Competence. Integrity. Commitment.

TO INCOME TAX, REGARDLESS THE EMPLOYMENT STATUS OF THE GRANTEE-EMPLOYEE WHO COULD BE A RANK-AND-FILE OR OCCUPYING A SUPERVISORY OR MANAGERIAL POSITION; TAX BASE IS THE FAIR MARKET VALUE; INCONSISTENT PROVISIONS OF RMC NO. 079-2014 ARE REPEALED. Revenue Regulations No. 13-2022, October 7, 2022

• The BIR prescribes the guidelines, procedures and requirements for the proper income tax treatment of equity-based compensation of any kind.
• Equity grants under applicable equity schemes (stock options, restricted share awards, stock appreciation rights, or restricted stock units) of the grantor shall give rise to a realized profit on the part of the grantee-employees.
• The equity grants to be awarded to the employees are for the services being rendered by the said employees.
• The equity grants, once exercised or availed of by the grantee-employee, are considered compensation subject to tax, regardless the employment status of the grantee-employee who could either be rank-and-file or occupying a supervisory or managerial position as Section 32 of the NIRC do not make a distinction for purposes of applying the tax implication on all forms of compensation, including equity-based compensation.
• RR 2-98 - Tax base: fair market value.
  • If the corporation transfers to its employees its own stock as remuneration of the services rendered by the employee, the amount of such remuneration is the FMV of the stock at the time the services are rendered.
• Provisions of RMC NO. 079-2014, dated October 31, 2014, inconsistent with this regulation, are revoked, repealed, or amended accordingly.

VAT ZERO-RATED: HMO PLANS ACQUIRED BY REGISTERED EXPORT ENTERPRISES FOR THE EMPLOYEES DIRECTLY INVOLVED IN THE OPERATIONS OF THE REGISTERED PROJECT OR ENTERPRISE AND FORMING PART OF THE COMPENSATION PACKAGE; HMO TO DEPENDENTS ARE VATABLE. RMC No. 137-2022, October 14, 2022

• The BIR further clarifies the guidelines on the availability of VAT Zero Rate (0%) on Health Maintenance Organization (HMO) plans acquired by Registered Export Enterprises (REEs) and prescribing the uniform template of detailed information thereof.
• The list provided in RMC 24-2022 on cost items that fall under “other expenditures” which are indispensable to the project or activity is not exclusive, as long as the same can be attributed directly to the registered activity of the REE.
• HMO plans acquired by the REEs for the employees directly involved in the operations of the registered project or enterprise and forming part of the compensation package for their health maintenance is zero-rated
• However, the VAT zero-rating shall not extend to HMO plans procured for employees’ dependents, as well as HMO plans for employees not directly involved in the operations of the registered projects or activities of the REE.
• REEs shall provide their suppliers detailed information on the HMP plans acquired.
• Information includes the  department where the employee is assigned (i.e. outbound calls department) and job description (i.e. agent), the type of transaction (i.e. off cycle premium insurance); period covered and the contribution allocated to employee and dependents.

WORK-FROM-HOME IS ALLOWED FOR 30% OF THE TOTAL WORK FORCE FOR INFORMATION TECHNOLOGY BUSINESS PROCESS MANAGEMENT (IT-BPM) SECTOR; 100% ALLOWED FOR IT-BPM REGISTERED BUSINESS ENTERPRISES TRANSFERRING REGISTRATION TO THE BOARD OF INVESTMENT. RMC No. 136-2022, October 14, 2022

• The BIR publishes the Fiscal Incentives Review Board (FIRB) Resolution No. 026-2022 - extending the 70:30 Work-From-Home (WFH) arrangement for Registered Business Enterprises (RBEs) in the Information Technology Business Process Management (IT-BPM) sector and allowing the transfer of registration of existing business enterprises in the IT-BPM to Board of Investments (BOI).
• FIRB Resolution No. 026-22 allows the 30% of the total work force to adopt WFH arrangement for IT-BPM RBE within the ECOZONE or FREEPORT zone, as a temporary measure under the CREATE Law
• The affected RBEs in the IT-BPM sector may be allowed to transfer their registration to the BOI from the Investment Promotion Agency administering an economic zone or freeport zone, where their project is located until December 31, 2022 to adopt 100% WFH.

