Competence. Integrity. Commitment.

BIR RULINGS

• Income received directly in connection with the construction/development of socialized housing units under the Government’s Socialized Housing Program is exempt from project-related income taxes, creditable withholding tax, and value added tax (VAT).
  • However, the purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project. (BIR Ruling No. PSH-267-2021, July 26, 2021).

• COMELEC is exempt from 12% VAT or 3% percentage on its local purchases of goods and services as well as importation of goods that will be used relative to the conduct of elections.
  • Thus, the suppliers/sellers of goods and services to COMELEC cannot shift or pass on any VAT or percentage to COMELEC on the latter’s purchases of goods and services that will be used in the election.
  • The exemption may only be invoked by COMELEC and does not extend to suppliers with respect to the latter’s purchases and other contractual arrangements.
  • The supplier is not entitled to the tax exemption but shall be considered as the end-user who will bear or assume the burden of the tax (VAT or Percentage tax). The suppliers/sellers of goods and services to COMELEC cannot shift or pass on any VAT or percentage tax to COMELEC on the latter’s purchases of goods and services that will be used in the elections. (BIR Ruling No. OT-268-2021, July 25, 2021).

• An entity engaged by the National Housing Authority (NHA), is exempt from project-related taxes/creditable withholding tax (CWT). Income received directly in connection with the conversion and enhancement of developed lots and completed housing units shall be exempt from value-added tax (VAT). The exemption from VAT shall only apply to sale of house and lot and other residential dwellings valued at P3,199,200.00. However, an indirect tax shall be subject to VAT. (BIR Ruling NSH-269-2021; NSH-270-2021; NSH-271-2021; NSH-272-2021, July 25, 2021). 

• A Non-Stock Savings and Loan Association (NSSLA), a non-profit organization, which obtains funds exclusively from its members and does not transact business with the general public, it is considered view that Gross Receipts Tax on its lending activities is not warranted for as long as such transactions do not fall under the contemplated activities as defined by law and its rules and regulations. (BIR Ruling No. OT-274-2021, July 27, 2021).

• If the company maintains a reasonable private retirement plan, the retirement benefits that will be received by the employees shall be exempt from income tax, provided that the two (2) conditions are met: (1) the employee had been in the service of the same private firm for the last 10 years and (2) he is at least 50 years old at the time of retirement.
  • If the retirement plan was not approved by the BIR, the Labor Code shall apply, which provides that the retirement benefit shall be exempt from income tax provided that the employee had been in service for at least 5 years and at least 60 years old but not beyond 65 years old at the time of retirement. (BIR Ruling No. OT-281-2021, August 2, 2021)

• 6% capital gains tax is imposed in the sale , exchange  or other disposition of the real property located in the Philippines.
  • Disposition includes all kinds of disposition unless specifically excluded by the law or subject to another tax.  Lot Swapping Agreements is considered a disposition subject to capital gains tax and documentary stamp tax. (BIR Ruling No. OT-291-2021, August 3, 2021;BIR Ruling No. OT-281-2021)

• The following are conditions in order that the earnings of a retirement fund may be exempt from income tax  (1) the contributions are made to the trust by the employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust and 2) no part of the income to be used for or diverted to purposes other than the exclusive benefit of the employees.
  • It is still however subject to other applicable taxes such as DST, stock transaction tax (BIR Ruling OT-282, August 2, 2021)

• Income derived by inventors of patented products shall be exempted from income tax only during the first ten (10) years from the date of first sale subject to the rules of the Department of Finance.
  • The technologies, manufacture or sale shall be also exempt from payment of license, permit fees, custom duties and charges on imports.
  • The same privilege shall be extended to the legal heir or assignee upon the death of the inventor, and not for any other entity that commercially produces and distributes the invented products.
  • Any income received by the entity from such production/distribution/marketing is subject to the payment of appropriate taxes (BIR Ruling No. INV-292-2021, August 2021)

