday (ITH) or subject to preferential income tax rate;
  3. Taxpayers reporting net operating losses for the current taxable year and the immediately preceding two (2) consecutive taxable years; and
  4.  A related party, as defined under Section 3 of Revenue Regulations (RR) No. 19- 2020, which has transactions with (a), (b) or (c).
    • For this purpose, key management personnel (KMP), as defined under shall no longer be required to file and submit the RPT Form, nor shall there be any requirement to report any transaction between KMP and the reporting entity/parent company of the latter in the RPT Form.
  • When short period AITRs are required by law or existing issuances to be filed, the RPT Form shall still be accomplished regardless of the reason for filing the said short period return. However, compliance herewith shall only be mandatory for short period returns filed in 2021 and subsequent years.
  • Transfer Pricing Documentation is required when the following materiality thresholds are met in the alternative (applicable to taxpayers required to submit TPD)

 

a. Taxpayers with Annual Gross Sales/Revenue for the subject taxable period If it exceeds P150,000,000.00*
Taxpayers with Total Amount of Related Party Transaction with foreign and domestic related parties If it exceeds P90,000,000.00*
b. RPT meeting the following threshold: sale of tangible goods If it exceeds P60,000,000 within the taxable year
RPT meeting the following threshold: service transaction, payment of interest, utilization of intangible goods or other related party transaction

 

 If it exceeds P15,000,000 within the taxable year
c. If TPD is required to be prepared during the immediately preceding taxable period for exceeding (a) or (b) above.
*The following items are included in computing he threshold:

· Amounts received and/or receivable from related parties or paid and/or payable to related parties during the taxable year. Excluded: compensation paid to key management personnel, dividends, and branch profit remittances; and

· Outstanding balance of loans and non-trade amounts due from/to all related parties.

RPT covered by the Advance Pricing Agreement is no longer required to be disclosed in the RPT Form but shall be included in the computation of the RPT

 

  • TPD and other supporting documents need notbe attached to the RPT Form, but shall be submitted within 30 calendar days upon receipt of request by the Commissioner or his/her duly authorized representatives, pursuant to a duly issued Letter of Authority, subject to non-extendible period of 30 calendar days based on meritorious grounds.
  • Taxpayers who are not covered are required to disclose in the Notes to the Financial Statements that they are not covered by the requirements and procedures for related party transactions.
  • For your reference, the regulation may be accessed (Revenue Regulations No. 34-2020, December 21, 2020)

 

 THE BIR PROVIDES THE REQUIREMENTS AND APPLICATION FORM IN PROCESSING THE TAX RESIDENCE CERTIFICATE; FAILURE TO SECURE TRC SHALL DISALLOW THE TAXPAYER FROM CLAIMING FOREIGN TAX CREDIT IN THE PHILIPPINES IN EXCESS OF THE TREATY BENEFIT.

  • The BIR sstreamlines the process of issuing Tax Residency Certificates (TRCs), amending RMO No. 51-2019.
  • It provides the detailed requirements to process TRCs to establish residence in the Philippines and to be exempt from tax in another country pursuant to the treaty of the source country with the Philippines.
  • Those who fail to secure a TRC shall not be allowed to claim foreign tax credits in excess of the appropriate amount of tax that is supposed to be paid in the source state had the income recipient invoked the provision/s of the treaty and proved his/her/its residency in the Philippines.
    • To achieve this purpose, tax auditors shall always ensure that Philippine taxpayers are only allowed the appropriate amount of tax credit which is equal to the amount of taxes that would be imposed on that item of income pursuant to the treaty.
    • If the treaty exempts the residents in the source country, it cannot claim foreign tax credit in the Philippines for failure of the resident to claim exemption in source country.  The tax auditor shall not allow as foreign tax credit the taxes paid in Country A but shall instead advise the taxpayer to secure a TRC and file a claim for tax refund in the source country.
  • For your reference, the regulation may be accessed (Revenue Memorandum Order No. 43-2020, December 1, 2020)

A NON-RESIDENT FOREIGN CORPORATION (“NRFC”) MAY OPT TO AVAIL OF THE 15% REDUCED DIVIDEND RATE ON INTERCOMPANY DIVIDENDS PAID BY A DOMESTIC CORPORATION IRRESPECTIVE OF WHETHER DOUBLE TAX CONVENTION OR TAX TREATY EXISTS BETWEEN THE PHILIPPINES AND ITS COUNTRY OF RESIDENCE; IF THE TAXPAYER IS NOT ENTITLED TO THE REDUCED RATE UNDER THE TAX CODE, THE TREATY RATE SHALL AUTOMATICALLY BE APPLIED PROVIDED THAT THE NRFC IS ABLE TO PROVE ITS ENTITLEMENT TO THE BENEFITS PROVIDED UNDER THE TREATY; REQUIREMENTS.

  • The BIR prescribes the guidelines and procedures for the availment of the reduced rate of 15% on intercompany dividends paid by a domestic corporation to a non-resident foreign corporation pursuant to Section 28 (B)(5)(b) of the NIRC of 1997, as amended.
  • It provides the following salient points:
    • The domestic corporation paying the dividends may remit outright the dividends to the NRFC and apply thereon the reduced rate of ruling from the BIR. It must determine, however, whether the existing law of the country of domicile allows NRFC a “deemed paid” tax credit in an amount equivalent to the 15% waived by the Philippines or exempts from tax the dividends received.
    • Within ninety (90) days from the remittance of the dividends or from the determination by the foreign tax authority of the deemed paid tax credit/non-imposition of tax because of the exemption, whichever is later, the NRFC or its authorized representative shall file with the BIR, through the International Tax Affairs Division (ITAD), a request for confirmation of the applicability of the reduced dividend rate of l5%.
    • The BIR shall issue a certification duly signed by the Assistant Commissioner for Legal Service in lieu of the usual BIR ruling. In case of denial, a BIR ruling signed by the Commissioner or his authorized representative, which shall contain the factual and legal bases that led to the conclusion, shall be issued. Such denial may result in the imposition of a deficiency assessment for the 15% differential, plus penalties.
    • All unfavorable rulings are appealable to the Department of Finance within thirty (30) days from receipt thereof pursuant to existing rules and regulations.
    • The NRFC may opt to avail of the reduced dividend rate under the Tax Code, irrespective of whether double tax convention or tax treaty exists between the Philippines and its country of residence. If the taxpayer is not entitled to the reduced rate under the Tax Code, the treaty rate shall automatically be applied provided that the NRFC is able to prove its entitlement to the benefits provided under the treaty.
  • For your reference, the regulation may be accessed (Revenue Memorandum Order No. 46-2020, December 23, 2020)

THE BIR CONSOLIDATES AND UPDATES THE GUIDELINES AND PROCEDURES ON THE PROCESSING OF CLAIMS FOR VALUE-ADDED TAX CREDIT/REFUND, EXCEPT THOSE UNDER THE AUTHORITY AND JURISDICTION OF THE LEGAL GROUP.

  • Among other provisions, it provides the following revenue officials authorized to approve/disapprove the claims:
Processing Office Amount of Claim Approving Revenue Official
VAT Credit Audit Division (VCAD) Not more than P50 Million Assistant Commissioner (ACIR)

Assessment Service
More than P50 Million up to P150 Million Deputy Commissioner

Operations Group
More than P150 Million Commissioner
Large Taxpayers Audit Division (LTAD) under Large Taxpayers Service (LTS) Regardless of amount ACIR -LTS
Revenue District Office Regardless of amount Regional Directo
  • The claims shall be processed based on submitted documents for verification by the assigned Revenue Officer/Group Supervisor. The process shall not be construed as an audit/investigation; hence, the claimant may be issued subsequently an electronic Letter of Authority by an authorized office for that purpose. However, the books of accounts and accounting records that may have relevance to the claim of the taxpayer may be examined and verified upon request of the assigned Revenue Officer.

For your reference, the regulation may be accessed HERE. (Revenue Memorandum Order No. 47-2020, December 23, 2020)

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The Bureau of Internal Revenue recently issued Revenue Regulations No. 18-2020 on Voluntary Assessment and Payment Program (VAPP). By availing the benefits under the VAPP, the taxpayer shall not be audited for 2018 for the tax types covered by the availment, and in case of pending audit, the issued Letter of Authority, Tax Verification Notice, Discrepancy Notice, Notice for Informal Conference, Preliminary Assessment Notice, Final Assessment Notice for pending cases shall be withdrawn and canceled. The VAPP is available until December 31, 2020, unless extended by the Secretary of Finance.

Update:

 

