BIR Updates May 8-14 2023

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

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

Local purchases of goods/services not considered “directly and exclusively used” in the registered project or activity of the Registered Export Enterprise (REE)	Janitorial services Security services Financial services Consultancy services Marketing and promotion Services rendered for administrative operations such as Human Resource, legal and accounting REE is allowed to prove to Investment Promotion Agency (IPA) that any of the local purchase of goods are directly and exclusively used in the registered project or activity In issuance of VAT zero-rating certification, IPA shall be guided by the rule “without such local purchase, the project or activity cannot proceed”
Purchased goods/services used in both registered project or activity and administrative operations	REE to adopt a method to best allocate No proper allocation, the purchase shall be subject to 12% VAT
Basis of VAT zero-rating on local purchase of goods	VAT zero-rating certification issued by the IPA BIR may conduct post-audit investigation/verification that goods are directly and exclusively used by the REE
Local suppliers of goods/services no longer required to apply for approval of VAT zero-rating with the BIR	All pending applications are given accorded VAT zero-rating treatment from filing of application

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

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

Timing of obligation to withhold

Income payment is paid or payable; or
Income payment is accrued or recorded as an expense or asset, in the payor’s book; or
If not yet paid or payable but the same has been recorded as expense or asset in payor’s books, obligation to withhold shall be in the last month of the return period in which the same is claimed as an expense or amortized
In other words, accrual and not cash basis should be applied.

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

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

Business Registration	Conversion of Non-Business Taxpayers (e.g. Employee, E.O. 98) with existing TIN to Business Taxpayers Registration of New Branch Registration of New Facility
Update of Registration (with Certificate of Registration generation)	Addition of Tax Type Registration of Additional Business/Trade Name Registration of Additional Line of Business Change in Registered Name of Non-Individual Taxpayers Update/Change in Registered Address or Transfer of Registration Update/Change of Civil Status

BIR RULINGS

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

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

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

BIR Updates May 8-14 2023

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