BIR RULINGS

• Donations made for the use of the National Government or any entity created by any of its agencies which is not conducted for profit or to any political subdivision of the said Government shall be exempt from the donor’s tax.
  • Furthermore, the Deed of Donation is not subject to documentary stamp tax, but only to the documentary stamp tax on the certification. (BIR Ruling No. DT-212-21, June 16, 2021).
• Donations to the Government, its agencies or political subdivisions are deductible in full from the cross income of the donor.
  • However, donations not in accordance with the National Priority Plan are subject to limited deductibility or deductions to an amount not exceeding 10% in the case of an individual and 5% in the case of a corporation of the taxpayer’s taxable net income as computed without the benefit  of this deduction.
  • Expenses incurred by the adopting entity for the “Adopting-a-School Program” shall be allowed an additional deduction from the gross income equivalent to fifty percent (50%) of such expenses.
  • Furthermore, donations made for the use of the National Government or any entity created by any of its agencies which is not conducted for profit or to any political subdivision of the said Government shall be exempt from the donor’s tax.
  • Thus, the amount incurred by the donor corporation for the proposed provision of educational supplies and educational incentives and the implementation of feeding programs in several schools of the Department of Education is fully deductible from gross income plus additional deduction equivalent to 50% thereof and is exempt from donor’s tax.(BIR Ruling No. DT-213-21, June 16, 2021).
• Retirement benefits received under the Labor Code shall not be included in the gross income and therefore not forming part of the taxable income.
  • Under the Labor Code, in absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of 60 years or more, but not more than 65 years which is declared the compulsory retirement age, who has served at least 5 years in the service of the same employer may retire and shall be entitled to retirement pay equivalent to at least ½ month salary for every year of service, a fraction of at least 6 months, being considered as one whole year.
  • Furthermore, the terminal pays not exceeding ten (10) days during the year are not subject to income tax and to the withholding tax. However, it is not applicable to sick leave credits since and employee must actually go on sick leave to be avail of said leave credits
  • Exemption does not include the payment of the separated employees’ salaries and the payment of the 13^thmonth pay and other benefits in excess of the Php90,000.00. (BIR Ruling No. OT-214-21, June 21, 2021).
• A non-stock, non-profit corporation or association organized and operated exclusively for educational purposes shall be exempt from taxes and duties, if its revenues are actually, directly and exclusively used for educational purposes.
  • Non-stock means no part of its income is distributable as dividends to its members, trustees or officers and that nay profit obtained as an incident to its operation shall, whenever necessary or proper, may be used for the furtherance of the purpose or purposes for which the corporation was organized.
  • Non-profit means that no income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted to the institutions’ purposes and all its activities conducted not for profit.
  • The giving of salaries or allowances to the members of the board of trustees is considered as distribution of equity (including the net income). This is a form of private inurement which the law prohibits in the organization and operation of a non-stock, non-profit corporation. This violates the requirement that no  part of the net income or assets of the corporation shall inure to the benefit of any individual or specific persons. (BIR Ruling No. SH30-215-21, June 21, 2021).
• The Commission on Elections (COMELEC) is exempt from 12% VAT on its  local purchases of goods and services as well as VAT on importation of goods that will be used in automated national and local elections. Thus, suppliers/sellers of goods and services to COMELEC cannot shift or pass on any VAT to COMELEC on the latter’s purchases of goods and services that were actually used for automated national and local elections until the completion of the post-election activities.
  • Furthermore, COMELEC shall no longer withhold and remit to BIR the five percent (5%) final withholding VAT. (BIR Ruling No. VAT-216-21, June 23, 2021).

