BIR DEADLINES from OCTOBER 12 to 16, 2020.

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

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)