  • In general, all persons, natural and juridical, including estates and trusts, are qualified to avail of the VAPP.
  • The VAPP covers calendar year 2018 and fiscal year 2018 ending in July, August, September, October, and November 2018, as well as those ending in January, February, March, April, May and June 2019.
    • For one-time transactions (ONETT) of individuals and taxpayers on a calendar year basis, the VAPP covers all transactions from January to December 2018.
    • For taxpayer on a fiscal year basis, the covered ONETT are those within their fiscal year 2018.
      • For example, if the fiscal year of the taxpayer is from May l, 2018 to April 30,2019, the ONETT covered is within this inclusive period.
    • The taxpayer cannot avail for only or two tax types and leave out the other tax types to which the taxpayer is registered.
      • Availment should cover all the tax types to which the taxpayer is registered, including withholding taxes, except when the taxpayer is pursuing a claim for tax credit/refund, in which case, he can leave out the tax type for such claim.
    • The taxpayer can avail of the program for the tax type(s) only on ONETT.
    • Taxpayers shall use BIR Form No. 2l I 9 for the application and BIR Form No. 0622 for payment of the corresponding voluntary tax.
    • In case of shares of stock not traded through the local stock exchange, the application shall be filed with the BIR Office where the taxpayer-seller is registered.
      • The additional requirements that must be submitted are Capital Gains Tax Return Documentary Stamp Tax Declaration/Return Payment Forms and proofs of tax payments.
    • For the availment re. creditable/expanded withholding tax for onerous transfer of real property other than capital asset, BIR Form No. 1606 – Withholding Tax Remittance Return shall be submitted as additional document.
    • In case the tax returns data are different from those in the BIR’s information system, the BlR-Integrated Tax System (ITS)-generated data will prevail unless there is proof of error in encoding of the tax returns data.
    • If a taxpayer is registered in one district, wants to avail of the VAPP for all his registered internal revenue taxes and he also wants to avail for his donor’s tax on his donation and capital gains tax on a sale of his real property, he should he file the VAPP applications as follows:
      • For availment of the registered internal revenue taxes, the filing of the application should be in the BIR office where the taxpayer is registered.
      • For availment of donor’s tax, the application should be filed at the RDO where the donor-taxpayer is domiciled at the time of donation; and
      • For the transaction involving sale of real property, the application should be filed with the RDO having jurisdiction over the location of the property.
    • Payment by check is acceptable, provided that check payments conform to the payment requirements of the BIR.
      • Payment through Tax Remittance Advice (TRA) is not considered as “cash” under the regulations. The purpose of the regulations is to raise additional revenues to augment government funds due to rising expenditures from the outset of the COVID-l9 pandemic. Hence, cash or all its forms are required for payment.
    • Gross sales as basis for computing the amount of voluntary tax payment shall mean the sales/receipts/revenues/fees net of sales returns, allowances and discounts per Annual Income Tax Return.
    • If there is no increase or decrease in the total taxes due for all tax types in 2018 compared to all taxes due in 2017, as in the case of enterprises enjoying tax exemptions and incentives, the voluntary tax payment shall be computed based on the “net increase of not more than 10% per table under Section 9.a. of the regulations.
    • If the taxpayer is only in its first year of operation for 2018 and there are taxes due for this year per tax returns filed, the taxpayer can avail of the VAPP. The voluntary tax payment shall be computed based on the “net increase of more than 30%” since there is no tax payment to be considered for 2017.
    • If the taxpayer paid improperly accumulated earnings tax, the payment will be included in the total taxes due for the purpose of computing the increase/decrease as it can be considered as income tax.
    • If the taxpayer’s assessment on ONETT pertains to the penalties, the voluntary payment shall be 5% of the basic tax paid.
    • In case the taxpayer paid minimum corporate income tax (MCIT) in 2017 and paid the normal income tax in 2018 the basis for his/its income tax due per return for 2017 and 2018 shall be as follows:
      • The MCIT shall be the income tax due for 2017 while the annual corporate income tax due computed under the normal income before deducting any tax credits/payments shall be considered the income tax due for 2018.
    • We consider excess tax credits from prior period/taxable year in determining the Net VAT due.
      • The reference to determine the VAT due for taxable years 2017 and 2018 is Line 25 – ‘Net VAT payable” in the quarterly VAT return. If the net VAT due is a negative amount, then the total taxes due for the year will not be reduced by the negative VAT amount.
    • If the taxpayer paid percentage tax or availed of the eight percent (8%) income tax rate despite having exceeded the threshold of three million pesos (P3,000,000),  he can apply for the VAPP provided that the VAT return will be filed and the VAT will be paid with the corresponding penalties after deducting the total percentage tax payments.
    • If the basic deficiency tax for 2018 is added to all the tax due per returns to determine the increase/decrease from 2017 to 2018, any deficiency tax payment for 2017 will not be added to all the tax due of the returns in 2017.
    • The waiver for refund is applicable only to claims for refund on erroneous payment. In Section 9.a of the same RR, it is stated that for taxpayers with claims for tax credit/refund, this shall constitute as a waiver of such claims under Section 12 unless they exclude from their availment the specific tax type for which they are pursuing the claim for tax credit/refund.
      • If the taxpayer would like to apply of the VAPP but he declines to waive his right to claim for refund, he can leave out from the availment the tax type for said refund. Thus, the specific tax type pertaining to the refund on erroneous payment shall not be covered by the availment.
    • A taxpayer with a pending claim for tax credit/refund can avail of the VAPP, provided that the claim is not on erroneous payment for which the taxpayer has not waived his right to such claim. For regular claims on tax types, the audit/verification and processing of the claim shall be continued, even if the corresponding tax type is included in the availment.
    • A taxpayer who failed to withhold and remit withholding taxes in 2018 is qualified to avail of the VAPP, under the condition that the amount not withheld and not remitted has to be paid first and the same shall form part of the total taxes remitted in 2018 which shall be taxable base in determining the 5% required amount to be paid to avail of the benefits under VAPP.
    • The exception “with pending cases” does not include those who failed to comply with an issued subpoena Duces Tecum, if no criminal case has been filed in court yet for failure to comply with SDT.
    • If the taxpayer is currently under audit/investigation for 2018 and availed of the VAPP but the application is under evaluation and awaiting approval in the investigating office, the conduct of audit shall be suspended while the availment is under evaluation. Upon the issuance of a Certificate of Availment, the electronic Letter of Authority and other related notices shall be withdrawn and cancelled.
    • If the taxpayer has an on-going investigation or a duly issued but protested FAN for 2017 and/or 2018, he can avail of the VAPP, but the availment will not cover taxable year 2017. The amount on the FAN for the audit case will, in no way, affect the computation of the VAPP.
    • The taxpayers with duly issued but protested FANs can avail of the VAPP, provided the FANs are for taxable year 2018, are under protest on or before the effectivity of the regulations and all tax types of the taxpayer are covered in the availment.
    • The concerned office, g.the investigating, reviewing and legal offices, will be informed when the taxpayer gives a copy of the payment form, proof of payment and Certificate of Availment (CA)
      • If the taxpayer with FAN has a duly issued CA after availing of the VAPP, there is a need to issue an Authority to Cancel Assessment (ATCA), which shall be approved and issued by the authorized revenue official in accordance with existing policies and procedures.
    • In case of denial of the availment, the taxpayer will be notified by the head of the processing office, which will issue a letter informing the taxpayer of the denial and the reasons therefor.
    • In case of VAPP under Section 9.c, an electronic Certificate Authorizing Registration (eCAR) shall be issued within 5 days from the issuance of the CA.
    • If a taxpayer who was notified to rectify the deficiencies in the availment or to pay the additional voluntary tax but fails to do so within 10 days from receipt of the notification, he is not given allowance or extension to rectify. Therefore, he cannot comply before even before the deadline of December 31, 2020 and qualify for the benefit of the VAPP.
      • In case the taxpayer’s availment rendered invalid and the taxpayer was subjected to audit or investigation, any voluntary tax paid shall constitute as payment of the deficiency tax assessments for the taxable year 2018, provided, that such payment includes the specific tax types and taxable period covered by the assessment notice.
    • If the taxpayer paid the tax for the VAPP on or before December 31, 2020 and submits the application after the deadline, the VAPP is considered availed of within the deadline. However, validity of the availment will depend upon the documents submitted and the amount of voluntary payment.

 

 

What are the taxes Covered?

–       Internal revenue taxes covering:

o   Taxable year ending December 31, 2018 or Fiscal year 2018 ending the last day of months of July 2018 to June 2019 (Subject Period)

–       Internal revenue taxes include one tax transactions (ONETT) such as estate tax, donor’s tax, Capital Gains Tax and ONETT-related creditable withholding tax (CWT)/expanded withholding tax and documentary stamp tax (DST)

 

Who are qualified to avail of the VAPP?

–       Those who are liable to pay internal revenue taxes for the Subject Period who, due to inadvertence or otherwise,  erroneously paid his/its internal revenue tax liabilities or failed to file returns/pay taxes

 

Who are not qualified to avail of VAPP?

–       Those taxpayers who have already been issued a Final Assessment Notice (FAN) that have become final and executory, on or before the effectivity of these Regulations;

–       Persons under investigation as a result of verified information filed by a Tax Informer under Section 282 of the NIRC of 1997, as amended, with respect to the deficiency taxes that may be due out of such verified information;

–       Those with cases involving tax fraud filed and pending in the Department of Justice or in the courts; and

–       Those with pending cases involving tax evasion and other criminal offenses under Chapter II of Title X of the NIRC of 1997, as amended.

 

Until when can the VAPP be availed of?

–       December 31, 2020, unless extended by the Secretary of Finance

 

How much is tax to be paid as a condition to avail of the benefits under the VAPP?

 

Increase/Decrease in the Total Taxes Due from 2017 to 2018*

(A)

 Amount of Voluntary Tax Payment Whichever is the higher of –

(B)

 Minimum Account

(C)
Net increase of not more than 10% 3% of 2018 gross sales**

or

7% of 2018 taxable net income

 Individuals, estates and trusts – P75,000

 

Corporations –

a.     With subscribed capital of more than P50 Million – P1,000,000.00

b.     With subscribed capital of more than P20 million up to P50 Million – P500,000

c.     With subscribed capital of more than P5 million up to P20 Million – P250,000

d.     With subscribed capital of P5 Million and less – P100,000.00

 

Other juridical entities, including but not limited to cooperative, foundations, general professional partnerships – P75,000
Net increase of more than 10% up to 30% 2% of 2018 gross sales

or

6% of 2018 taxable net income
Net increase of more than 30% 1% of 2018 gross sales

or

5% of 2018 taxable net income
Net decrease of not more than 10% 4% of 2018 gross sales

or

8% of 2018 taxable net income
Net decrease of ore than 10% 5% of 2018 gross sales

or

9% of 2018 taxable net income
*Total taxes due in 2017 and 2018, for purposes of the above schedule refer to the sum of all tax due per tax return (IT, PT, ET, and DST) and net VAT payable (VAT) before deducting any creditable withholding tax, quarterly payment or advance payment.

 

**Gross sales and taxable net income shall be based on the Annual Income Tax Return for the taxable year ending December 31, 2018, and fiscal year 2018, ending on the last day of July 2018 to June 2019.

 

 

 

How much is the settlement amount for Final withholding taxes (On compensation, fringe benefits etc.) and creditable withholding tax (CWT) other than CWT on ONETT?

–       5% of the basic withholding tax remittance for the taxable year

 

How much is the settlement amount for taxes on ONETT, such as Estate Tax, Donor’s Tax, CGT, ONETT-related CWT/Expanded Withholding Tax and DST?

–       Basic tax due of the unfiled tax return/unpaid tax due plus 5%

 

What are the requirements to avail of the benefits under VAPP?