BIR RULINGS

• Sale of house and lot under economic and low-cost housing project of a company duly registered with the Board of Investments under Executive Order (EO) No. 226 is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project.
  • The exemption is limited in duration and number of units sold.
  •  Sale of units used for commercial purposes such as leasing, retail stores, offices etc. shall be subject to payment of appropriate taxes.
  • Sale of house and lot and other residential dwellings with selling price of not more than P1,919,500 (for residential lot) and not more than  Php 3,199,200 (for house and lot and other residential dwellings)  is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: BOI-LEH-203-2022, BOI-LEH-204-2022, BOI-LEH-205-2022, BOI-LEH-206-2022)

• The Transfer of  club shares from one  trustee-employee to another is not subject to capital gain tax (CGT) because it does not involve any monetary consideration and the trustee-employee merely transfers  legal title to the proprietary share from one nominee of the corporation to another nominee.
  • The transfer is exempt from donor’s tax as there is no donative intent, and the transaction is a bona fide transaction effected solely for business reasons.
  • The Transfer is not subject to documentary stamp tax (DST) as there is no transfer or conveyance to the beneficial ownership of or any right, claim or interest over the share or over the assets.
  • However, the notarial acknowledgement to the Declaration of Trust is subject to DST of P30.00. (BIR Ruling No: OT-207-2022)

• The transfer of electronic gift certificates to the taxpayer is not considered income but a fund if the taxpayer holds the electronic gift certificate in trust of the vendor.
  • However, service fees paid to the taxpayer by its clients constitutes gross income subject to income tax and withholding tax.
  • The issuance of electronic gift certificates is not subject to VAT and as such, Non-VAT receipt is proper. However, the taxpayer shall be subject to VAT and required to issue VAT official receipts on the amount it receives from its customers/clients for the service fees. (BIR Ruling No: OT-208-2022)

• Non-Bank Financial Intermediaries (NBFI) who are not performing quasi-banking functions doing business in the Philippines are generally subject to Gross Receipt Tax.
  • Non-Banks Financial Intermediaries like savings and loan associations are exempt from income tax under the special laws.
  • Further, interest income derived by it from its deposit and deposit substitutes are exempt from 20% final withholding tax.
  • However, Income derived from any properties, real or personal, or any activity conducted for profit, regardless of the disposition is subject to income tax.
  •  BFS are subject to Documentary Stamp Tax (DST), particularly on loan agreements, mortgages, pledges, foreclosures and sales.
  • Moreover, whenever Non-Bank Financial Intermediaries is one of the parties to a taxable  transaction, it shall be responsible for the remittance  of the DST due regardless of who will bear the burden of paying the DST.(BIR Ruling No: OT-209-2022)

• The transfer of title of the property by the trustee in favor of the trustor, who is the beneficial owners is not subject to internal revenue taxes and creditable withholding tax, considering that the transfer and re-conveyance is not motivated by a valuable consideration and merely acknowledges, confirms and consolidates the legal title and ownership over the Property in the name of the Trustor.
  • The transfer of the property to the trustee is not subject to 12% value-added tax because the property is not held primarily for sale to customers or for lease in the ordinary course of trade or business.
  • The transfer and re-conveyance of the property of the Trustor without any monetary consideration is not subject to document stamp tax. However, the notarial acknowledgment is subject to the DST of P30.00 (BIR Ruling No: OT-210-2022)

• Sale of real properties held primarily for sales to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to VAT. The instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale, or otherwise) is not exclusive to those contracts which are executed and notarized. It also includes sale on installment plan thru a Reservation Agreement reckoned from the year the initial payment is made. Therefore, the sale covered by a reservation agreement is subject to VAT. (BIR RulingNo: VAT-211-2022)

BIR ANNOUNCES THE AVAILABILITY OF OFFLINE ELECTRONIC BUREAU OF INTERNAL REVENUE FORMS VERSION 7.9.3 

• Under RMC No. 131 dated September 28, 2022, the BIR announces the availability of Offline e-BIR Package Version 7.9.3 which is downloadable HERE.
• The new Offline eBIRForms Package has the following modifications:
  • Additional Alphanumeric Tax Codes (ATCs) in BIR Form No. 0605 to be used by the International Carriers in paying their taxes in reference to RMO No. 37-2022, to wit:

• Required official e-mail address of the taxpayer to be provided in the eBIRForms profile page. The e-mail shall be used as an additional mode of serving BIR orders, notices, letters, communications and other processes.

TAX VERIFICATION NOTICE (TVN) FOR ESTATE TAX CASES IF DECEDENT HAS NO REGISTERED BUSINESS IS DISCONTINUED.  RMO No.41-2022, September 29, 2022

• In order to comply with the ease of doing business in processing requests for issuance of Certificate Authorizing Registration related to the transfer of properties left by the decedent, issuance of TVN for estate tax cases where the decedent has no registered business is discontinued.

“ASK FOR RECEIPT” NOTICE SHALL BE VALID UNTIL JUNE 30, 2023 AND MUST BE REPLACED BY NOTICE TO ISSUE RECEIPT/INVOICE; DESIGNATED EMAIL ADDRESS TO BE REQUIRED, WHICH SHALL BE USED BY THE BIR TO SERVE. RMO No. 43-2022, September 29, 2022

• The BIR prescribes the policies, guidelines and procedures in the issuance and use of Notice to Issue Receipt/invoice (NIRI) pursuant to Revenue Regulations No. 10-2019
• NIRI shall be displayed in an area conspicuous to the public at the place of business of the seller, including branches and mobile stores.

