Securities and Exchange Commission

• 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)

• 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)

• Public  companies  (PCs)  and  registered  issuers  (RIs)  are  mandated  to  submit  a  new  Manual  on Corporate  Governance  (MCG) within  six  (6) months  from  the  effectivity  date  thereof,  or  until 12  July 2020, but extended up to 30 September 2020.
  • Signatories  of  the  MCG  shall be the company’s Chairman  of the  Board  and  Compliance  Officer.
• MCGs  submitted  with  incomplete  and/or  incorrect  signatories  shall be  deemed  as not  filed.
  • The  imposable  penalties  for non- or late  submission of the  MCG  shall be P10,000 (basic penalty) and P1,000 (monthly penalty). The  monthly penalty  shall accrue  until the  MCG is submitted  to  the  SEC.
  • PCs and  RIs  which  are  publicly listed  in  the  Philippine  Stock  Exchange shall  not  be  covered  by  this Memorandum  Circular  and  shall  continue  to  be  governed  by  SEC  Memorandum  Circular  No.  19,  Series  of 2016,  or  the  Code  of Corporate  Governance  for Publicly -Listed  Companies,  and  related  issuances. The Circular may be accessed HERE(SEC Memorandum Circular No. 19)

 

REGULATED FINANCIAL INTERMEDIARIES’ ONBOARDING PROCEDURES FOR LOW RISK ACCOUNTS.

• The SEC provides rules on simplified onboarding procedures for low risk accounts. It applies to regulated entities authorized by the SEC  to  intermediate and  effect securities  transactions for  and on  behalf  of customers and  are  required  to  conduct  customer  due  diligence.  It includes financial intermediaries  such  as Broker Dealers in Securities, Government  Securities Eligible Dealers,  Investment Houses, Underwriters of  Securities, Investment Company Advisers and Mutual Fund Distributors(“Regulated FIs”).
• The purpose of the memorandum is to have simplified onboarding procedures for Low Risk customers of Financial Intermediaries.
• An account opened and maintained by an individual investor with an initial and subsequent deposit, investment or re-investment amounting to a total of not more than P50,000 shall be considered a “low risk account”
  • The investor shall be allowed to invest in excess of the prescribed limit only for the purpose of exercising his right as a holder of securities (e.g. participation in a stock rights offering, exercise of pre-emptive right, and other similar acts, the non-exercise of which shall result in the dilution or diminution of his holdings)
• Only  individual Filipino investors  shall  be  allowed  to  open  low  risk  accounts. These investors shall be presumed to beneficially own the said accounts. The process for the opening of an account by any legal person such as a corporation or a trust  shall  follow  the  regular  requisites  and  procedures required by the  concerned regulated  FI in  accordance  with  the  relevant  rules  and  regulations  and its internal procedures. Nothing  herein  prevents  a  Regulated  FI  from  adopting a  different  risk-based  approach following  the  said  regular  requisites  and  procedures  in  determining  other  accounts as being low-risk accounts
• Minimum information and documents required in account opening: Complete name of customer, birthdate, e-mail address, address, mobile number, source of income, identification card, signature card
• FI shall implement measures to establish true identity of the customer, during or after the opening of account but not later than 15 days from the date the account is opened
• FI shall review the low risk account in random fashion or otherwise.
  • If an account ceases to be low-risk, normal/regular or enhanced due diligence, should be conducted immediately in accordance with the prescribed rules within 1 month.
  • Low risk accounts showing more than average activities trading activities shall be automatically subject to review of its low risk status.
• The Memorandum is issued in accordance with the SEC’s rules which prescribe a definite customer due diligence (Know Your Customer) requirements for broker dealers in securities, with focus on establishing the customer’s real identity and credit worthiness and elicit information necessary to comply with the suitability requirements.
• The Circular may be accessed (SEC Memorandum Circular No. 31, August 13, 2020)

 

EXCHANGES AND OTHER ORGANIZED MARKETS ARE MANDATED TO HAVE INDEPENDENT DIRECTORS THAT CONSTITUTE 1/3 OF THE MEMBERS OF THE BOARD OF DIRECTORS; AND 4 SECTORAL REPRESENTATIVES.