–       Mandatory Requirements:

o   Duly accomplished BIR Form No. 2119

o   Payment Form (BIR Form No. 0622) with proof of payment

 

–       Additional Requirements:

o   Filed tax returns (proof of payment of taxes paid in 2017 and 2018 and audited financial statements for the covered taxable year for those availing of the program under Section 9.a/non-ONETT (i.e. income tax, VAT, percentage tax, excite tax, and DST other than DST on ONETT)

o   Copy of remittance return and proof of payment of final and creditable withholding taxes for taxpayers availing of the program under Section 9.b (Final Withholding Taxes)

o   Copy of duly paid BIR Form 0605 stamped either by the Authorized Agent Banks or Revenue Collection Officers duly signed by the BIR the taxpayer is registered and proof of payment representing settlement of previous deficiency tax, with or without an assessment notice, if any, covering the taxable period

o   ONETT Tax returns and corresponding documentary requirements for the transaction of taxpayers availing of the program under Section 9.c

 

What is the mode of submission?

–       Personally or through courier service

 

What is the mode of payment?

Cash only. Non-cash mode of payment such as tax debit memo, will not qualify as a valid payment.

 

Where should the taxpayer pay?

–       Authorized Agent Banks (AAB) or Revenue Collection Officer (RCO) under the BIR office having jurisdiction over the taxpayer

–       For sale of property: AABs/RCO under the BIR office covering the location of the property

 

Should the application be separately filed in case of multiple availment?

–       Yes, separate application must be filed in case the availment is under non-ONETT  and ONETT

 

What is the BIR’s procedure in handling the VAPP?

–       Within thirty (30) working days from receipt, the Revenue Officer will evaluate the Application, Payment Form and other documents submitted, and will endorse the same to the Assistant Chief, LT Office/Assistant Revenue District Officer (ARDO) for review, and to the Chief, LT Office/Revenue District Officer, as the case may be, for approval, who shall affix his signature on the BIR Form No 2119.

–       If the review reveals deficiencies or defects in the availment, the approving official shall notify the concerned taxpayer through the email address provided in BIR Form No. 2119 and shall require the taxpayer to rectify the defects and/or comply with/pay the deficiencies within ten (10) working days from receipt of the notification/email. Failure to act and/or pay the required amount on the part of the taxpayer within such period shall result in the denial of the application.

–       A Certificate of Availment shall be issued by the concerned LT Office/RDO within three (3) working days from approval of the application. Such Certificate shall serve as proof of the taxpayer’s availment of the VAPP, compliance with the requirements, and entitlement to the privilege granted under these Regulations.

–       The LT Office/RDO shall transmit all dockets on approved VAPP applications to the concerned reviewing office not later than the 5th day following the month of issuance of the Certificate of Availment for post review.

 

What is the consequence if the taxpayer failed to submit the documentary requirements or if the taxpayer submits erroneous/incomplete/falsified information?

–       The taxpayer shall not be entitled to avail of the benefits under the VAPP.

–       The voluntary payment may be applied against any deficiency tax liability for the taxable year 2018, in case of audit/investigation.

 

What is the consequence if the availment is found to be invalid, deficient or defective?

–       The taxpayer shall not be entitled to the privilege.

–       However, the taxpayer may apply the voluntary payments made against any deficiency tax liability for the taxable year 2018 in case of audit/investigation.

 

What is the effect if the taxpayer is issued Certificate of Availment?

–       It/he shall not be audited for 2018 for the tax types covered by the availment

–       In case of audit, the issued Letter of Authority, Tax Verification Notice, Discrepancy Notice, Notice for Informal Conference, Preliminary Assessment Notice, Final Assessment Notice for pending cases shall be withdrawn and canceled.

 

What is the effect if the taxpayer’s  tax returns for the covered taxable period are currently being audited?

–       The conduct of the audit shall be suspended upon the availment of the VAPP while the availment is under evaluation. It shall resume if the availment has been found invalid.

 

What are the instances where despite the issuance of a Certificate of Availment, the availment is rendered invalid and shall be subject to audit/investigation:

  1. When there is strong evidence or findings of under-declaration of sales, receipts or income or overstatement of deductions by more than 30% based on a written report of the appropriate revenue official stating the facts with supporting documents; and/or
  2. When there is verifiable information that the taxpayer has withheld but failed to remit withholding taxes.

Any voluntary payment may be applied against the deficiency tax due, if any, that may be assessed against the taxpayer after the audit/investigation.

 

Can taxpayers who failed to file tax returns and/or pay their non-ONETT taxes for the taxable year 2018 avail of the VAPP?

               –      Yes, provided the unfiled tax returns shall first be filed and/or unpaid taxes plus corresponding penalties for late filing and payment shall first be paid by the taxpayer.

 

Can taxpayer claim for refund or credit for any payment made under this VAPP (i.e erroneous payment)?

–        No, the payment is construed as a waiver of the taxpayer’s right to claim for refund or credit, notwithstanding the collection thereof from an erroneous payment, unless the taxpayer excludes in the availment the specific tax type for which it is pushing the claim for tax credit/refund.

 

Is payment under the VAPP considered an admission of fraud on the part of the taxpayer?

–     No, the act of voluntary payment under this program shall not be deemed as an admission on the part of the taxpayer that there was fraud in the declaration of its taxes and/or there was an intention to pay the tax erroneously.

 

When is the VAPP effective?

–      15 days after publication on September 5, 2020

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CONVERSION FROM ONE PERSON CORPORATION (OPC) TO ORDINARY STOCK CORPORATION (OSD) AND VICE VERSA; REQUIREMENTS

  • The SEC issues guidelines for the conversion of corporations either to One Person Corporation (OPC) or to Ordinary Stock Corporation (OSC)
  • OSC may apply for its conversion into an OPC.
    • If a single stockholder has acquired all the outstanding capital stock of an OSC with corresponding Certificate Authorizing Registration or tax clearance having been issued by the BIR
      • Single stockholder must be a natural person of legal age, a trust or an estate.
    • Upon  issuance  of the  Certificate  of  Filing  of Amended  Articles  of    Incorporation  by  the  SEC  reflecting  the  conversion  to  OPC,  the  Articles  of   Incorporation  and  By-laws  of the  OSC  shall  be deemed  superseded. The  date  of issuance of the Certificate of Filing of Amended Articles  of Incorporation  shall  be deemed  as the date  of approval  of the  conversion.
    • The OPC  converted  from  an  OSC shall succeed the latter and be legally responsible for all the  latter’s  outstanding  liabilities  as of the date  of  approval  of the  conversion.
  • OPC may be converted to OSC.
    • When the shares in an OPC ceases to be held solely by a single stockholder.
    • Notice to SEC of the facts and circumstances leading to be conversion is required;
      • Following  the  transfer/s   of  shares   in  an  OPC  wherein   there   becomes  at  least  two  (2)  stockholders  in  the  OPC,  a  Notice  of  Conversion  of  OPC into an OSC shall  be filed  with   the  Commission  within  sixty  (60)  days  from  such  transfer/s  of  shares.  The  period for filing the Notice shall  be observed even though the conversion will  be  applied for,  or will take  place,  afterwards.
      • For  the   purpose  of  submitting  the   notice,   the  date  of transfer  of  shares  shall  be  deemed  to  be  the  date  that  the  corresponding  Certificate  Authorizing  Registration/  tax  clearance  is issued  by the  Bureau  of  Internal  Revenue.
      • If the  Notice  of  Conversion  is filed  with  the  Commission  beyond  sixty  (60)  days  from  the  transfer  of  shares,  the  OPC  may  still  be  approved  for  conversion  into  an  Ordinary  Stock  Corporation  subject  to  prior  payment  of  penalty
    • Upon  issuance  by the SEC  of the Certificate  of Filing of Amended Articles of  Incorporation  and of By-laws  reflecting the conversion to an OSC,  the  Articles  of  Incorporation  of the  OPC  shall  be deemed  superseded. The  date  of  issuance  of the Certificate  of  Filing of Amended  Articles  of  Incorporation and  of  Bylaws  shall  be deemed  as the date  of approval  of the  conversion.
    • The  OSC converted  from  an OPC shall succeed the latter and be legally responsible for all the  latter’s  outstanding  liabilities  as of the  date  of  conversion.
    • By reason  of the  nature  of these  corporations,  the conversion  from  an OSC to OPC shall  be deemed  as optional. On the other hand, the  conversion  from an OPC  to OSC  shall  be deemed  as  mandatory,  unless when  winding-up  and  dissolution  is  appropriate.
    • For your easy reference, the SEC guidelines and requirements may be accessed (SEC Memorandum Circular No. 27 s. 2020)

 

 

BUREAU OF INTERNAL REVENUE

 

BIR DEADLINES FROM OCTOBER 20 TO 25, 2020. A gentle reminder on the following deadlines, as may be applicable:

 

DATE FILING/SUBMISSION
October 20, 2020 · Filing & Payment of 2550M with required attachments – Non-eFPS filers – Month of September 2020

· E-Filing/Filing & E-Payment/Remittance of 1600 WP-Month of September 2020
October 21, 2020 · E-Filing of 2550M eFPS filers under Group E – Month of September 2020
October 22, 2020 · E-Filing of 2550M eFPS filers under Group D – Month of September 2020
October 23, 2020 · E-Filing of 2550M eFPS filers under Group C – Month of September 2020
October 24, 2020 · E-Filing of 2550M eFPS filers under Group B – Month of September 2020
October 25, 2020 · Submission of Quarterly Summary List of Sales/Purchases by a VAT Taxpayer – Non eFPS filers – Taxable Quarter ending September 30, 2020

· Submission of Sworn Statement of Manufacturer’s or Importer’s Volume of Sales of each particular brand of Alcohol, Tobacco Products & Sweetened Beverage Products – Taxable Quarter ending September 30, 2020

· E-Filing/Filing & E-Payment/Payment of 2550 & 25501Q – eFPS & Non-eFPS filers – Taxable Quarter September 30, 2020

· E-Filing & E-Payment of 2500M with required attachments – eFPS filers under Group A – Month of September 30, 2020

· E-Payment of 2550M for Group E, D, C & B – Month of September 2020

 

FILING AND PROCESSING OF CLAIMS OF INPUT VAT REFUND PRESCRIBING UNTIL DECEMBER 19, 2020 ARE SUSPENDED; NEW DEADLINES

 

  • The Secretary of Finance suspends the filing and 90-day processing of Value-Added Tax (VAT) Refund claims anchored under Section 112 of the Tax Code of 1997, as amended, in relation to Section 4(tt) of RA No. 11494 (Bayanihan to Recover as One Act) (“Bayanihan Law”)
  • The deadline of filing for VAT refund claims whose prescription falls during the effectivity of R,A. No. 11494, shall be suspended until December 19, 2020, which is the next adjournment of the Eighteenth Congress.
  • However, to prevent claims, the following deadlines the expected influx of numerous filers of VAT refund shall be extended to the following dates:

 

Taxable Quarter Deadline
Calendar quarter ending September 30, 2018 December 31, 2020
Fiscal quarter ending October 31, 2018 January 31, 2021
Fiscal quarter ending November 30, 2018 January 31, 2021
Calendar quarter ending December 31, 2018 February 15, 2021

 

  • The 90-day processing of VAT refund claims is suspended during the effectivity of R.A. No. 11494 or until the next adjournment of the Eighteenth Congress on December 19, 2020.
  • If the areas where ECQ or MECQ is in force after the affectivity of Bayanihan Law, the following shall be observed:
    • lf the deadline for the filing of the VAT refund claim falls within the ECQ or MECQ period, filing of the claim shall be extended for thirty (30) days after the lifting of the ECQ or MECQ. This applies to the affected areas of the processing offices or to the registered business address of the taxpayer claimant where the restrictions are strictly enforced.
    • The 90-day period of processing VAT refund claims is suspended during the declaration of ECQ or MECQ in the area and shall resume thirty (30) days after the same has been lifted.
    • ln cases where the processing office is required temporary closure, in view of COVID-19 cases, to prevent further spread at the affected office, following the interim guidelines on use of leave credits under Memorandum Circular No. 05, s. 2020 issued by the Civil Service Commission, the 90-day processing of VAT refund claims shall be suspended until the last day of the quarantine period for the affected processing office.
  • For your reference, the regulation may be accessed (Revenue Regulations No. 27-2020, 06 October 2020)

 

ELECTRONIC LETTER OF AUTHORITY (E-LA) MAY BE SERVED VIA PERSONAL SERVICE, SUBSTITUTED SERVICE AND MAIL; REQUIREMENTS AND CONDITIONS.

 

  • The BIR clarifies the proper modes of service of an electronic Letter of Authority (eLA)

 

Mode of Service Requirement
Personal Service · By delivering personally a copy of the eLA at his registered or known address or wherever he may be found.

o A known address shall mean a place other than the registered address where business activities of the party are conducted or his place of residence.

· Personal or substituted service of the eLA shall be effected by the RO assigned to the case. However, such service may also be made by any BIR employee duly authorized for the purpose.
Substituted Service · In case personal service is not possible.

· Can only be resorted to when the party is not present at the registered or known address.
a.  The eLA may be left at the party’s registered address, with his clerk or with a person having charge thereof.

 

 

 · If the known address is a place where business activities of the party are conducted, the eLA may be left with his clerk or with a person having charge thereof.

· If the known address is the place of residence, substituted service can be made by leaving the eLA with a person of legal age residing therein.
b.    No person is found in the party’s registered or known address · the Revenue Officers (ROs) concerned shall bring a barangay official and two (2) disinterested witnesses to the address so that they may personally observe and attest to such absence.

· The original copy of the eLA shall be given to said barangay official.

o “Disinterested witnesses” refer to persons of legal age other than employees of the Bureau of Internal Revenue.
c. Party found at his registered or known address or any other place but refuses to receive the eLA · the ROs concerned shall bring a barangay official and two (2) disinterested witnesses in the presence of the party so that they may personally observe and attest to such act of refusal.

· The original copy of the eLA shall be given to said barangay official

 
Mail · Registered mail with an instruction to the Postmaster to return the mail to the sender after ten (10) days, if undelivered; or

· Reputable professional courier service;

· Ordinary mail, if no registry or reputable courier is available in the locality of the taxpayer.

 

 

  • When service is complete:
    • Personal service shall be complete upon actual delivery of the eLA to the taxpayer or his representative.
    • Service by registered mail is complete upon actual receipt by the taxpayer or after five (5) days from the date of receipt of the first notice of the postmaster, whichever date is earlier.
    • Service by ordinary mail is complete upon the expiration of ten (10) days after mailing.
    • Service to the tax agent/practitioner, who is appointed or authorized by the taxpayer in accordance with existing revenue issuances, shall be deemed service to the taxpayer.
  • For your reference, the regulation may be accessed (Revenue Memorandum Circular No. 110-2020, October 6, 2020)

 

COURT OF TAX APPEALS DECISIONS

 

REQUISITES OF CONVICTION FOR VIOLATION OF SECTION 255 OF THE NATIONAL INTERNAL REVENUE CODE; LAW PENALIZES RESPONSIBLE OFFICERS.

 

  • The following elements must be established by the prosecution to secure the conviction of accused, to wit:
    • That a corporate taxpayer is required to pay any tax, make a return, keep any record, or supply correct and accurate information;
    • That the corporate taxpayer failed to pay the required tax, make a return or keep the required record, or supply the correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations; and
    • That accused, as the employee responsible for the violation, willfully failed to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations.
  • The law penalizes not only the partner, president, general manager, branch manager and treasurer but also the officers-in-charge and employees responsible for the violation.
    • In this case, the accused is a Vice-President of the Company. She also sent a letter to the BIR acknowledging that the company’s tax assessment case has become a delinquent account and also requested considerable time to put its accounting records in order to be able to settle the corporation’s tax liabilities by way of compromise. This establishes that the accused is a responsible officer of the company and thus must be held criminally liable. (Suarez v. People of the Philippines, CTA EB Crim. No. 066, CTA Crim Case No. A-4, September 1, 2020)

 

PHP 286 MILLION TAX ASSESSMENT CANCELLED: TAX ASSESSMENT ISSUED WITHOUT A LETTER OF AUTHORITY IS VOID; STATEMENT IN THE ASSESSMENT THAT “INTEREST AND AMOUNT DUE WILL HAVE TO BE ADJUSTED” IF PAID BEYOND A CERTAIN PERIOD AND LACK OF DUE DATE RENDER THE ASSESSMENT IS VOID.

 

  • The CTA cancelled the tax assessment for violation of due process.
  • Under the rules, a revenue officer must be authorized through a LOA,  in order that the said officer may validly examine the books of accounts and other accounting records of the taxpayer. Any tax assessment issued without an LOA is in violation of the taxpayer’s right to due process and is therefore void.
    • In 2010, the BIR issued a Memorandum Order stating that all LOA’s issued from March 1, 2010 covering cases for 2009 shall be retrieved and replaced by electronic LOA. In this case, the BIR did not retrieve and replace the existing LOA. Therefore, the assessment was declared void.
  • Under the rules, tax assessment must not only contain a computation of tax liabilities, but it also must include a demand on the taxpayer to settle the tax liability that is there definitely and fixed.
    • In this case, the assessment notice states “Please note that the interest and the total amount due will have to be adjusted if paid beyond….” Moreover, the assessment notices and final decision on disputed assessment do not contain any due date for the payment of the assessed deficiency tax. Therefore, the  liability is considered not definitely set and fixed, hence, the assessment is void. (Robinsons Toys, Inc. v. CIR, CTA Case No. 9161, September 2, 2020)

 

PHP 23 MILLION VAT ASSESSMENT UPHELD: “PRICE ADJUSTMENT” MUST BE REFLECTED IN THE INVOICE AS SALES DISCOUNT; IN ZERO-RATED VAT ON CONSTRUCTIVE EXPORT, THE GOODS MUST ENTER THE ECOZONE; FOR VAT PURPOSES, GOODS MUST BE SUPPORTED BY INVOICE, SERVICES MUST BE SUPPORTED BY OFFICIAL RECEIPT; IF THE DOCUMENT STATES “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX” THE INPUT VAT CANNOT BE CLAIMED AS A CREDIT.

 

  • The CTA upholds VAT assessment for failure to comply with technical requirements under the law.
  • For sales discount to be allowable as deduction from the gross selling price, it must be indicated in the sales invoice at the time of sale
    • In this case, the company’s “price adjustment” cannot be considered a sales discount since the amount is not indicated  as sales discount at the time of sale
  • For sales of goods to economic zones to be considered zero-rated (constructive export), the goods sold by VAT-registered persons in the customs territory must enter an ecozone. The seller must not just rely on the mere fact of registration of the buyer within the ecozone. The place of delivery of goods in the case is material.
    • In this case, while the taxpayer has satisfactorily proven that the customers are SBFZ-registered entities, it was not established that the goods actually entered the ecozone.
  • Under the rules, a VAT-registered person shall issue (1) VAT invoice for every sale, barter or exchange of goods or properties; and (b) VAT official receipt for every lease of goods or properties and for every sale, barter or exchange of services.
  • If an official receipt/invoice states “This Document is not valid for claim of input tax,” the taxpayer-purchaser is not entitled to claim input VAT credits. (Pag-Asa Steel Works, Inc. v. BIR, CTA Case No. 9506, September 2, 2020

 

PHP 115 TAX REFUND GRANTED; PAGCOR CONTRACTEES AND LICENSEES ARE EXEMPT FROM INCOME TAX; REFUND OF ERRONEOUSLY OR ILLEGALLY PAID INCOME TAX SHALL BE FILED WITHIN 2 YEARS COUNTED FROM THE FILING OF THE ANNUAL INCOME TAX RETURNS.

 

  • The CTA granted the taxpayer’s claim for refund of erroneously or illegally paid tax due to its exemption as PAGCOR’s licensee.
  • Under the law and Bloomberry Resorts Case, PAGCOR is exempted from income tax in lieu of the 5% franchise tax. PAGCOR’s exemption extends to its contractees and licensees.
    • In this case, the taxpayer was able to show that it is an entity duly authorized and licensed by PAGCOR.
    • The taxpayer was also able to demonstrate that the Consortium to which it belongs remitted license fees to PAGCOR in relation to its gaming revenues.
    • Lastly, with the documentary and testimonial evidence, the taxpayer was able to substantiate its claim for refund
  • Further, under the rules, claims for refund of erroneously or illegally paid taxes should be filed within 2 years from the date of payment of tax or penalty. Specifically, in case of income taxes, the period shall run from the time of the filing of the Final Adjustment Return or Annual ITR.
    • The BIR erroneously argued that the prescriptive period shall run from the filing of the Quarterly ITR as the quarterly tax payments are mere advance payment of the annual corporate income tax. (Premiumleisure and Amusement, Inc. (PLAI) v. CIR, CTA Case No. 9798, September 2, 2020)

 

P10 MILLION REFUND OF INPUT VAT ARISING FROM ZERO-RATED SALES GRANTED; REQUISITES OF REFUND.