BIR RULINGS

• Honoraria and allowances granted to the electoral boards/poll workers or persons who rendered election services in the elections are considered compensation income subject to withholding tax because the name by which remuneration is designated is immaterial. Honoria and allowances constitute compensations income.
  • However, the same is not subject to expanded withholding tax because it is received by employees. Withholding tax applies only to those who render service or labor-only for a fee or under a contract of service.
  • The same is also not subject to VAT as the same is received by employees. VAT applies only to teachers performing services in the course of trade or business. (BIR Ruling No: OT-195-2022)
• Sale of house and lot under economic and low-cost housing project of a company duly registered with the Board of Investments under Executive Order (EO) No. 226 is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: BOI-LEH-196-2022, BOI-LEH-197-2022, BOI-LEH-198-2022)
• A non-stock and non-profit corporation with primary purpose of being an educational institution is exempted from income tax and VAT only on revenues or receipts generated from:
  • Tuition fee and other school fees: and
  • Income derived from the operation of cafeterias/canteen, dormitories, and bookstores located within its premises, owned and operated by the corporation to be actually, directly and exclusively used for educational purposes.
  • However, the corporation is liable to all other including those below:
    • Income derived from any of its properties, real or personal, or any activity conducted for profit, which income should be returned for taxation unless they are actually, directly and exclusively used for educational purposes;
    • If engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, its revenues derived therefrom shall be subject to the 12% VAT, in case the gross receipts from such sales exceed Three Million Pesos (Php3,000.000.00), or the 3% (now 1%) percentage tax, if the gross receipts do not exceed Php3,000.000.00; (BIR Ruling No: Certificate of Tax Exemption No: SH30-200-2022, SH30-201-2022, SH30-202-2022)
• Merger between two (2) non-profit civic associations/organizations with consequent transfer of the property is not qualified as a tax-free merger. There must be an exchange of property solely for stock in another corporation. It is clear that in order to qualify as an exception to the recognition of the gain or loss upon the sale or exchange of property, a corporation which is a party to a merger exchanges its property solely for stock in another corporation which is also a party to the merger. (BIR Ruling No: S40M-199-2022).

BIR LIFTS THE SUSPENSION OF THE CONDUCT OF ENFORCEMENT ACTIVITIES AND OPERATIONS COVERED BY OUTSTANDING MISSION ORDERS (MOS) AND REMOVAL OF THE PROHIBITION ON THE ISSUANCE OF NEW MOS AUTHORIZING SUCH ACTIVITIES AND OPERATIONS UNDER REVENUE MEMORANDUM CIRCULAR NO. 77-2022. (RMC No. 127-2022, September 7, 2022)

• Under RMC No. 77-2022 dated May 30, 2022, the BIR suspended and prohibited the all field audits and other field operations covered by outstanding Mission Orders.
• The MOs authorizes the conduct of enforcement activities and operation of any kind, including: ocular inspection, surveillance activities, stock-taking activities and implementation of administrative sanction of suspension and temporary closure of business
• Effective immediately, the BIR lifted and removed the said suspension and prohibition.

THE BIR PROVIDES POLICIES AND GUIDELINES FOR THE ISSUANCE OF INTERNATIONAL CARRIERS SPECIAL CERTIFICATE. RMC No. 37-2022, September 16, 2022

• The said circular covers international carriers applying for International Carriers Special Certificate (ICSC).
• New applicants shall register and secure TIN online via ORUS and upload documents therein.
• Taxes to be paid:
  • Income tax – 2/12% based on Gross Philippine Billings (to be computed using the exchange rate at the time of payment), unless subject to preferential rate or exempted on the basis of applicable tax treaty or international agreement to which the Philippines is a signatory or on the basis of reciprocity
  • 3% percentage tax (common carrier’s tax)
• Application of ICSC:
  • ICSC to be issued only upon payment of common carrier’s tax and 2.5% income tax.
• Regional Director No. 7A – Quezon City shall issue the ICSC

BIR RULINGS

• Sale of house and lot duly registered with the Department of Human Settlements and Urban Development (DHSUD) is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. Moreover, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: PSH-148-2022, PSH-158-2022, PSH-162-2022, PSH-168-2022, PSH-169-2022)

• The purchases of goods/articles under the construction/development of NHA’s Socialized Housing Program is exempt from project-related income tax, creditable withholding tax and value-added tax on its income received directly in connection with the mentioned project. However, the purchases of goods/articles of the said company shall be subject to VAT, even if the said purchases are to be used for social housing projects and must issue VAT exempt official receipts on its gross receipts from the said socialized housing project. (BIR Ruling No: Certificate of Tax Exemption No: NSH-157-2022, NSH-159-2022, NSH-163-2022)