• SEC promulgates the rules on the number of independent directors and sectoral representatives of exchanges and other organized markets
• Independent Directors shall constitute at least 1/3 of the members of the board of directors of exchanges and other organized markets
  • The independent director of an exchange and organized market shall have relevant experience for at least 3 years prior to his election
• There shall be at least 4 Sectoral Representatives.
  • Sectoral Representatives refer to persons who represent the interests of issuers, investors and other market participants. He is affiliated with an entity that has issued securities traded in the organized market or engaged in the business of investing or investment management, or engaged individually in trading or investing in securities which are traded in an exchange or in an organized market; or engaged in the promotion, development and operation of capital or financial market-related activities other than being an issuer or investor
  • He must have at least 3 years of experience in or working knowledge of the related sector and the capital or financial markets
  • Directors representing the sectors may be elected for a maximum period of 10 years with mandatory cooling off period of at least 1 year after the first 5 years.
• A copy of the Memorandum Circular may be accessed HERE(SEC Memorandum Circular No. 20, 13 August 2020)

 

Bureau of Internal Revenue

 

BIR DEADLINES from AUGUST 16 to AUGUST 23, 2020. A gentle reminder on the following deadlines, as may be applicable:

 

DATE	FILING/SUBMISSION
August 16, 2020	· Submission of Consolidated Return of All Transactions based on the Reconciled Data of Stockholders – August 1 to 15, 2020
August 20, 2020	· Filing and payment of 2550M – Non-eFPS filers – Month of July 2020 · E-Filing/filing and e-Payment/remittance of 1600 WP – Month of July 2020
August 21, 2020	· E-Filing of 2550M – eFPS filers under Group E –  Month of July 2020
August 22, 2020	· E-Filing of 2550M – eFPS filers under Group D –  Month of July 2020
August 23, 2020	· E-Filing of 2550M – eFPS filers under Group C –  Month of July 2020

 

BIR makes available the use of e-AUDITED FINANCIAL STATEMENT (“E-AFS”) System for the submission of attachments to the Income Tax Returns of Taxpayers with Fiscal-Year Accounting Period and in the Submission of Attachments to the Quarterly Income Tax Returns.

• All concerned taxpayers, availing the facilities of the eAFS System, whether or not registered under the Large Taxpayers Service, shall scan the required documents and comply with the BIR-prescribed procedures
  • Taxpayers shall keep the original copies of the digitally submitted documents in accordance. The same shall be presented, upon request, to the BIR. For your reference, the procedure may be accessed (Revenue Memorandum Circular No. 82-2020, August 11, 2020)

 

Court of Tax Appeals Decisions

 

EXCESS TAX CREDIT IN THE CURRENT YEAR CANNOT BE DISALLOWED BY THE BIR AS TAX BENEFIT ACCRUES IN THE SUBSEQUENT YEAR; BIR FORM 2307 MUST BE USED AS CREDIT IN THE SAME QUARTER OF THE TAXABLE YEAR IN WHICH THE INCOME IS EARNED OR RECEIVED, OTHERWISE DISALLOWED.

• The CTA En Bancpartially reversed the decision of the CTA Division with respect to the cancellation of the assessment. Among others, it ruled:
• The examination of books must be limited only to the period indicated in the LOA.
  • The assessment on excess tax credit is void because the coverage of tax assessment is 2009, but the tax benefit from the excess tax credits will be in the succeeding year (2010).
• Tax credits relating to income recognized in the prior year were properly disallowed.
  • In this case, the taxpayer used the BIR Form 2307 in the current year (2009) for the income recognized in the previous year (2008).
  • The Court held that the amount of creditable taxes withheld must be claimed as credit against the income tax liability of the payee in the same quarter of the taxable year in which it was earned or received. The declaration of income earned or received must be made in the same period with the claiming of the related tax credit. The taxpayer, as a payee, should ask for a copy of the BIR Form 2307 within 20 days from the close of the taxable quarter or simultaneous with the income payment.
  • The taxpayer has the duty to prove that the income was recognized in the same period that the related credit was claimed, otherwise, the credit will be disallowed (CIR v. Ayala Property Management Corporation, CTA EB No. 2053, CTA Case No. 9298, July 7, 2020).