 

  • CTA granted the taxpayer’s claim for refund of input taxes from its zero-rated sales.
  • The following are the requisites for the claim of refund of input VAT
    • The administrative claim with the BIR should be filed within 2 years from the close of the taxable quarter when the pertinent zero-rated sales were made.
      • In case of full or partial denial of the refund claim, or the failure on the part of the BIR to act on the said claim within a period of 120 days [now 90 days], the judicial claim should be filed with the court, within 30 days from receipt of the decision or after the expiration of the said 120 [now 90] days.
      • If the BIR decides after the lapse of the period, the BIR’s decision is inconsequential in the determination of the timeliness of the claim.
    • Taxpayer is a VAT-registered person
      • The taxpayer is engaged in zero-rated or effectively zero-rated sales
        • Sale of goods or services to person whose exemption under the special laws effectively subjects the supply of goods or services to zero-rated VAT.
        • Under the law, all Renewable Energy Developers shall be entitled to  zero-rated VAT on its purchases of goods and services needed for the development, construction, and installation of its plant facilities.
        • RE Developers must have secured a DOE Certificate of Registration, Registration with the Board of Investment, and Certificate of Endorsement by the DOE
      • for zero-rated sales the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations;
    • On input taxes:
      • the input taxes are not transitional input taxes;
      • the input taxes are due or paid;
      • the input taxes have not been applied against output taxes during and in the succeeding quarters; and

the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of the sales volume. Gamesa Eolica SL-Unipersonal Philippine Branch v. CIR, CTA Case No. 9668, September 2, 2020)

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BIR DEADLINES from OCTOBER 12 to 16, 2020.

A gentle reminder on the following deadlines, as may be applicable:

 

DATE FILING/SUBMISSION
October 12, 2020 · E-Filing of 1601C – eFPS filers under Group D – Month of September 2020
October 13, 2020 · E-Filing of 1601C – eFPS filers under Group C – Month of September 2020
October 14, 2020 · E-Filing of 1601C – eFPS filers under Group B – Month of September 2020
October 15, 2020 · E-Filing of 1601C – eFPS filers under Group A – Month of September 2020

· E-filing/filing and E-payment/payment of 1702RT, MX and EX with required attachments – FY ending June 30, 2020

· Registration of Bound Loose Leaf Books of Accounts/Invoices/Receipts and other Accounting Records – FY ended September 30, 2020

· E-payment of 1601C, for Group E, D, C and B – Month of September 2020

· Submission of Quarterly List (with monthly breakdown) of Contractors of Government Contracts entered into by the Provinces/Cities/Municipalities/Barangays – CQ ending September 30, 2020

· Filing and payment of 1707A by Corporate Taxpayers – Fiscal Year ending June 30, 2020

· Payment of 2nd Installment of Income Tax Return for Self-employed individuals – CY 2019

· Submission of List of Medical Practitioners – CQ ending September 30, 2020

· Filing & Payment of 1704 – FY ending September 30, 2019

· E-Submission of Quarterly Summary List of Machines (CRM-POS) sold by all Machine Distributors/Dealers/Vendors/Suppliers – TW ending September 30, 2020
October 16, 2020 · Submission of Consolidated Return of All Transactions based on the Reconciled Data of Stockbrokers – October 1 -15 2020

 

sale, barter, exchange or other disposition of shares of stock in closely heLD corporations THROUGH INITIAL PUBLIC OFFERING shall noT BE subject to the tax.

 

  • The Secretary of Finance issued RR No. 23-2020, repealing the tax on initial public offering (IPO) of shares of stocks under theBayanihan to Recover as One Act (Republic Act No. 11494) or the Bayanihan II.
  • Thus, every sale, barter, exchange or other disposition of shares of stocks in closely held corporations through IPO shall no longer be subject to tax imposed by said section upon effectivity of the Bayanihan II on September 15, 2020.
  • For your reference, a copy of the issuance may be accessed
  • https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2023-2020.pdf
  • (Revenue Regulations No. 23-2020, 30 September 2020)

 

 

no additional DOCUMENTARY STAMP TAX shall apply to term extensions and credit restructuring, micro-lending including those obtained from-pawnshops and extensions thereof granted by covered institutions for loans falling due, or any part thereof, on or before December 31,2020.

 

  • The Secretary of Finance implements Section 4 (uu) of RA No. 11494 (Bayanihan to Recover as One Act) on the exemption from Documentary Stamp Tax of loans extended or credits restructured.
  • It provides that no additional DST shall apply to term extensions and credit restructuring, micro-lending including those obtained from-pawnshops and extensions thereof granted by covered institutions for loans falling due, or any part thereof, on or before December 31,2020.
    • Covered institutions are the all lenders, including but not limited to banks, quasi-banks, financing companies, lending companies, real estate developers, insurance companies providing life insurance policies, pre-need companies, entities providing in-house financing for goods and properties purchased, asset and liabilities management companies and other financial institutions under the supervision of the Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), and the Cooperative Development Authority (CDA), public and private, including the Government Service Insurance System (GSIS), the Social Security System (SSS) and Home Development Mutual Fund (Pag-IBIG Fund).
  • On the other hand, inter-bank loans and bank borrowings shall be subject to the DST imposed under Section 179,195 and 198 of the NIRC, as amended.
    • Interbank loan shall include, among other things, (a) interbank call loan (IBCL) transactions; (b) borrowings evidenced by deposit substitute instruments; (c) purchases of receivables with recourse. It shall not include funds borrowed by banks from trust departments of banks or investment houses.
  • For your reference, a copy of the issuance may be accessed
  • https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2024-2020.pdf
  • (Revenue Regulations No. 24-2020, September 30, 2020)

 

 

NET OPERATING LOSS FOR TAXABLE YEAR 2020 AND 2021 IS ALLOWED TO BE CARRIED OVER AS DEDUCTION FROM GROSS INCOME FOR THE NEXT FIVE (5) CONSECUTIVE YEARS IMMEDIATELY FOLLOWING THE YEAR OF SUCH LOSS.

 

  • The Secretary of Finance prescribes the rules and regulations to implement Section 4 (bbbb) of RA No. 11494 (Bayanihan to Recover as One Act) relative to Net Operating Loss Carry-Over (NOLCO) under Section 34 (D)(3) of the NIRC, as amended.
  • It provides that unless otherwise disqualified from claiming the deduction, the business or enterprise which incurred net operating loss (excess of allowable deduction over gross income of the business in a taxable year) for taxable years 2020 and 2021 shall be allowed to carry over the same as a deduction from its gross income for the next five (5) consecutive taxable years immediately following the year of such loss.
  • The net operating loss for said taxable years may be carried over as a deduction even after the expiration of RA No. 11494 provided the same are claimed within the next five (5) consecutive taxable years immediately following the year of such loss.
  • It also provides that the NOLCO shall be separately shown in the taxpayer’s income tax return (also shown in the Reconciliation Section of the Tax Return) while the unused NOLCO shall be presented in the Notes to the Financial Statements showing, in detail, the taxable year in which the net operating loss was sustained or incurred, and any amount thereof claimed as NOLCO deduction within five (5) consecutive years immediately following the year of such loss.
    • The NOLCO for taxable years 2020 and 2021 shall be presented in the Notes to the Financial Statements separately from the NOLCO for other taxable years. Failure to comply with this requirement will disqualify the taxpayer from claiming the NOLCO.

 

  • For your reference, a copy of the issuance may be accessed
  • https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2025-2020.pdf
  • (Revenue Regulations No. 35-2020, September 30, 2020)

 

 

DONATION OF PERSONAL COMPUTERS, LAPTOPTS, TABLETS OR SIMILAR EQUIPMENT FOR USE IN TEACHING AND LEARNING IN PUBLIC SCHOOLS ARE EXEMPT FROM DONOR’S TAX UNTIL DECEMBER 19, 2020.

 

  • The Secretary of Finance  implements Section 4 (zzz) of RA No. 11494 (Bayanihan to Recover as One Act) relative to donations of identified equipment for use in public schools.
  • Donor/s of personal computers, laptops, tablets, or similar equipment for use in teaching and learning in public schools shall be entitled to the following tax incentives:
    • Deduction from the gross income of the amount of contribution/donation subject to limitations and conditions;
    • Exemption from the payment of donor’s tax;
    • In case of foreign donation, the importation of personal computers, laptops, tablets, or similar equipment by the Department of Education (DEPED), or Commission on Higher Education (CHED), or TESDA, shall be EXEMPT from value added tax (VAT).
    • In the case of local donation where the personal computers, laptops, tablets, or similar equipment are originally intended for sale or for use in the course of business by the donor, the same shall not be treated as transaction deemed sale. Furthermore, any input tax VAT attributable to the purchase of donated personal computers, laptops, tablets, or similar equipment not previously claimed as input tax shall be creditable against any output tax
  • For purposes of availment of the tax incentives provided under these Regulations, no prior determination or ruling issued by the Bureau of Internal Revenue shall be required.
  • The regulation covers alldonations of personal computers, laptops, tablets, or similar equipment (i.e. mobile phone, printer) for use in teaching and learning in public schools, starting from the effectivity of the Act on September 15,2020 up to December 19, 2020.
  • The amount of donation shall be based on the actual acquisition cost of personal computers, laptops, tablets, or similar equipment donated. If the personal computers, laptops, tablets, or similar equipment donated had already been used, its depreciated value shall be taken into consideration.
  • For your reference, a copy of the issuance may be accessed
  • https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2026%20-%202020.pdf
  • (Revenue Regulations No. 26-2020, October 6, 2020)

 

 

 

Court of Tax Appeals Decisions

 

ISSUANCE OF THE FORMAL ASSESSMENT NOTICE OR FINAL LETTER OF DEMAND WITHIN THE 15-DAY PERIOD GIVEN TO THE TAXPAYER TO REPLY TO PRELIMINARY ASSESSMENT NOTICE RENDERS THE TAX ASSESSMENT VOID FOR VIOLATION OF DUE PROCESS.