• Sale of house and lot under economic and low-cost housing project of a company duly registered with the Board of Investments under Executive Order (EO) No. 226 is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling Nos: Certificate of Tax Exemption No: BOI-LEH-149-2022, BOI-LEH-150-2022, BOI-LEH-151-2022, BOI-LEH-156-2022)

• A sale of parcel of land by private individuals in favor of homeowners association under a Community Mortgage Program (CMP), is not subject to capital gains tax pursuant to Section 32 (b) of Republic Act (RA) No. 7279, as amended by RA No. 10884.
  • The transaction is, however, subject to documentary stamp tax under Section 196 of the National Internal Revenue Code (Tax Code) of 1997, as amended.
  • Registry of Deeds shall transfer the title only if Certificate Authorizing Registration is used by the BIR. (BIR Ruling No: Certificate of Tax Exemption No: CMP-152-2022, CMP-161-2022, CMP-164-2022, CMP-165-2022, CMP-166-2022)

• A non-stock and non-profit corporation with primary purpose of being an educational institution is exempted from income tax and VAT only on revenues or receipts generated from:
  • Tuition fee and other school fees: and
  • Income derived from the operation of cafeterias/canteen, dormitories, and bookstores located within its premises, owned and operated by the corporation to be actually, directly and exclusively used for educational purposes.
  • However, the corporation is liable to all other including those below:
    • Income derived from any of its properties, real or personal, or any activity conducted for profit, which income should be returned for taxation unless they are actually, directly and exclusively used for educational purposes;
    • If engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, its revenues derived therefrom shall be subject to the 12% VAT, in case the gross receipts from such sales exceed Three Million Pesos (Php3,000.000.00), or the 3% percentage tax, if the gross receipts do not exceed Php3,000.000.00;
  • Acts as an employer and its employees receive compensation income subject to the withholding tax; (BIR Ruling Nos: Certificate of Tax Exemption No: SH30-153-2022, SH30-154-2022, SH30-155-2022)

• The Deed of Absolute Donation being a gift in favor of a religious corporation is exempt from the payment of the donor’s tax pursuant to Section 101 (A) (1) of the Tax Code, subject to the condition that not more than thirty percent (30%) of said gift shall be used by the done for administration purposes.
  • The Deed of Donation is likewise not subject to the Documentary Stamp Tax (DST) under Sec. 196 but only to the DST of P15.00 imposed under Sec. 188.(BIR Ruling No: Certificate of Tax Exemption No: DT-160-2022)

• Borrowing and lending of securities within the borrowing period not exceeding two years and the delivery of the collateral are exempt to capital gains tax (CGT), stock transaction tax and documentary stamp tax (DST)
  • The Lender/Agent and Borrower/ Agent are required to submit bi-annually reports of outstanding and liquidated Securities Borrowing and Lending (SBL) Transactions and Stock Returns within the period provided under (RR) No. 10-2006.
  • Violation of these requirements shall subject the transaction to taxes.
  • Moreover, the transaction shall also be subject to the penalties provided under Sections 248 and 249. (BIR Ruling No: MSLA-167-2022)

• Joint ventures or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the government is not taxable as a corporation for complying with the conditions:
  • The Joint Venture is for the undertaking of construction project;
  • The Joint Venture involves joining or pooling of resources by licensed local contractors (licensed as general contractor by the PCAB);
  • The local contractors are engaged in construction business;
  • The Joint Venture itself is duly licensed by the PCAB; and therefore not subject to the corporate income tax.
    • Moreover, the gross payments are likewise not subject to the two percent (2%) creditable withholding tax, and being exempt from corporate income tax, is not required to file quarterly and final adjustment returns.
    • However, the co-ventures are separately subject to the regular corporate income tax imposed on their taxable income during each taxable year derived by the construction project and the net income of the co-ventures derived from is subject to the creditable withholding tax imposed.

Finally, the co-ventures are required to enroll themselves to the Bureau of Internal Revenue’s Electronic Filing and Payment System (eFPS). The enrollment should be done at the Revenue District Office (RDO) where they are registered as taxpayers. (BIR Ruling No: JV-170-2022)

BIR TO LAUNCH ONLINE REGISTRATION AND UPDATE SYSTEM (ORUS); TAXPAYERS ARE ADVISED TO UPDATE RECORDS USING REGISTRATION UPDATE SHEET (RUS); OFFICIAL EMAIL ADDRESSES SHOULD BE PROVIDED, WHERE THE BIR SHALL SERVE ITS ORDERS, NOTICES, LETTER, AND OTHER PROCESS/COMMUNICATIONS. RMC No. 122-2022

• The BIR prescribes the guidelines in updating the registration information record of taxpayers who will enroll in the Bureau's Online Registration and Update System (ORUS).
• The BIR will launch ORUS allowing taxpayers to register, update and transact registration-related transactions online
• Purpose of Circular: to advise taxpayers to update their registration records to enroll in ORUS
• Taxpayers shall update their registration records, such as e-mail address, contact information using the S1905 – Registration Update Sheet (RUS)
  • Email address should be official email address
  • Email address shall be used in serving BIR orders, notices, letters, and other processes/communications to the taxpayers
• For taxpayers with head office – head office registration shall be updated first before updating the branches
• Employers to inform employees regarding this requirement
• Submission of RUS – via email to the BIR (list may be accessed HERE.