PHP 13 MILLION DOCUMENTARY STAMP TAX (DST) REFUND DENIED: EXEMPTION FROM DOCUMENTARY STAMP TAX MUST BE CLEARLY ESTABLISHED; A LENDER’S EXEMPTION FROM DST SHIFTS THE LIABILITY TO A NON-EXEMPT BORROWER.

• The CTA denied the taxpayer’s DST refund. In this case, the taxpayer borrowed a loan from a lender, who is granted tax exemption.
• The law provides that a loan agreement is subject to DST. It is paid by the person making, signing, issuing, accepting or transferring the instrument. In other words, Any of the parties to the transaction shall be liable for the DST. When one of the parties to a loan agreement is exempt from tax, the other party not exempt from tax shall be directly liable for the DST.
  • In this case, the loan agreement is subject to DST. While the lender is granted tax exemption, being a specialized agency of the United Nations and member of the World Bank Group, its exemption is limited to authorized transactions, and loan is not one of them.
  • Even if the transaction is exempt from tax, the borrower-taxpayer in this case is liable as when one of the parties is exempt from tax, the other party not exempt shall be directly liable (South Negros Biopower, Inc. v. CIR, CTA Case no. 9921, July 8, 2020)

PHP 10 MILLION TAX ASSESSMENT PARTIALLY REDUCED; BUSINESS LEAGUE, CHAMBER OF COMMERCE OR BOARD OF TRADE’S EXEMPTION FROM INCOME TAX AND VAT, REQUISITES; REIMBURSEMENT OF EXPENSES IS NOT SUBJECT TO EXPANDED WITHHOLDING TAX (“EWT”); ANNUAL MEMBERSHIP IS NOT SUBJECT TO VAT; REGISTRATION FEES AND SPONSORSHIPS ARE SUBJECT TO VAT.

• The CTA partially reduced the taxpayer’s assessment.
• For business league, chamber of commerce, or board of trade to be exempt from income tax, the following should be established:
  • The entity is not organized for profit. The Certificate of Incorporation must establish the nature of the organization.
  • No part of the net income inures to the benefit of any private stockholder or individual; and
  • The income must not be from any of the properties, real or personal, or from any of their activities conducted for profit.
    • The source of income is a factor in determining whether the income is exempt from tax.
    • The entity must establish that the income is not subject to income tax. If the taxpayer fails to prove exemption, the assessment is valid.
  • Absence of tax exemption certificate does not operate to divest a taxpayer of the exemption that is specifically granted by the law. A Memorandum Circular by the BIR cannot add a registration requirement where there is none to begin with. The Tax Exemption Certificate should merely operate to confirm taxpayer’s entitlement to income exemption.
  • On Expanded Withholding Tax (EWT)
    • Income payments made by top withholding agents to their local/resident suppliers of goods other than those covered by other rates of withholding tax is subject to EWT. If the BIR fails to submit evidence that the taxpayer is a top withholding agent, the taxpayer is not required to withhold tax.
    • Reimbursement of expenses is not subject to withholding. Mere reimbursement of actual expenses/costs without any mark-up or profit element does not constitute income payments, and are, therefore, not subject to income tax and consequently, to withholding tax. Further, reimbursement of expenses, by its very nature, is not income but a mere return of capital.
    • Honorarium is subject to withholding tax.
    • Gift certificates are not subject to withholding tax.
    • Payments for hotel accommodation is not among those items of income payments subject to withholding tax.
  • On Value-Added tax
    • VAT is imposed on sale, barters, exchanges, among others, in the course of trade or business. The phrase in the course of trade or business means the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock nonprofit private organization.
    • Even though the taxpayer proved that it is a business league, chamber of commerce or board state that is exempt from income tax, it must prove that the receipts were derived solely from the mandatory contributions of the members for its operating expenses, and not from rendering services in the course of trade or business.
      • Annual membership fees are not subject to VAT because they are treated as capital and not income. They are held in trust and used for the furtherance of the primary purpose for which the association is incorporated.
      • Registration fees collected from non-members in relation to the conduct of taxpayer’s event is subject to VAT because it is considered as performance of service for a fee as the non-member is permitted to join and participate in the event.
      • Sponsorship fee is also subject to VAT because it is paid in exchange for some benefits relative to the sponsor’s participation in the events of the taxpayer (CTA Case No. 9666, July 8, 2020).