 

  • As part of due process in the issuance of tax assessments, a taxpayer is given 15 days from the receipt of the PAN to file a protest with the BIR. It is only after the  lapse of the prescribed 15-day period that the BIR may issue the corresponding FAN/FLD.
    • In this case, the PAN dated February 17, 2014 was received by the taxpayer on March 26, 2014. The taxpayer had fifteen (15) days or until April 10, 2014, within which to respond to the said PAN. However, the BIR issued the subject FLD/FAN on March 28, 2014, which is before the lapse of the said 15-day period for it to protest or respond thereto.
    • Therefore, as the taxpayer is denied of its right to due process, the assessment is considered void.
  • (The Orchard Golf Club and Country Club, Inc. v. CIR, CTA Case No. 9086, September 1, 2020)

 

COMMON CARRIERS ARE EXEMPT FROM LOCAL BUSINESS TAX; REVENUE ORDINANCE REQUIRING PRIOR PAYMENT TO PROTEST LOCAL BUSINESS TAX ASSESSMENT IS VOID.

 

  • The CTA En Bancaffirmed the CTA Division’s decision cancelling the local business tax assessment as dividend and interest income derived by a holding Company is not subject to local business tax.
  • Under the rules, a common carrier is exempted from the payment of local business tax.
    • In the instant case, LRT is considered a common carrier because its operation involves the safe transport of passengers between all railway stations along its current route. Neither does the fact that the nationa government’s continuous ownership through the LRT constitute any bar to the notion that it could be deemed a common carrier. Therefore, it is exempt from local business tax.
  • Under the Local Government Code, prior payment of the assessed local business tax is not necessary for filing a protest. Payment under protest has been specifically provided in case of real property tax assessment. Moreover, local business tax assessment may be protested within 60 days.
    • In the instant case, City of Caloocan’s Revenue Code requires prior payment before protest. It also shortens the period to protest from 60 days to 30 days.
    • Therefore, the ordinance, being in contravention with the Local Government Code, is declared null and void.

(Light Rail Manila Corporation v. City of Caloocan, CTA AC No. 224, September 2, 2020)

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SEC IMPLEMENTS THE MANDATORY 60-DAY GRACE PERIOD FOR ALL LOANS WITH FINANCING COMPANIES, LENDING COMPANIES AND MICROFINANCE NGOS.

  • Among other institutions, financing and lending companies and microfinance NGOs shall implement a one-time 60-day grace period to be granted for the payment of all existing, current and outstanding loans falling due or any part thereof, on or before December 31 2020.
  • The grace period shall apply to each loan whether the borrower has a single loan or multiple loans with the financing companies (FC), lending companies (LC), and Microfinance NGOs (MF-NGOs).
  • FCs, LCs, and MF-NGOs shall not charge or apply interest on interest, penalties, or other charges during the mandatory one-time 60-day grace period to future payment or amortizations of the borrowers.
    • Furthermore, FCs, LCs, and MF-NGOs are prohibited from requiring their clients to waive the application of the provisions of the Bayanihan to Recover As One Act.
    • No waiver previously executed by borrowers covering payments falling due until 31 December 2020 shall be valid.
  • The accrued interest for the one-time 60-day grace period may be paid by the borrower on the staggered basis until 31 December 2020. Nonetheless, this shall not preclude the borrower from paying the accrued interest in full on the new due date.
  • The parties may agree on a grace period longer than 60 days, and/or the payment of accrued interest on a staggered basis beyond 31 December 2020
  • For your easy reference, the SEC Notice may be accessed (SEC Notice, 21 September 2020)

 

SEC PROVIDES GUIDELINES IN THE FILING, INVESTIGATION, AND RESOLUTION OF COMPLAINTS FOR VIOLATION OF THE RIGHT TO INSPECT AND/OR REPRODUCE CORPORATE RECORDS.

 

  • The Circular is issued pursuant to the Revised Corporation Code which provides that corporate records shall be open for inspection by any director, trustee, stockholder or member of the corporation and refusal to provide records is punishable by law. Thus, the SEC promulgates the guidelines in enforcing the right of the members to inspect and/or reproduce corporate records and the procedure for the conduct of investigation for violation of the same.
  • For your reference, the SEC Circular may be accessed (MC No. 25. S. 2020, 20 August 2020)

 

Bureau of Internal Revenue

 

BIR DEADLINES from September 5 to 11, 2020. A gentle reminder on the following deadlines, as may be applicable:

 

DATE FILING/SUBMISSION
October 5, 2020 · E-Filing/Filing & E-Payment/Payment of 2000 (DST) & 2000-OT (One Time Transaction) – for the month of September 2020
October 8, 2020 · Submission of All Transcript Sheets used by Dealers of Automobiles/Manufacturers/Toll Manufacturers/Assemblers/Importers of Alcohol Products, Tobacco Products, Petroleum Products, Non-essential Goods, Sweetened Beverage Products, Mineral Products and Automobiles – Month of September 2020
October 10, 2020 · Filing and payment/remittance of 1601C for Non E-FPS filers for the month of September 2020

· E-submission of monthly E-Sales Report of all taxpayers using CRM/POS with TIN ending in odd number for the month of September 2020

· E-Filing/Filing and e-Payment/payment of BIR Form 1600 with Monthly Alphalist of Payees & 1606 – Month of September 2020

· E-Filing and e-Payment/Remittance of BIR Form 1600 and 1601C withholding tax return for National Government Agencies for the month of September 2020

· Filing and payment/remittance of 2200M Excise Tax Return for the amount of Excise Taxes Collected from payment made to Metallic Minerals for the month of September 2020

· Submission of List of Buyers of Sugar together with a copy of certificate of advance payment of VAT made by each buyer appearing in the List by a Sugar Cooperative – September 2020

· Submission of Information Return on Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill for the month of September 2020

· Submission of Monthly Report of DST Collected and Remitted by the Government Agency for the month of September 2020

· Submission of Transcript Sheets of 2222ORB – Month of September 2020
October 11, 2020 · E-Filing of 1601C – eFPS filers under Group E – Month of August 2020

 

NOTICE OF DISCREPANCY REPLACES NOTICE OF INFORMAL CONFERENCE; TAXPAYER SHALL PRESENT EXPLANATION/DOCUMENTS WITHIN 30 DAYS FROM THE RECEIPT OF THE NOTICE OF DISCREPANCY; FAILURE TO SETTLE SHALL REQUIRE INVESTIGATING OFFICER TO ENDORSE THE CASE FOR ISSUANCE OF THE PRELIMINARY ASSESSMENT NOTICE WITHIN 10 DAYS FROM CONCLUSION OF THE DISCUSSION.

 

  • The Secretary of Finance has issued RR No. 22-2020, amending its previous rules on informal conference. The amendment pertains to the preparation of a Notice of Discrepancy instead of a Notice of Informal Conference.
  • It provides that ifthe taxpayer disagrees with the discrepancy/ies found during the audit/investigation, the taxpayer must present an explanation and provide documents to support his explanation within thirty (30) days from receipt of the Notice of Discrepancy.
  • If despite the discussion of discrepancy, the taxpayer is found liable for deficiency taxes and the taxpayer does not agree to the discrepancy or address the same by paying the deficiency taxes, the investigating office shall endorse the case for issuance of a Preliminary Assessment Notice within ten (10) days from the conclusion of the discussion.
  • For your reference, a copy of the issuance may be accessed (Revenue Regulations No. 22-2020, 15 September 2020)

 

OVERSEAS FILIPINOS INVESTING IN PERSONAL EQUITY AND REQUIREMENT ACCOUNT ARE REQUIRED TO SECURE TAX IDENTIFICATION NUMBER EITHER MANUALLY OR E-MAIL.

 

  • Overseas Filipino (OF) investors who wish to invest in Digital Personal Equity and Retirement Account (PERA) platform are required to secure a Tax Identification Number (TIN) before they can open an account with the banks and become eligible to invest in PERA.
  • OFs may secure their TIN manually through authorized representatives; or via E-mail application.
    • For purposes of this registration, Overseas Filipinos shall not be issued any TIN Card. For applications filed manually, the BIR Form No. 1904 duly stamped received indicating the TIN issued shall serve as proof of registration. On the other hand, for applications filed through email, the acknowledgment receipt/reply to the email is sufficient proof of receipt of such application.
  • For your reference, a copy of the issuance may be accessed HERE. (Revenue Memorandum Circular No. 103-2020, 14 September 2020)

 

 

Court of Tax Appeals Decisions

 

PHP 13 MILLION LOCAL BUSINESS TAX ASSESSMENT UPHELD: TAXPAYER SHOULD APPEAL WITHOUT AWAITING THE DECISION OF THE LOCAL TREASURER AFTER THE LATTER FAILED TO ACT ON ITS PROTEST WITHIN 60 DAYS FROM THE DATE OF FILING OF THE SAID PROTEST.

 

  • The CTA En Bancdenied the taxpayer’s petition to cancel the local treasurer’s assessment for lack of jurisdiction due to failure to appeal on time.
  • Under the rules, in case of notice of assessment issued by the local treasurer, the taxpayer has 60 days from receipt of the notice to file a written protest. The treasurer shall decide the protest within 60 days from the time of filing. The taxpayer shall have 30 days from receipt of the denial of its protest or from the lapse of 60-day period within which to appeal with the court of competent jurisdiction. Otherwise, the assessment becomes conclusive and unappealable.
  • In this case, the taxpayer filed its complaint with the court within 30 days from issuance of the decision of the local treasurer. However, the local treasurer issued its decision after the lapse of 60-day period to decide. The decision of the local treasurer is moot and academic considering that the 60-day period has lapsed. Therefore, the assessment is upheld. (Kuehne + Nagel, Inc., v. City of Paranaque et. Al., CTA EB No. 2208, CTA AC No. 206, September 9, 2020).

 

PHP 1 MILLION LOCAL BUSINESS TAX ASSESSMENT CANCELLED: HOLDING COMPANIES ARE EXEMPT FROM LOCAL BUSINESS TAX ON DIVIDEND AND INTEREST INCOME.

 

  • The CTA En Bancaffirmed the CTA Division’s decision cancelling the local business tax assessment as dividend and interest income derived by a holding Company is not subject to local business tax.
  • The Local Government Code imposes tax on dividends earned by banks and other financial institution. In its enumeration of banks and other financial institutions, a holding company is not expressly mentioned.
    • In this case, Makati City cannot expand the law and legally impose local business tax on dividend income earned by holding companies when the law itself does not expressly provide. (Makati City and the Office of the City Treasurer v. Allons Holdings, Inc., CTA EB No. 2146, CTA AC No. 195 September 01, 2020; see also Makati City Treasurer and City of Makati v. Mermac, Inc., CTA EB No. 2131, CTA AC No. 193, September 2, 2020)

 

LOCAL GOVERNMENT UNIT’S PETITION DISMISSED DUE TO FAILURE TO SUBMIT CITY TREASURER’S AUTHORITY TO FILE THE CASE.

