- 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Preliminary Assessment Notice, Final Assessment Notice previously issued for pending cases shall be consequently withdrawn and canceled.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:
- Large Taxpayers;
- 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;
- Taxpayers reporting net operating losses for the current taxable year and the immediately preceding two (2) consecutive taxable years; and
- 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)
|More than P50 Million up to P150 Million||Deputy Commissioner
|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)