BIR CLARIFIES REMOVAL OF 5-YEAR VALIDITY PERIOD ON RECEIPTS/INVOICES; RECEIPTS/INVOICES EXPIRING BEFORE JULY 15, 2022 ARE NO LONGER VALID AND SHOULD BE RETURNED FOR DESTRUCTION TO THE BIR; P20,000 (FIRST OFFENSE) AND P50,000 (SECOND OFFENSE) FOR USE OF EXPIRED RECEIPTS OR INVOICES RMC No. 123-2022

• The BIR  clarifies the provisions of Revenue Regulations No. 6-2022 relative to the removal of the five (5) – year validity period on receipts/invoices

BIR RULINGS

• The bonus payments granted by the company to its employees are considered compensation income and are not exempt from withholding tax.
  • The employer must withhold from compensation paid on computed amount
  • The company should deduct and withhold the proper tax at the time the income payment is paid (BIR Ruling No: OT-133-2022)
• Sale of house and lot under economic and low-cost housing project of a company duly registered with the Board of Investments under Executive Order (EO) No. 226 is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: BOI-LEH-135-2022)
• Sale of house and lot duly registered with the Housing and Land Use Regulatory Board (HLURB) is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. Moreover, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: PSH-136-2022, PSH-137-2022, PSH-138-2022, PSH-139-2022, PSH-140-2022,  PSH-141-2022, PSH-142-2022, PSH-143-2022)
• The purchases of goods/articles under the construction/development of NHA’s Socialized Housing Program is exempt from project-related income tax, creditable withholding tax and value-added tax on its income received directly in connection with the mentioned project. However, the purchases of goods/articles of the said company shall be subject to VAT, even if the said purchases are to be used for social housing projects and must issue VAT exempt official receipts on its gross receipts from the said socialized housing project. (BIR Ruling Nos: Certificate of Tax Exemption No: NSH-144-2022, NSH-145-2022, NSH-146-2022, NSH-147-2022)

FIELD AUDIT AND OTHER FIELD OPERATIONS ON ALL OUTSTANDING LETTERS OF AUTHORITY (LOA)/ AUDIT NOTICES AND LETTER NOTICES (LN) SHALL BE LIFTED PER INVESTIGATING OFFICE UPON APPROVAL OF THE COMMISSIONER OF INTERNAL REVENUE. (RMC No. 121-2022)

• The BIR prescribes the guidelines on the lifting of suspension of field audit and operations pursuant to Revenue Memorandum Circular No. 77-2022.
• Lifting is on a per Investigating Office upon approval by the Commissioner of Internal Revenue (CIR) of the Memorandum Request.
  • Investigating Office: Revenue District Office, Regional Investigation Division, VAT Audit Section, Office Audit Sections, Large Taxpayer VAT Audit Unit, Large Taxpayers Audit Divisions or National Investigation Division.
• Upon approval of Memorandum Request by the CIR, the Investigating Office shall immediately resume its field audit and other field operations on all outstanding Letter of Authority (LOAs), Audit Notices, and Letter Notices.
• No new LOAs, written orders to audit and/or investigate taxpayers’ internal revenue tax liabilities shall be issued and/or served except:
  •  (a) in those cases enumerated under RMC No. 77-2022
    • Investigation of cases prescribing on or before October 31, 2022, processing and verification of estate tax returns, donor's tax returns, capital gains tax returns and withholding tax returns on the sale of real properties or shares of stocks together with the documentary stamp tax returns related thereto; Examination and/or verification of internal revenue tax liabilities of taxpayers retiring from business; o Audit of National Government Agencies (NGAs), Local Government Units (LGUs) and Government Owned and Controlled Corporations (GOCCs) including subsidiaries and affiliates; and Other matters/concerns where deadlines have been imposed or under the orders of the Commissioner of internal Revenue; and
  • (b) in case of re-issuance/s to replace previously issued LOA/s due to change of revenue officer and/or group supervisors.