COMPROMISE PENALTY REQUIRES CONFORMITY OF THE TAXPAYER.

• CTA En Bancupheld the CTA amended decision removing the compromise penalty.
• The compromise penalty can only be collected or imposed by agreement between the taxpayer and the BIR. It cannot be imposed without the agreement or conformity of the taxpayer. Otherwise, the imposition is illegal and unauthorized.The fact that the BIR uses the term “compromise penalty” connotes that there should have been prior conformity by the taxpayer. Compromise implies agreement (CIR v. Batangas Electric I Cooperative 1, CTA EB No. 1939, CTA Case No. 8423, July 8, 2020).

5-YEAR PRESCRIPTIVE PERIOD IN CRIMINAL CASES RELATED TO TAX RUNS FROM THE DATE OF TAX VIOLATION, OR IF UNKNOWN, FROM THE DATE OF DISCOVERY THEREOF UP TO THE DATE WHEN CASE IS FILED WITH THE DEPARTMENT OF JUSTICE.

• The CTA En Bancaffirmed the decision of the CTA Division dismissing the criminal case on the ground of prescription.
• Section 281 of the NIRC provides that all violations of any provision of the Tax Code shall prescribe after 5 years. The commencement of the prescriptive period shall run from the a) day of commission of the violation of the law; and (2) if the same is unknown at that time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment.
  • In the second mode, both the date of discovery and the institution of judicial proceedings for investigation and punishment are significant events in the prosecution of any infraction of the Tax Code. As long as the period from the discovery and institution of judicial proceedings for its investigation and punishment up to the filing of the Information in Court does not exceed 5 years, the government’s right to file a criminal action does not prescribe. Conversely, if the period from the institution of judicial proceedings for its investigation up to the filing of the information in court exceeds 5 years, then the government’s right to file an action has been prescribed.
  • In this case, the accused received the FAN in February 2007, and it became final when it failed to file its protest in March 2007. The date when FAN attained finality is the date of discovery of the violation.
  • The complaint affidavit against the accused was filed with the DOJ for preliminary investigation in 2011.
  • The 5-year prescriptive period begins to run in 2011 until 2016. However, the information was filed with the Court in 2018. Therefore, the 5-year prescriptive period had already lapsed (People of the Philippines v. Virgilio Castillo, CTA EB Crim No. 053, CTA Crim Case No. O-663, July 8, 2020).

PHP 94 MILLION TAX ASSESSMENT CANCELLED; RE-ASSIGNMENT OF TAX AUDIT REQUIRES ISSUANCE OF NEW LETTER OF AUTHORITY (LOA)

• The Court cancelled the tax assessment for lack of LOA.
• The law requires that any re-assignment/transfer of cases to another revenue officer shall require the issuance of a new Letter of Authority.
• In this case, the BIR re-assigned the taxpayer’s audit to other examiners without a LOA and in the form of  Memorandum of Assignment (MOA).
• The Court ruled that the MOA cannot be treated as an LOA as any re-assignment requires a new LOA. The said MOA’s fatal infirmity is further highlighted by the fact that it was signed and issued by a Revenue District Officer only and not by a Revenue Regional Director (Jed Marketing Corporation v. CIR, CTA Case No. 9709, July 9, 2020)

PHP 332 MILLION  EXCESS AND UNUTILIZED CWT GRANTED; REFUND MUST BE FILED WITHIN THE 2-YEAR PRESCRIPTIVE PERIOD; FACT OF WITHHOLDING MUST BE ESTABLISHED BY BIR FROM 2307; INCOME MUST BE INCLUDED IN THE TAX RETURN.

• The law grants two (2) options to a taxable corporation whose total quarterly income tax payments in a given taxable year exceed its total income tax due. The taxpayer may either:
  • file a tax refund (either in the form of cash or tax credit certificate) or
  • carry over the excess credit.
    • However, once the carry-over option is chosen actually or constructively it becomes irrevocable for that taxable period.
    • The phrase “for that taxable period” refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer
    • In exercising its option, the corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other.
  • Jurisprudence on claims of refund has dictated the following additional requirements:
    • The claim for refund must be filed within the two- year prescriptive period;
    • The fact of withholding must be established BIR Form 2307, showing the amount paid and the amount of tax withheld therefrom; and
    • The income upon which the taxes were withheld must be included in the return of the recipient (Procter & Gamble Distributing (Philippines), Inc. v. CIR, CTA No. 9634, July 9, 2020).