 

  • The CTA En Bancaffirmed the decision of the CTA Division dismissing the case for the City Treasurer’s lack of authority to file the case.
  • Under the rules and prevailing jurisprudence, the City of Treasurer must be authorized by the Sangguniang Panglungsodthrough an ordinance.
    • In the instant case, the City Treasurer failed to submit her authority to file the case. Thus, the case was dismissed (City Treasurer and City of Makati v. Mermac, Inc., CTA EB No. 2131, CTA AC No. 193, September 2, 2020).

 

PRINTED SCREENSHOTS OF OFFICIAL WEBSITE OF FOREIGN GOVERNMENT’S REGISTRY OF COMPANIES ARE SUFFICIENT PROOF IN LIEU OF THE CERTIFICATES/ARTICLES OF FOREIGN INCORPORATION/ASSOCIATION.

 

  • Under the rules, to be entitled to zero-rating, each entity must be supported at the very least by both SEC Certificate of Non-Registration and Proof of Certificate/Articles of Foreign Incorporation.
    • The CTA En Banc has already given imprimatur on the presentation of printed screenshots of the foreign government’s registry of companies in lieu of the Certificates/Articles of Foreign Incorporation/Association.
    • Being official government registry of corporation, the Court accepts printed screenshots of the official websites of other foreign government’s registry of companies as sufficient proof in lieu of the Certificates/Articles of Foreign Incorporation/Association. (CIR v. AIG Shared Services Corporation (Philippines, CTA EB No. 2071, CTA Case No. 9100, September 07, 2020)

 

PHP 2.9 MILLION INPUT VAT REFUND PARTIALLY GRANTED: INPUT TAX, WHICH CANNOT BE DIRECTLY ATTRIBUTED TO A SPECIFIC TYPE OF SALE, SHALL BE ALLOCATED PROPORTIONATELY ON THE BASIS OF VOLUME OF SALES; IF TAXPAYER-PURCHASER ERRONEOUSLY ASSUMED THE INPUT TAX, ITS RECOURSE IS REIMBURSEMENT FROM THE SUPPLIERS.

 

  • The CTA En Banc affirmed the amended decision of the CTA Division partially granting refund of input VAT.
  • Among other, the Court ruled:
    • If the input tax cannot be entirely attributed to a specific type of sale, it must be allocated proportionately on the basis of volume of sales.
    • In case where no input VAT should have been paid, and the taxpayer paid the same, its recourse should have been to seek reimbursement from its suppliers.  There was no distinction which would limit the application of the said doctrine only to a VAT exempt PEZA-registered entity.
    • Machine validated IEIRD is required to properly substantiate the payment of duties and taxes on imported goods.(Taganito Mining Corporation v. CIR, CTA EB No. 1972, CTA Case No. 9057, September 3, 2020)

 

PHP 94 MILLION TAX ASSESSMENT PARTIALLY REDUCED; REQUISITES OF ZERO-RATED SALES; IN PROVING REIMBURSEMENT, TAXPAYER MUST ESTABLISH THE REASONABLE CONNECTION THAT EXPENSES WERE BILLED BY ANOTHER ON BEHALF OF THE TAXPAYER.

 

  • For the supply of services to qualify as VAT zero-rated, the following requisites must be satisfied:
    • The services must be other than processing, manufacturing, or repacking of goods (as shown by the contract);
    • The payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulation (as shown by certificate of inward remittance; unsupported booking commissions in the inward remittance is subject to VAT); and
    • The recipient of such services must be doing business outside the Philippines (as shown by SEC Certificate of Non-Registration of the Company and Memorandum and Articles of Association)
  • The taxpayer must prove that communication expenses and marketing expenses are reimbursement in order to be exempt from withholding tax. It should show a reasonable connection or basis that the said expenses were billed by another on behalf of the taxpayer. (Commissioner of Internal Revenue v. Sabre Travel Network (Philippines), CTA EB No. 1932, CTA Case No. 8678; Sabre Travel Network (Philippines) v. CIR, CTA EB No. 1937, CTA Case No. 8678, September 2, 2020)

 

 

P1M TAX ASSESSMENT UPHELD: IT IS THE DUTY OF THE TAXPAYER TO SUBMIT DOCUMENTS UPON RECEIPT OF SUBPOENA DUCES TECUM; TAXPAYER CANNOT INSIST ON BIR TO CHECK THE RECORDS INSIDE ITS OFFICE PREMISES.

  • As the rules compel submission of documents in case of subpoena duces tecum,it is incumbent upon the taxpayer to ensure prompt and timely transmittal of the records to the BIR. If it wants to prove correctness of the tax return, it should comply with the Subpoena Duces Tecum. It cannot insist that BIR check the records inside its office premises. (8199 Convenience Corporation v. CIR, CTA EB No. 1912, CTA Case No. 8853, September 3, 2020)
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SEC EXTENDS THE DEADLINES AND PROVIDES FOR INTERIM PROCEDURES FOR THE SUBMISSION OF PRINTED/HARD COPIES OF ANNUAL REPORTS.

  • Corporations whose fiscal years ended November 30, 2019 or December 31, 2019, regardless of their SEC registration or license numbers shall have until September 30, 2020 to submit the printed/hard copies of their AFS to the SEC Main Office and Extension Offices.
  • Corporations whose fiscal years ended between January 31, 2020 and June 30, 2020 shall have the following new deadlines:

 

Fiscal Year End New Filing Deadline
January 31, 2020 August 28, 2020
February 29, 2020 September 28, 2020
March 31, 2020 October 27, 2020
April 30, 2020 November 11, 2020
May 31, 2020 October 28, 2020
June 30, 2020 November 27, 2020

 

  • Corporations, which held their annual stockholders’ or members’ meetings during the previously imposed ECQ and MECQ, shall have until September 30, 2020 to submit the printed or hard copies of their GIS to the SEC Main Office and Extension Offices
  • For your easy reference, the Circular may be accessed HERE(SEC Notice, 11 August 2020).

 

SEC EXTENDS THE DEADLINES FOR POSTING OF ADDITIONAL SECURITIES DEPOSIT AND SUBSTITUTION OF SECURITIES DEPOSIT TO ALIGN THE SAME WITH THE DEADLINE OF THE AUDITED FINANCIAL STATEMENTS.

 

  • Posting of additional securities deposit for branch offices whose submission of AFS was extended pursuant to MC No. 17and MC No. 18, all series of 2020 shall be extended until October 29, 2020.
  • The extension for posting of additional securities deposit and substitution of securities deposit shall automatically be applied without the need for a request from the affected branch offices.
  • For corporations incorporated prior to February 23, 2019, the adjustment in the computation of additional securities deposit based on the new figures of Section 143 of the Revised Corporation Code (RCC) and compliance with the increase in initial deposit amounting to P500,000 will commence on August 1, 2020, unless the foreign corporation opts to comply with the minimum amount of P500,000 imposed by the RCC.
  • For foreign corporations licensed on February 23, 2019, or onwards, the minimum of P500,000 shall be imposed, as required by Section 143 of the RCC. Any additional securities deposit for these corporations shall adopt the adjustment in the computation based on the figures of Section 143 of the RCC.
  • In relation to the change of resident agent, the following applications will not incur penalty if payment of appropriate fees are made on or before September 30, 2020. Hence, penalty shall commence to run on October 1, 2020:
    • Applications on request for change of resident agent filed and reviewed before March 16, 2020 with issued Payment Assessment Form (PAF)
    • Applications on request for change of resident agent filed before the quarantine period (ECQ, MECQ, GCQ, MGCQ) but issued a PAF during the quarantine period
    • Applications on request for change of resident agent filed and reviewed during the quarantine period but without issuance of PAF
  • For your easy reference, the Circular may be accessed HERE(SEC Memorandum Circular No. 24, 25 August 2020).

 

Bureau of Internal Revenue

 

BIR DEADLINES from September 6 to 14, 2020 . A gentle reminder on the following deadlines, as may be applicable:

 

DATE FILING/SUBMISSION
September 8, 2020 · E-Submission of e-Sales Report of all Taxpayers using CRM/POS with TIN ending in even number – Month of August 2020

· Submission of All Transcript Sheets used by Dealers of Automobiles/Manufacturers/Toll Manufacturers/Assemblers/Importers of Alcohol Products, Tobacco Products, Petroleum Products, Non-essential Goods, Sweetened Beverage Products, Mineral Products and Automobiles – Month of August 2020
September 10, 2020 · Filing and payment/remittance of 1601C, 0619-E and 0619-F – Non E-FPS filers for the month of August 2020

· E-submission of E-Sales Report of all taxpayers using CRM/POS with TIN ending in odd number for the month of August 2020

· E-Filing/Filing and e-Payment/payment of BIR Form 1600 with Monthly Alphalist of Payees & 1606 – Month of August 2020

· E-Filing and e-Payment/Remittance of BIR Form 1600 and 1601C withholding tax return for National Government Agencies for the month of August 2020

· Filing and payment/remittance of 2200M Excise Tax Return for the amount of Excise Taxes Collected from payment made to Metallic Minerals for the month of August 2020

· Submission of List of Buyers of Sugar together with a copy of certificate of advance payment of VAT made by each buyer appearing in the List by a Sugar Cooperative- for the month of August

· Submission of Information Return on Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill for the month of August

· Submission of Monthly Report of DST Collected and Remitted by the Government Agency for the month of August

· Submission of Transcript Sheets of 2222ORB – Month of August 2020
September 11, 2020 · E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group E – Month of August 2020
September 12, 2020 · E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group D – Month of August 2020
September 13, 2020 · E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group C – Month of August 2020
September 14, 2020 · E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group B – Month of August 2020

 

BIR FURTHER EXTENDS THE DEADLINE FOR BUSINESS REGISTRATION OF THOSE INTO DIGITAL TRANSACTIONS UNTIL SEPTEMBER 30, 2020 WITHOUT PENALTY FOR LATE REGISTRATION.