TAXPAYERS ENGAGED IN THE EXPORT OF GOODS AND SERVICES, ELECTRONIC COMMERCE (E-COMMERCE) AND LARGE TAXPAYERS ARE MANDATED TO ISSUE ELECTRONIC RECEIPTS OR SALES/COMMERCIAL INVOICE. (Rev. Regs. 8-2022)

The BIR prescribes policies and guidelines for the implementation of the use of the Electronic invoicing/receipting System (EIS)

SALES AND PURCHASE DATA GENERATED AND VERIFIED THRU ELECTRONIC INVOICING/RECEIPTING SYSTEM (EIS) ARE ADMISSIBLE AT THE TIME OF AUDIT OR INVESTIGATION OR VERIFICATION OF THE TAXPAYER. (Rev. Regs. No. 9-2022)

• The BIR prescribes the policies and guidelines for the admissibility of sales documents in electronic format.
•  Sales and purchase data (generated and verified thru EIS) are admissible at the time of audit or investigation or verification of the taxpayer.
  •  Sales/purchase  must comply with information/data requirements under the rules;
  •  Zero-rated stamping is no longer necessary since sales shall be reported to EIS for each classification (VATable, zero-rated and exempt)
• Submission of printed copies of sales invoice or receipts shall no longer be required.
  •   TP must be duly authorized to use the EIS.
  •   EIS may be either web-based format or through Application Programming Interface (API) transmission of sales data.
• Submission of printed invoice/receipts for purchases shall no longer be required.
  •  Suppliers must be using web-based  issuance in the EIS or via SDTS
  •  The purchase data must be validated in the EIS for purposes of input VAT and deductibility of expenses
  •  If not reported in the EIS by the supplier, the sales shall be considered unreported and subject to further investigation
  •  Original form or digital copies, whichever is applicable must be retained in case of demand for verification of data.
• Taxpayers may be required to present/submit hard copies of the receipts or invoices or allowed access to the CAS, under the following instances:
  •   Missing or vague details the invoice/receipts that were transmitted to the EIS, which the investigating revenue officer needs further clarification;
  •   Information are not included in the data required to be transmitted to the EIS;
  •   Validation of export sales data during the verification of VAT refund claims;
  •   Taxpayer is under fraud investigation;
  •   Skipped or missing series in the invoices or receipts issued; and/or
  •   Other instances as may be determined by the CIR
• Sampling may be allowed.
• BIR may access the CAS or POS/CRM machines under EIS to validate whether sales transmitted to EIS matches the sales recorded in the system.
• If taxpayer refuses access to the CAS, the BIR may employ alternative means to verify the records of the taxpayer.
  •  Refusal may also result in possible disallowances or assessments
  •   Violation of revenue regulations on maintenance, retention and submission of electronic records (RR9-2009), may result in the prosecution of the taxpayer.
  •   Acknowledgement Certificate or Permit to Use CAS may also be revoked.
•   Sales and purchases not covered by this regulation shall comply with rules for manual verification of sales and purchases.

BIR RULINGS

• Joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government is not taxable as a corporation provided that the joint venture complied with the conditions provided in RR No. 10-2012. (BIR Ruling No: Certificate of Tax Exemption No: JV-128-2022)
• Income or gain derived by employees from their exercise of the stock options is considered as additional compensation subject to income tax and consequently to withholding tax on compensation. However, if the said stock option is granted to employees holding supervisorial and/or managerial position shall be subject to fringe benefits tax. (BIR Ruling No: OT-130-2022)
• Income derived by the inventor from technologies and invention is exempt from income tax. In addition, the government’s purpose of enacting the Inventors and Inventions Incentives Act is to provide incentives to inventors and protect their exclusive right to the invention, particularly when it is beneficial to the people and contributes to national development and process. (BIR Ruling No: INV-131-2022)
• All contracts, deeds, documents and transactions entered into by the BSP which are related to the conduct of its business are exempt from the payment of DST. (BIR Ruling No: OT-132-2022)
• Transfer of subdivided lots in favor of a housing member-beneficiaries of homeowners’ association is exempt from CGT and CWT considering that the transfer is only a formality to finally effect the transfer of the property to the member-beneficiaries who bought the property from the former owner through the association. In other words, the Association is merely transferring the ownership of the property to its member-beneficiaries who actually own them.
  • Moreover, the transfer is exempt from donor’s tax as there is no donative intent on the part of the association to donate the property to the members-beneficiaries, considering that it could not donate the property the ownership of which already belongs to the members-beneficiaries.
  •  It is not also subject to DST. However, the notarial acknowledgment of the deed of conveyance is subject to the DST of P30.00. (BIR Ruling No: CMP-134-2022)
• Importation of a cargo vessel destined for domestic transport operations shall be exempt from VAT. Provided that the VAT exemptions shall be subject to the requirements on restriction vessel importation and mandatory vessel retirement program of MARINA. (BIR Ruling No: Certificate of Tax Exemption No: VAT-127-2022)
• Sale of house and lot duly registered with the Housing and Land Use Regulatory Board is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: PSH-129-2022)
  •  Sale of house and lot under economic and low-cost housing project of a company duly registered with the Board of Investments under Executive Order (EO) No. 226 is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No:, BOI-LEH-120-2022)
  • Sale of house and lot duly registered with the Department of Human Settlements and Urban Development (DHSUD) is exempt from income tax and creditable withholding tax on its income received directly in connection with the mentioned project. In addition to that, sale of house and lot and other residential dwellings with selling price of not more than Php 3,199,200 is VAT exempted. (BIR Ruling No: Certificate of Tax Exemption No: PSH-121-2022)