CRIMINAL CASE DISMISSED: THE BIR MUST ATTACH THE RELEVANT PLEADINGS AND DOCUMENTS IN ITS PETITION; AN APPEAL TO THE DEPARTMENT OF JUSTICE (DOJ) OUTSIDE THE 15-DAY PERIOD SHOULD BE DISMISSED.

• The CTA has jurisdiction over the Petition for Certiorari assailing DOJ’s resolution which affirms the dismissal of a criminal case against a taxpayer.
• The rules require that relevant pleadings and documents be attached and failure to comply with any of the documentary requirements, will be a sufficient ground for the dismissal of the petition. In the case, the BIR failed to attach the Motion for Extension of Time is an omission and a fatal infirmity.
• The DOJ correctly dismissed the criminal case for being filed out of time. Appeal should be taken within 15 days from receipt of the resolution. The period to file an appeal is non-extendible. The BIR filed its appeal beyond the 15-day period. (CIR v. Secretary of Justice, CTA Case No. 10101)

 

PHP 33 MILLION TAX ASSESSMENT CANCELLED; 180-DAY PERIOD WITHIN WHICH TO ACT ON THE PROTEST MAY BE RESET IF THE BIR SENDS ANOTHER NOTICE GIVING THE TAXPAYER TO SUBMIT ADDITIONAL DOCUMENTS SANS TAXPAYER’S REQUEST; THE BIR MUST AWAIT THE LAPSE OF 15-DAY PERIOD GIVEN TO THE TAXPAYER TO RESPOND TO THE PRELIMINARY ASSESSMENT NOTICE (PAN) BEFORE IT ISSUES THE FORMAL ASSESSMENT NOTICE, OTHERWISE ASSESSMENT IS VOID.

• In cases where the BIR failed to act on taxpayer’s protest with request for reinvestigation, the taxpayer has 30 days to appeal to the CTA from the lapse of 180-day period counted the date of submission of additional documents, which shall be made within 60 days from the filing of the protest.
• In this case, the taxpayer submitted supporting documents on April 11, 2014 and the BIR did not act on the protest within 180 days or until October 8, 2014. Supposedly, the taxpayer has 30 days or until November 7, 2014 to appeal to the CTA. Yet, the taxpayer filed the appeal only on January 21, 2015.
• Nevertheless, the court ruled that the appeal was filed within the reglementary period. It based its ruling on the fact that the BIR sent a letter to the taxpayer on June 11, 2014 giving the taxpayer 15 days to submit additional documents. The taxpayer submitted documents on June 25, 2014. Therefore, the BIR had 180 days or until December 22, 2014 to act on the protest. Considering that the BIR failed to act on it, the taxpayer has 30 days or until January 21, 2015 to elevate the case to the court.
  • The Court ruled that it cannot close its eyes to the glaring injustice should it allow the BIR to benefit from his mischievous scheme. Parenthetically, the BIR should not, on its own, have extended the period to submit relevant supporting documents in support of the protest but – having done so – it cannot thereafter escape from its consequence and righteously argue that taxpayer’s appeal was filed out of time.
  • The FAN was issued in violation of the taxpayer’s right to due process; therefore, the assessment is void.
    • The taxpayer has 15 days within which to reply to the PAN. However, it received the PAN 6 days after the PAN was issued or within the 15-day period. PAN is an important part of the due process.
    • The fatal infirmity that attended the issuance of the FLDs and Assessment Notices prior to the lapse of the fifteen (15)-day period to respond to the PAN was not cured by petitioner’s filing of a protest to the FAN (Solutions Using Renewable Energy, Inc. v. CIR, CTA Case No. 8974, July 9, 2020).