 

  • For your reference, a copy of the issuance may be accessed (Revenue Memorandum Circular No. 92-2020, September 1, 2020)

 

Court of Tax Appeals Decisions

 

PHP 3 MILLION REFUND ERRONEOUSLY PAID PERCENTAGE TAX; GROSS REVENUE TAX OF 5% IMPOSED ON NON-BANK FINANCIAL INTERMEDIARIES IS BASED ON RECEIPTS.

 

  • The BIR partially granted the taxpayer’s refund of erroneously paid tax from P3.9M to P3.4M arising from overpaid percentage taxes.
  • The following are the requirements in order to prove a claim for refund of taxes erroneously paid or illegally collected.
    • The taxpayer should file a written claim for refund with the BIR within 2 years from the date of payment of tax or penalty;
    • If denied or not acted upon within the 2-year period, the petition for refund should be filed with the CTA within 30 days from receipt of the denial AND within said 2-year period from the date of payment of tax or penalty regardless of any supervening clause
    • The claim for refund must be a categorical demand for reimbursement; and
    • There must be proof of payment of erroneously or illegally collected taxes.
  • In this case, the taxpayer was able to prove the foregoing requirements.The taxpayer is a non-bank financial intermediary subject to 5% percentage tax on its gross receipts (Gross receipt tax or GRT). Under the rules, GRT shall only apply to income actually or constructively received during a taxable period, and the claim of refund is based on error of computation in computation of gross receipts.
    • The Court confirmed that the tax base for GRT purposes should be the income actually or constructively received. Considering that the income subjected to GRT was on accrual basis, the taxpayer erroneously computed its GRT (Aeon Credit Service (Philippines), Inc.  v. CIR, CTA Case No. 9770, July 15, 2020).

 

PHP 2.3 MILLION INCOME TAX REFUND DENIED; SALARIES PAID BY ADB TO FILIPINO CITIZENS ARE SUBJECT TO INCOME TAX.

 

  • The CTA En Bancaffirmed the CTA Division’s decision denying the claim of refund of income tax paid by the ADB employees.
  • Pursuant to the 1965 ADB Charter Agreement, salaries of ADB employees are not subject to tax. However, when the Philippine government ratified the Agreement, it provided for a reservation that it retains the right to tax salaries and emoluments paid by the bank to the Filipino citizens. The BIR issued RMC No. 31-2013 which implements the foregoing rule, which took effect on May 2, 2013.
    • The rules should operate prospectively. Since the tax payments being sought to be refunded pertain to taxable year 2013 and BIR’s RMC took effect on May 2, 2013, the income earned are subject to income tax.
    • Thus, the taxpayer’s claim for refund was denied (Canzon et. al., v. CIR, CTA EB No 2040, CTA Case No. 9384, July 16, 2020).

 

PHP 2.7 BILLION TAX ASSESSMENT CANCELLED; CHIEF OF LARGE TAXPAYER AUDIT DIVISION CANNOT VALIDLY SIGN A MEMORANDUM OF ASSIGNMENT; PAGCOR’S LICENSEES AND CONTRACTEES ARE EXEMPT FROM INCOME TAX ON GAMING REVENUES.

 

  • The CTA En Bancaffirmed the decision of the CTA Division declaring the assessment void, cancelled and withdrawn.
  • Under the rules, a Memorandum of Assignment (MOA) may be construed as equivalent to new letter of authority where the authority of a newly designated revenue officer emanates from, provided that it contains all the necessary elements to establish a contract of agency between the CIR or his duly authorized representative and the new revenue officer.
  • The Revenue Regional Director (RRD) is authorized to issue an LOA. The position equivalent to a RRD for the Large Taxpayers Division, who is authorized to issue the LOA, is the Assistant Commissioner or Head Revenue Executive Assistants (HREA)
    • In the instant case, only the OIC-Chief signed the MOA. He is neither the CIR, RRD nor HREA. Thus the MOA is void and the resulting assessment is also void.
  • Jurisprudence has ruled that PAGCOR’s licensees and contractees, such as the taxpayer in this case,  are exempt from income tax on their gaming revenues.
  • Therefore, the assessment was declared void, cancelled and withdrawn(CIR v. Travellers International Hotel Group, Inc., CTA EB No. 2047, CTA Case No. 9168, July 17, 2020).

 

PHP 37 MILLION LOCAL BUSINESS TAX ASSESSMENT CANCELLED; CITY TREASURER MUST BE AUTHORIZED TO FILE A CASE IN THE FORM OF CITY CHARTER OR RESOLUTION; COMMON CARRIERS ARE EXEMPT FROM LOCAL BUSINESS TAX.

 

  • A local government unit (LGU) has the power to sue through its officials. However, before a city official can exercise the LGU’s power to sue, a law granting such prerogative must first be passed (e.City Charter). Otherwise, a city official can only exercise such power if a resolution is passed by the Sangguniang Panglungsod authorizing him to sue on behalf of the City.
    • In the instant case, the Charter does not provide an express grant of power to the treasurer to initiate and prosecute suits. Neither was there a resolution passed as proof of the treasurer’s authority.
  • Under the Local Government Code, taxes on the gross receipts of transportation contractors and person engaged in the transportation of passengers or freight by hire or common carriers are not subject to local business tax.
    • In this case, the taxpayer is engaged in the business of freight forwarding. It is engaged in international freight and/or cargo consolidation and forwarding by means of air and sea transportation. It is a common carrier not subject to local business tax(City of Paranaque v. Kuehne + Nagel, Inc., CTA EB No. 2130, CTA AC No. 189, Civil Case No. 07-0370, July 17, 2020)

 

PHP 54 MILLION REAL PROPERTY TAX ASSESSMENT UPHELD; REAL PROPERTY TAX EXEMPTION ARISING FROM TAX INCENTIVES IS A QUESTION OF FACT SUBJECT TO PRIOR EXHAUSTION OF ADMINISTRATIVE REMEDIES.

  • The CTA En Banc affirmed the decision of the CTA Division dismissing the taxpayer’s appeal for lack of jurisdiction.
  • When a taxpayer assails the reasonableness of the amount of the real property tax (RPT) or where the issue involves a question of fact, the proper recourse is to pay the assailed the RPT assessment and protest the same with the local treasurer and/or assessor, as the case may be within 30 days from the date of payment. The treasurer and/or assessor shall have 60 days from receipt within which to decide the protest. If the decision is unfavorable, the taxpayer has 60 days to appeal to the local board of assessment appeals, which if the latter decides unfavorably, the matter may be appealed to CBAA within 30 days. If the CBAA’s decision is unfavorable, the taxpayer may appeal with the CTA En Banc(“Prior exhaustion of administrative remedies”).
  • Claiming exemption from RPT raises a question as to the correctness or reasonableness of an assessment, thus, it involves a question of fact which requires exhaustion of administrative remedies.
    • In this case, the taxpayer’s claim of RPT exemption arising from availment of incentives is a question of fact which should be subject to prior exhaustion of administrative remedies. The taxpayer should not have directly resorted to the regular court.
  • Therefore, the resulting assessment issued against the taxpayer is upheld (Jetti Petroleum, Inc. v. Tolentino, CTA EB No. 2093, July 14, 2020)

 

PHP 12 MILLION REFUND OF CUSTOMS DUTIES GRANTED; PETROLEUM FUEL PURCHASED AND DELIVED TO AN ECOZONE FOR THE PRODUCTION OF GLASS PRODUCTS IS EXEMPT FROM CUSTOMS DUTIES AND TAXES.

  • The CTA En Banc affirmed the decision of the CTA Division granting refund.
  • Under the rules, supplies brought into the Ecozone by a duly-registered PEZA enterprise and to be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed, manipulated, manufactured, mixed with foreign or domestic merchandise, whether directly or indirectly related in such activity, shall not be subject to customs laws and regulations and thus exempt from customs duties and taxes.
    • In this case, the petroleum fuel purchased by the taxpayer which was delivered to its factory inside the economic zone was to be used for the production of glass products. Accordingly, being a PEZA-registered ecozone export enterprise, the passed-on customs duties on the said purchases may be a proper subject of a claim for refund.

Therefore, the refund was granted (BOC v. Pioneer Float Glass Manufacturing, Inc., CTA EB No. 1973, CTA Case No. 8752, July 14, 2020)

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BIR further extends the deadline for business registration of those into digital transactions until September 30, 2020 without penalty for late registration

For your reference, a copy of the issuance may be accessed HERE. (Revenue Memorandum Circular No. 92-2020, September 1, 2020) 

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BIR DEADLINES from September 6 to 14, 2020

A gentle reminder on the following deadlines, as may be applicable:

DATE FILING/SUBMISSION
September 8, 2020
  • E-Submission of e-Sales Report of all Taxpayers using CRM/POS with TIN ending in even number – Month of August 2020
  • Submission of All Transcript Sheets used by Dealers of Automobiles/Manufacturers/Toll Manufacturers/Assemblers/Importers of Alcohol Products, Tobacco Products, Petroleum Products, Non-essential Goods, Sweetened Beverage Products, Mineral Products and Automobiles – Month of August 2020
September 10, 2020
  • Filing and payment/remittance of 1601C, 0619-E and 0619-F – Non E-FPS filers for the month of August 2020
  • E-submission of E-Sales Report of all taxpayers using CRM/POS with TIN ending in odd number for the month of August 2020
  • E-Filing/Filing and e-Payment/payment of BIR Form 1600 with Monthly Alphalist of Payees & 1606 – Month of August 2020
  • E-Filing and e-Payment/Remittance of BIR Form 1600 and 1601C withholding tax return for National Government Agencies for the month of August 2020
  • Filing and payment/remittance of 2200M Excise Tax Return for the amount of Excise Taxes Collected from payment made to Metallic Minerals for the month of August 2020
  • Submission of List of Buyers of Sugar together with a copy of certificate of advance payment of VAT made by each buyer appearing in the List by a Sugar Cooperative- for the month of August
  • Submission of Information Return on Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill for the month of August
  • Submission of Monthly Report of DST Collected and Remitted by the Government Agency for the month of August
  • Submission of Transcript Sheets of 2222ORB – Month of August 2020
September 11, 2020
  • E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group E – Month of August 2020
September 12, 2020
  • E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group D – Month of August 2020
September 13, 2020
  • E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group C – Month of August 2020
September 14, 2020
  • E-Filing of 1601C, 0619-E & 0619-F – eFPS filers under Group B – Month of August 2020
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