COURT OF TAX APPEALS DECISIONS

January 2022

REFUND OF EXCESS INPUT VAT ON ZERO-RATED SALES

Certain requisites must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT related to zero-rated sales. Said requisites are classified into certain categories, to wit:

As to the timeliness of the filing of the administrative and judicial claims:

• The claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made;
• That in case of full or partial denial of the refund claim rendered within a period of ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be filed with the Court of Tax Appeals (CTA) within thirty (30) days from receipt of the decision.
  • The 120 (now 90) + 30-day periods to appeal are both mandatory and jurisdictional. After the lapse of the 120 (now 90)-day period, claimant has 30 days to elevate its claim to the CTA. The claimant need not wait for the decision of the BIR after the 120-(now 90) day waiting period. It should file a judicial claim for refund with the CTA. A waiting period of only 120 (now 90) days and respondent's inaction within the said period is deemed a denial of the claim. (Lepanto Consolidated Mining Company v. CIR, CTA EB No. 2329, CTA Case No. 10153, CTA Case No. 10153, January 5, 2022)

With reference to the taxpayer's registration with the BIR:

• The taxpayer is a VAT-registered person;

In relation to the taxpayer's output VAT:

• The taxpayer is engaged in zero-rated or effectively zero-rated sales;
• Re. Sales of Goods: For zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b), and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations;
  • Re. sales of goods abroad, in order for an export sale to qualify as zero-rated, the following essential elements must be present:
    • the sale was made by a VAT registered person;
    • there was sale and actual shipment of goods from the Philippines to a foreign country, as evidenced by the following:
      • sales invoice as proof of sales of goods; the invoice must comply with the invoicing requirements. (Ametron Incorporated v. CIR, CTA Case No. 9893, January 4, 2022)
      • bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country
        • The sales invoice must indicate the related airway bill or details of items exported. Thus, there is a failure to ascertain whether goods covered by the invoice were actually shipped to the intended foreign customers. (Ametron Incorporated v. CIR, CTA Case No. 9893, January 4, 2022)
    • The sale was paid for in acceptable foreign currency accounted for in accordance with the rules and regulations of the BSP. Amounts shown in the summary of VAT zero-rated sales supported with sales invoices must be traced with certainty to the certificates of inward remittance (Ametron Incorporated v. CIR, CTA Case No. 9893, January 4, 2022)
• Re. zero-rated sales of goods to a BOI-registered entity whose products are 100% exported, the following must be complied with:
  • The supplier must be VAT-registered;
  • The BOI-registered buyer must likewise be VAT-registered
  • The buyer must be a BOI-registered manufacturer/producer whose products are 100% exported. For this purpose, a Certification to this effect muse be issued by the BOI and which certification shall be good for one year unless subsequently re-issued by the BOI
  • The BOI-registered buyer shall furnish each of its suppliers with a copy of the aforementioned BOI Certification which shall serve as authority for the supplier to avail of the benefits of zero-rating for its sales to said BOI-registered buyers; and
  • The VAT-registered supplier shall issue for each sale to BOI-registered VAT invoice with the words “zero-rated” (Rema Tip Top Philippines, Inc. v. CIR, CTA Case No. 9794, January 24, 2022)
•  Re. sales of services, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%), to wit:
  •  The services fall under any of the categories under Section 108(6)(2), or simply, the services rendered should be other than ''processing, manufacturing or repacking of goods” i.e. corporate finance advisory services, training and personnel management, etc. (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022)
  •  The service must be performed in the Philippines by a VAT-registered person.  The agreement must specify that the services shall be performed in the Philippines (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022)
  •  The payment for such services should be in acceptable foreign currency accounted for in accordance with BSP rules. Payment must be supported by Certificate of Inward Remittance. (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022); New York Bay Philippines, Inc. v. CIR, CTA Case No. 9896, January 26, 2022)
  • The recipient of the services is a foreign corporation, and the said corporation is doing business outside the Philippines, or is a nonresident person not engaged in business who is outside the Philippines when the services were performed (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022); New York Bay Philippines, Inc. v. CIR, CTA Case No. 9896, January 26, 2022)
    • in order to be considered as a non-resident foreign corporation doing business outside the Philippines, each entity must be supported, at the very least, by both a Certification of Non-Registration of Corporation/Partnership issued by the Philippine Securities and Exchange Commission (SEC), and proof of incorporation/registration in a foreign country (e.g., Articles/Certificate of Incorporation/Registration).  Failure to provide the documents warrants the denial of the claim (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022; New York Bay Philippines, Inc. v. CIR, CTA Case No. 9896, January 26, 2022; (Rema Tip Top Philippines, Inc. v. CIR, CTA Case No. 9794, January 24, 2022)