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

 

DATE	FILING/SUBMISSION
July 5, 2020	· Filing and Payment of Documentary Stamp Tax for the Month of June · Submission of Summary Report of Certification issued by the President of the National Home Mortgage Finance Corporation for the Month of June
July 8, 2020	· E-submission of monthly E-Sales report of all taxpayers using CRM/POS with TIN ending in even number for the month of June ·  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 for the month of June 2020
July 10, 2020	· Filing and payment/remittance of 1601C – Non E-FPS filers for the month of June ·  E-submission of E-Sales Report of all taxpayers using CRM/POS with TIN ending in odd number for the month of June 2020 · E-Filing/Filing and -Payment/payment of BIR Form 1600 and 1601C withholding tax return for National Government Agencies for the month of June · E-submission of E-Sales Report of all taxpayers using CRM/POS with TIN ending in odd number for the month of June 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 June 2020 · Submission of List of Buyers of Sugar together with a copy of certificate of advance payment of VAT for the month of June · Submission of Information Return n Releases of Refined Sugar by the Proprietor or Operator of a Sugar Refinery or Mill for the month of June · Submission of Monthly Report of DST Collected and Remitted by the Government Agency for the month of June

 

NEW SIN TAX REFORM LAW IS EFFECTIVE ON JANUARY 27, 2020, not JANUARY 1, 2020. The BIR circularizes Republic Act No. 11467  or the New Sin Tax Reform Law which increases the excise tax on alcohol products, tobacco products, and adds new provisions to the National Internal Revenue Code. It provides:

• The Circular clarifies that the law shall be applicable prospectively and shall take effect immediately after its complete publication in a newspaper of general circulation on January 27, 2020 (RMC No. 65-2020, June 30, 2020). For your easy reference, issuance may be accessed 

 

Securities and Exchange Commission

 

SEC MAIN OFFICE RESUMES OPERATION beginning JULY 1, 2020; deadline for the submission of audited financial statements and general information sheet is extended. The SEC notifies the public that its main office resumes operation beginning July 1, 2020 and deadlines for annual reports are adjusted. It provides:

• The Commission shall continue operating at a limited capacity in view of the community quarantine and other health measures being implemented amid the COVID-19 pandemic.
• The Commission shall resume accepting Annual Financial Statements (AFS) and the General Information Sheet (GIS) primarily through the SEC Express Nationwide Submission (SENS) facility, which allows for the submission of reports through courier or registered mail.
• All corporations shall comply with the Commission’s directive that submissions to the SEC Main Office shall be made through courier services, including express delivery services, or through registered mail using the SENS facility at 
• For Audited Financial Statements, the following are new deadlines:

 

Filing Schedule	Last Digit of SEC Registration/License Number
July 1, 2, 3, 6, 7, 8, 9, 10	1 and 2
July 13, 14, 15, 16, 17	3 and 4
July 20, 21, 22, 23, 24	5 and 6
July 27, 28, 29, 30	7 and 8
August 3, 4, 5, 6, 7	9 and 0

• For GIS – Corporations, which held their annual stockholders’ meetings during the ECQ and Modified ECQ in the National Capital Region, may submit their GIS until 31 August 2020, without incurring penalties. The GIS shall be submitted through courier services, including express delivery services or through registered mail using the SENS facility.
• Alternative Modes of Filing:
  • Email Submission – Corporations may continue sending the scanned copies of their duly signed and, if applicable, notarized reports through email. The documents shall be considered received on the date reflected in the Acknowledgment Receipt that the Commission shall send through email. Accordingly, the printed copies may be submitted later or after the prescribed deadlines.
  • Submission to the SEC Extension Offices – Corporations headquartered outside the National Capital Region may continue filing their reports with the SEC Extension Offices, except for Cebu, Baguio and Tarlac. For your easy reference, the issuance may be accessed 

Court of Tax Appeals Decisions

  

A TAXPAYER MAY BE GENERALLY ASSESSED WITHIN 3 YEARS, UNLESS EXTENDED IN THE FORM OF WAIVER; WAIVER MUST INDICATE THE NATURE AND AMOUNT OF TAX DUE; OTHERWISE, IT IS INVALID AND DOES NOT EXTEND THE 3-YEAR PRESCRIPTIVE PERIOD.