 BIR RULINGS

• Sale, importation, printing or publication of books and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements shall be exempt from value-added tax.
  • Furthermore, other than non-exempt activities such as the printing of brochures, bookbinding, engraving, stereotyping, electrotyping, lithographing of various reference books, trade books, journals and other literary works, said transactions are subject to VAT; further, sale of books, newspapers, magazines, reviews and bulletin in digital or electronic format or computerized versions, e-books, e-journals, electronic copies, online library services, CDs and software shall be subject to VAT. (BIR Ruling No. VAT-200-21, June 08, 2021).
• Basis in computing capital gains tax in the subsequent sale of shares is the net capital gains or loss realized on the sale, barter, exchange or disposition of shares stock, the identifiable amount of the vendor/transferor’s basis for the property sold or disposed plus expenses of sale/disposition, if any, shall be deducted from the consideration contracted to be paid. In case, however, that the fair market value of the shares of stock sold is greater than the amount of money received, the excess of the fair market value of the shares of stock sold over the amount of money received as consideration shall be deemed as gift subject to the donor’s tax, unless shown to have been made at arm’s length and free from donative intent. (BIR Ruling No. OT-201-21, June 08, 2021).
• The transfer of title of the property by the trustee in favor of the beneficiaries, who are the beneficial owners is not subject to capital gains tax and VAT. There is no sale, exchange or disposition of real property involved, since it is ostensibly just for return of the property to the legal owner and merely acknowledges, confirms and consolidates the legal title and beneficial ownership over the property. (BIR Ruling No. OT-203-21, June 08, 2021).
• Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare parts thereof for domestic or international transport operations shall be exempt from the value-added tax. However, that the exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be subject to the requirements on restrictions on vessel importation and mandatory vessel retirement program of Maritime Industry Authority (MARINA). (BIR Ruling No. VAT-204-21, June 2021).
• If the LGU lacks resources to provide for basic services to the homeowners' association, the latter shall endeavor to provide the same. In recognition of the associations’ efforts to assist the LGUs in providing these basic services, association dues and income derived from rentals of their facilities shall be tax-exempt, provided, that such income and dues shall be used for the cleanliness, safety, security and other basic services needed by the members, including the maintenance of the facilities of their respective subdivisions or villages.  However, if the LGU does not support the association not because it lacks resources but because it does not want to provide financial support to the program involving private properties, Therefore, it shall  be subject to applicable internal revenue taxes on its income from association dues, rentals of their facilities, trade business and other activities (BIR RULING NO. OT-206-21, June 15, 2021).
• Homeowner’s associations shall   complement, support and strengthen local government unit in providing vital services to their members and help implement local government policies, programs, ordinances, and rules.
• Furthermore, income derived from association dues, membership fees, other assessment and charges collected in a purely reimbursement basis and rentals of facilities is exempt from income tax, value-added tax or percentage tax, whichever is applicable, provided, that such income and dues shall be used for the cleanliness, safety, security and other basic services needed by the members, including the maintenance of the facilities of their respective subdivisions or villages. (BIR RULING NO. OT-207-21, June 16, 2021).
• 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 NO. SH30-208-21 & SH30-209-21, June 16, 2021).
• Merger between two (2) non-profit civic associations/organizations and 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-210-21, June 16, 2021).
• Joint ventures involving foreign contractors may also be treated as a non-taxable corporation only if a member foreign contractor is covered by a special license as contractor by the Philippine Contractors Accreditation Board (PCAB) of the Department of Trade and Industry (DTI).(BIR RULING NO. JV-211-21, June 16, 2021).

BIR RULINGS

• Medical, dental, hospital, veterinary and laboratory services (including facilities and medical supplies used in rendering such services) are exempt from VAT, except those rendered by independent professionals. (BIR Ruling No. VAT-073-21, March 18,2021; VAT-074-21, March 18,2021)
• Taxpayers may be allowed to change its accounting method from FIFO to Moving average method provided that such method conforms to the best accounting practice in its trade or business and will clearly reflect the income of the company. (BIR Ruling No. CT 076 to 078-2021, March 18, 2021)
• Transfer by Central Bank-Board of Liquidators of undisposed assets to the National Government is subject to tax, unless it is clearly shown that the transaction is exempt from taxes (BIR Ruling No. CT-080-2021, March 18, 2021)
• Asset Privatization Trust  (now Privatization and Management Office or PMO), as well as corporations and assets held by it, shall be exempt from all taxes, fees, charges, imposts and assessments arising from passing of title from government institutions to the Trust and/or from the Trust to a private acquisitor or buyer imposed by the National Government or any subdivision thereof. Thus, sale of land between the National Government of the Republic of the Philippines through the PMO and the City Government of Makati is exempt from capital gains tax.
  • However, in case of documentary stamp tax, when one party to a taxable document enjoys exemption from the tax, the other party who is not exempt shall be the one directly liable to tax. Since PMO is exempt from DST, the City of Makati is subject to DST. (BIR Ruling CT-081-2021, March 18, 2021)
• Gross payments to the following contractors are subject to 2% withholding tax, whether individual or corporate: general engineering contractors, general building contractors, specialty contractors (quantity surveyors, cost engineers and construction cost specialists) and other contractors enumerated in Section 2.57.2 (C) (BIR Ruling No. OT-082-2021, March 18,2021)
• Estate tax return must be filed within one (1) year from the decedent’s death and in meritorious cases, the Commissioner have the authority to grant a reasonable extension for filing of return not exceeding thirty (30) days from the last day of the deadline (i.e.  difficulty for the heirs to process documents and to travel to provinces to obtain copies of tiles and tax declarations) (BIR Ruling No. OT-083-21, March 18, 2021)
• Entities engaged by the National Housing Authority are exempt from project-related income taxes and creditable withholding tax.
  • The socialized housing units are exempted from VAT provided that the selling price does not exceed Php 3,199,200.00 per house and lot package. Provided further, that beginning January 1, 2021, the exemption from VAT shall only be applicable to house and lot package and other dwellings with selling price not more than Php 2,000,000.000.
  • However, their purchases of goods shall be subject to VAT, even if are to be used for the socialized housing project, since VAT is an indirect tax which can be passed on by the seller of goods/services.
  • Also, the sale of parcels of land in favor of NHA which will be used for the project is exempted from capital gains tax, documentary stamp tax and VAT.(Certificate of Tax Exemption No. JV-085-21, March 24, 2021)
• Income derived by the following are exempted from income and withholding tax
  • Foreign governments
  • Financing institutions owned, controlled or enjoying refinancing from foreign government
  • International or regional financial institutions established by foreign governments.
• Income from their investment in the Philippines in:
  • loans
  • stocks
  • bonds
  • other domestic securities including dividend income
  • Interest on its deposits in banks in the Philippines (BIR Ruling No. 051-2012 CT-084-2021, March 18, 2021) :
• Services other than processing, manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engage in business who is outside the Philippines when services are performed, paid in acceptable foreign currency is subject to zero-rated VAT, without even the necessity of applying for and securing prior approval for VAT zero-rating. Moreover, the taxpayer is entitled to apply for the refund of any excess or unutilized input VAT due or paid attributable to zero-rated services. However, this ruling does not grant/approve claim for refund as it is a separate process subject to requirements. (BIR Ruling No. VAT-075-21, March 18, 2021)