As regards the taxpayer's input VAT being refunded:

• 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 volume
• Input tax must comply with invoicing requirements.
• Other matters:

• • A counterclaim in a VAT refund case violates right to due process. In an action for refund of taxes, as the claim for refund is not based on the theory of erroneous payment but is filed to recover excess and unutilized input VAT under Section 112(A) and (C) of the NIRC of 1997, as amended. Excess input tax or creditable input tax is not an erroneously, excessively, or illegally collected tax. If there is a finding of VAT liability on the part of the taxpayer-claimant, the proper recourse would be to subject said taxpayer-claimant to an audit/investigation. The same will start with the issuance of a Letter of Authority (LOA) and thereafter, the issuance of an assessment notice. (Procter & Gamble International Operations SA – ROHQ v. CIR, CTA Case No. 9897, January 19, 2022)
  • Failure to submit supporting documents in the administrative level is not fatal to the claimant’s claim. The taxpayer may present additional documents before the CTA to substantiate its claim for refund, albeit the same were not presented at the administrative level. (CIR v. Plipinas Kyohritsu, Inc., CTA EB No. 2334 (CTA Case No. 9557), January 20, 2022)

REFUND OF EXCESS OR ERRONEOUSLY PAID TAX.

The withholding agent is considered the proper party to file a claim for refund of the withheld taxes. Where excess or erroneously paid tax arose from income payment made by the local taxpayer to a Japanese corporation not doing business in the Philippines, the payor becomes the withholding agent allowed to claim refund of tax. (CIR v. Toledo Power Corporation, CTA EB No. 2359 (CTA Case No. 9465), January 5, 2022)

TAX ASSESSMENTS

• The rules impose a 30-day expiration period for the service of the Letter of Authority (LOA). Upon its expiration, the LOA becomes wholly unenforceable. Thus, where the taxpayer received the LOA 62 days after its issuance, the LOA is void and without effect. (Vanguard Logistics Services, Phils., Inc. CTA Case No. 10155, January 27, 2022)
• Any re-assignment/transfer of cases to another revenue officer requires a new LOA, absence of which renders the assessment void. Thus, where the only basis for the authority of the new examiner to conduct audit was a Memorandum of Assignment (MOA) without LOA, the new examiner is considered not duly authorized to conduct the audit. Even if MOA is considered as LOA, it must be issued by the Assistant Commissioner/Head Revenue Executive Assistants for large taxpayers. Thus, where the MOA was signed only by the chief of the regular LT Audit Division, and not by the Assistant Commissioner/HREA, the assessment is void. (Metro Manila Star Asia Corp v. CIR, CTA Case No. 9302, January 26, 2022)
• The taxpayer must appeal the assessment to the CTA or Commissioner within 30 days from demand. In the absence of the Final Decision on Disputed Assessment, Preliminary Collection Letter (PCL) serves as demand of the BIR. Thus, where the taxpayer based the appeal on the BIR letter-response on the constructive service of the FDDA after the BIR has issued collection letters, and not on the PCL, the appeal is considered filed out of time. (Ten-four Readymix Concrete, inc. v.  CIR, 2311, CTA Case No. 10081, January 25, 2022)
• In tax evasion cases committed through willful refusal to pay taxes, the five-year prescription to file case would begin to run from the taxpayer’s receipt of the notice and demand for payment of the assessed tax deficiency. Thus, where the FAN was served on September 13, 2013, and it attains finality after 30 days or October 14, 2013, to toll the running of five-year prescriptive period, the BIR should have filed a criminal complaint with the DOJ on October 14, 2018. Since the criminal complaint was filed on April 11, 2019, the offense charged had already been prescribed (People of the Philippines v. Angelo R. Balili, CTA Crim Case No. A-8; Case Nos. R-mKT-20-01449-CR and R-MKT-20-01450-CR, January 25, 2022)
• One of the elements of violation of Section 255 is that the accused is a person required to file return, pay tax and supply correct and accurate information. The obligation to pay tax arises either by self-assessment or by BIR’s notice or demand via assessment. If the charge is based on BIR’s assessment, due process must be observed. Thus, where the BIR failed to establish that Notice of Informal Conference was issued to and that PAN and FAN/FLD were received by the accused, the failure to do so renders the assessment void and warrants the acquittal of the accused. (People of the Philippines v. Grand East Empire Corporation and Solania G. Ong, CTA Crim Case Nos. O-779, O-780 & O-781, January 24, 2022)