• The BIR may assess internal revenue taxes within three (3) years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later, unless extended, as when before the expiration thereof, the BIR and the taxpayer agreed in writing via
• The Waiver, must indicate the nature and the amount of the tax due, to be valid, and would have the effect of extending the three-year prescriptive period to assess. These details are material as there can be no true and valid agreement between the taxpayer and respondent absent these information.
• Where the waivers do not indicate the kind and amount of the taxes to be assessed or collected, they are invalid. Correspondingly, the same did not effectively extend the three-year prescriptive period. Hence, the assessment is void (Panay Electric Company v. CIR, CTA Case No. 9523, June 1, 2020).

A TAX ASSESSMENT STATING THAT THE “INTEREST WILL HAVE TO BE ADJUSTED” IS VOID AS THE AMOUNT REMAINS INDEFINITE.

• An assessment is a written notice and demand made by the BIR on the taxpayer for the settlement of a due tax liability that is definitelyset and fixed.
• If the Formal Letter of Demand/Formal Assessment Notice (FLD/FAN) reveals that although it provides for the computation of the taxpayer’s supposed tax liabilities, the amounts thereof remain indefinite, since the tax dues are still subject to modification. Specifically, the subject FLD-FAN states: “Please take note that the interest will have to be adjusted if paid beyond the date specified therein ().

 

A TAX ASSESSMENT WITH A “REQUEST TO PAY THE DEFICIENCY” IS VOID” CONSIDERING THAT IT IS NOT CONSIDERED A DEMAND.

• The FLD/FAN states “in view thereof, you are requested to pay your aforesaid deficiency income tax, value added tax and documentary stamp tax through the duly authorized agent bank in which you are enrolled, within the time shown in this assessment notice.”
• The request to pay is not a demand to pay. To demand means to “require (a person) to do and is also defined as “the assertion of a legal right.
• An examination of the FLD/FAN would reveal that there is no demand or requirement for the taxpayer to pay the taxes due. The phrase ”you are requested to pay your aforesaid deficiency tax negates the imperative nature and assertion of a legal right of an assessment.
• Correspondingly, the subject FLD/FAN do not purport to be a demand for payment of tax due, which a final assessment notice should supposedly be. Clearly, the subject tax assessments are void, and thus, bear no valid fruit ().

 

A  LETTER OF AUTHORITY (“LOA”) IS NOT SUBJECT TO THE 3-YEAR PRESCRIPTIVE PERIOD; LETTER OF AUTHORITY AND TAX ASSESSMENT DISTINGUISHED.

• The taxpayer questions the Letter of authority issued by the BIR. It argues that as of the date of the issuance of the LOA, the BIR’s right to assess and collect within the 3-year period had already prescribed. It filed the tax returns for 2012 taxable year and the LOA was issued only in 2017.
• The CTA held that the 3-year period is period within the BIR should issue a tax assessment and not an LOA.
• The issuance of an LOA is not subject to the prescriptive period.
• A tax assessment is totally different from an LOA.
  • An assessment is a written notice and demand made by the BIR on the taxpayer for the settlement of a due tax liability that is there definitelyset and fixed. It also signals the time when penalties and interests begin to accrue against the taxpayer.
  • An LOA gives notice to the taxpayer that it is under investigation for possible deficiency tax assessment; at the same time, it authorizes or empowers a designated revenue officer to examine, verify, and scrutinize a taxpayer’s books and records, in relation to internal revenue tax liabilities for a particular period. The LOA commences the audit process and informs the taxpayer that it is under audit for possible deficiency tax assessment.
  • A tax assessment is preceded by an LOA, which entails the examination of a taxpayer’s books of accounts and other accounting records; and the issuance of an LOA does not necessarily mean the subsequent issuance of a tax assessment. Parenthetically, the BIR is not mandated to make an assessment relative to every return filed with it (Hemisphere-Leo Burnett v. Commissioner of Internal Revenue, CTA Case Nos. 9749, June 03, 2020).

A PEZA-REGISTERED ENTITY IS A VAT-EXEMPT ENTITY AND ITS IMPORTATION IS NOT SUBJECT TO VAT, APPLYING THE CROSS-BORDER RULE; IT IS ALSO EXEMPT FROM NATIONAL AND LOCAL TAXES IN LIEU OF 5% GROSS INCOME TAX.