SOCIAL MEDIA INFLUENCERS ARE SUBJECT TO INCOME TAX, VALUE-ADDED TAX (OR PERCENTAGE TAX); SHALL REGISTER WITH THE BIR AND FILE TAX RETURNS; SUBJECT TO ROYALTY TAX AND FOREIGN TAX CREDIT; BIR MAY OBTAIN INFORMATION FROM FOREIGN COUNTRY (Revenue Memorandum Circular No.  97-2021, August 16, 2021)

 BIR FORMS 2307 AND 2316 SHALL BE STORED AND SUBMITTED TO THE BIR (Revenue Regulations No. 16-2021, August3, 2021)

• Submission of BIR Form 2307 as an attachment to SAWT
  • Scan the original copies of the BIR Form 2307 through a scanning machine or device
  • Store the soft copies of BIR Form 2307,using the file format and naming conventions prescribed under the available Modes or submission facilities of the BIR; and
  • Submit the soft copies of the said BIR Form in accordance with the revenue issuances governing the selected modes or submission facilities of the BIR.
• Submission of BIR Form 2316
  • Scan the original copies of the BIR Form 2316 through a scanning machine or device
  • Store the soft copies of BIR Form2316, using the file format and naming conventions prescribed under the available Modes or submission facilities of the BIR; and
  • Submit the soft copies of the said BIR Form in accordance with the revenue issuances governing the selected modes or submission facilities of the BIR.

AVAILMENT OF ESTATE TAX AMNESTY IS EXTENDED UNTIL JUNE 14, 2023; PROOF OF SETTLEMENT OF ESTATE (JUDICIAL OR EXTRA-JUDICIAL) NEED NOT ACCOMPANY THE RETURN AT THE TIME OF FILING BUT REQUIRED BEFORE E-CAR IS ISSUED. (Revenue Regulations No. 17-2021, August 3, 2021)

BIR RULINGS

• Joint venture or consortium formed for the purpose of undertaking construction projects is not taxable as a corporation, provided the joint venture should be:
  • For the undertaking of a construction project
  • Should involve jointing or pooling of resources by licensed local contractors registered with PCAD
  • Local contractors are engaged in construction business;
  •   Joint venture must also be registered with PCAB
•  Furthermore, the joint venture is exempt from income and withholding tax and is not required to file quarterly and final adjustment returns. However, the net income of the co-venturers derived  from the Joint Venture Project  is subject to creditable withholding tax and  the same shall be remitted to BIR by the latter before the distribution of net income  as the co-venturers are separately subject to regular corporate income tax. (BIR Ruling No. JV-056-21, March 2, 2021)
• 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 taxes. (Certificate of Tax Exemption No. SH30-054-21, March 1, 2021; SH30-055-21, March 1, 2021; SH30-059-21, March 3, 2021; SH30-060-21, March 3, 2021; SH30-061-21, March 3, 2021)
•  The classification of a particular real property as being capital or ordinary asset does not depend upon its actual use or the purpose for its acquisition, but on the nature of the business of its registered owner. To be considered as habitually engaged in the real estate business, the taxpayer must consummate during the preceding year at least 6 taxable real estate sale transaction (OT- 065-2021, March 10, 2021)