 

• Taxpayer is a PEZA-registered entity.
• The BIR assessed the taxpayer for deficiency VAT on its importation of its construction materials and equipment. It contends that the taxpayer’s tax incentive is not absolute because it is subject to the rules and regulations of PEZA and the conditions set in the Registration Agreement.
• The Court ruled that the assessment is wrong. The taxpayer is a VAT-registered entity, is a VAT-exempt entity under the law. Economic zones (PEZA) are considered a separate customs territory or legal fiction of foreign territory. Even though they are within the Philippines, theyare regarded in law as foreign soil.
  • If it’s treated as a foreign territory, the cross-border rule applies, which states that no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the  territorial border of the taxing authority. Importation into economic zones are considered importationmade into foreign territory and not subject to VAT. Importations made by PEZA-registered enterprises which are located in the ecozones are considered foreign territory and are automatically not subject to VAT.
• The CTA also ruled that the taxpayer, being a PEZA-registered entity, is likewise entitled to exemption from national and local taxes, in lieu of payment of 5% gross income tax
• The taxpayer is automatically entitled to preferentialtax rate. There is no condition imposed upon PEZA-registered entity to enjoy its privileges. Even assuming that the taxpayer is required to obtain approval of PEZA before it can avail of the incentives, the imposition is erroneous because as a PEZA-registered entity it is VAT-exempt (CIR v. Philippine International Air Terminals Co., Inc., CTA EB No. 1918, CTA Case No. 9123, June 3, 2020)

 

REQUISITES FOR THE CLAIM FOR INPUT VAT REFUND. Jurisprudence has laid down certain requisites which must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT.

• The claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made;
• In case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of [90] days from the date of submission of complete documents in support of the application, the judicial claim must be filed with this Court, within 30 days from receipt of the decision or after the expiration of the said [90]-day period;
• The taxpayer is a VAT registered;
• The taxpayer is engaged in zero-rated or effectively zero-rated sales;
• The acceptable foreign currency exchange proceeds have been duly accounted with BSP rules and regulations in the form of Certificate of Inward Remittance;
• The input taxes are not transitional input taxes;
• The input taxes are due or paid;
• 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 sales volumes;
• The input taxes have not been applied against output taxes during and in the succeeding quarters (Maxima Machineries, Inc. v. CIR, CTA Case No. 9268, June 1, 2020)

 

IN INPUT VAT REFUND, THE DOCUMENTS TO SUPPORT NRFC DOING BUSINESS OUTSIDE THE PHILIPPINES ARE SEC NEGATIVE CERTIFICATION AND FOREIGN BUSINESS REGISTRATION; SERVICE AGREEMENTS AND SCREENSHOTS OF CORPORATE PROFILE ARE NOT SUFFICIENT. 

• In a claim for refund of input VAT for zero-rated sales (e.g. sale to non-resident foreign corporation (“NRFC’) doing business outside the Philippines), each foreign entity must be supported, at the very least, by both  a) SEC certificate of non-registration of corporation/partnership and  b) proof of foreign incorporation/ association/business registration. The said basic documents are necessary because the Philippine SEC’s negative certification establishes that the recipient of the service has no registered business in the Philippines, while the certificate/ articles of incorporation/ association will prove that the recipient of the service is indeed foreign. Furthermore, the former document will tend to satisfy the requirement that the service-recipient is not engaged in trade or business within the Philippines, while the latter document will indicate whether the same service recipient is engaged in business at all.
  • Service agreements and printed screenshotsor corporate profiles are not sufficient to establish that its service recipients are non-resident foreign corporations doing business outside the Philippines. The former document only shows the names of customers to whom it rendered services, but do not, in any way, establish that the service recipients are engaged in business outside the Philippines; while the latter document is self-serving, and lack (Commissioner of Internal Revenue v. Chevron Holdings, Inc., CTA EB No. 1950, CTA Case No. 8946, June 3, 2020)

 

IN INPUT VAT REFUND, INPUT VAT MAY BE ALLOCATED PROPORTIONATELY ON THE BASIS OF SALES VOLUME.

• If the taxpayer is engaged in zero-rated and also in taxable sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.

The law only mandates that the input tax paid or incurred is attributable to a taxpayer’s zero-rated sales. The law does not require that the input tax be directly attributable to zero-rated sales. Input taxes that bears a direct or indirect connection with a taxpayer’s zero-rated sales satisfies the requirement of the law (Id.)