FILING AND PAYMENT OF TAXES FALLING DUE FROM AUGUST 6 TO 20, 2021 IS EXTENDED FOR 15 CALENDAR DAYS. (Revenue Memorandum Circular No. 91-2021, August 3,2021)

• Deadline of filing of returns and payment of the corresponding taxes due thereon, and submission of reports and attachments, falling within the period from August 6, 2021 to August 20, 2021 for taxpayers under ECQ and MECQ is extended.
• The deadline is extended for a period of fifteen (15) days from August 20, 2021.
• If the ECQ and/or MECQ will be extended, then filing of returns and payment of the corresponding taxes due thereon and submission of reports and attachments shall be extended by 15 days from the lifting of the ECQ and/or MECQ.
• Taxpayer during the period may:
  •  Pay the taxes in the nearest Authorized Agent Banks (AABs), notwithstanding RDO jurisdiction; and
  • File and pay the corresponding tax due to the concerned Revenue Collection Officers of the nearest RDO even in areas where there are AABs.

DEADLINE FOR FILING OF PAPERS, LETTERS, AND DOCUMENTS IN ECQ AND MECQ COVERED AREAS IS EXTENDED. (Revenue Memorandum Circular No. 92-2021, August 9, 2021)

• Face to face meetings of BIR officials and employees with taxpayers/authorized representatives are declared deferred and rescheduled until the lifting of the ECQ and MECQ.
  • Deadline for filing of papers, letter and documents falling on August 6, 2021, during the ECQ and MECQ period and for RDOs and BIR Offices located in ECQ and MECQ covered areas is hereby extended as follows:

• Future declarations of ECQ and/or MCQ will extend the deadline of the submission of the above documents for the same period and will reschedule the face to face meetings of BIR officials and employees.

THE RUNNING OF THE STATUTE OF LIMITATIONS ON ASSESSMENT AND COLLECTIONS OF TAXES IN NATIONAL CAPITAL REGION AND OTHER AREAS IN THE COUNTRY COVERED BY ENHANCED COMMUNITY QUARANTINE (ECQ) AND MODIFIED ECQ (MECQ) IS SUSPENDED. (Revenue Memorandum Circular 93-2021, August 9, 2021)

• The running of the statute of limitations for assessment and collection of deficiency taxes is suspended in the affected jurisdictions while ECQ and/or MECQ is in effect, including any extension/s thereof, and for sixty (60) days thereafter.
• The suspension of the running of the Statute of Limitations shall apply with respect to the issuance and service of assessment notices, warrants and enforcement, and/or collection of deficiency taxes.
•  Future declarations of ECQ and/or MCQ will also suspend the running of the statute of limitations for assessment and collection of deficiency taxes and for 60 days thereafter.

CLARIFICATIONS IN COMPUTATIONS OF DONOR’S TAX IN CASE OF PARTIAL RENUNCIATION OF INHERITANCE (Revenue Memorandum Circular 94-2021, August 10, 2021)

•  General renunciation of an heir on his share from the inheritance is not subject to Donor's Tax.
• Partial renunciation of inheritance is when an heir renounces his share to a specified property but not to the entire properties of the decedent.
• Donor’s tax shall be imposed on the value forgone as a result of such waiver/renunciation.
• Where the value of the property received as a result of the partial renunciation is lower than the total value of the supposed share, the difference is subject to donor’s tax.

ALPHANUMERIC TAX CODE (ATC) FOR EXCISE TAXES ON EXPORTS OF SWEETENED BEVERAGES PRODUCTS PAID THROUGH PAYMENT FORM - BIR FORM NO. 0605 (Revenue Memorandum Order No. 24-202, August 13, 2021)

BIR RULINGS

• Retirement benefits received by officials and employees of private firms with a “reasonable benefit plan” shall be exempt from income and withholding tax. Provided, that the employee had been in the service of the same private firm for at least 10 years and he is at least 50 years old at the time of retirement. In the absence of the retirement plan or agreement regarding the retirement benefits of the employees in the company, an employee who has reached the age of sixty (60) years or more, but not beyond sixty-five (65) years (Compulsory Retirement Age), and rendered the least five (5) years of service in the company may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service and will be likewise exempt from income and withholding tax. Provided, further, that in both case, the benefits granted shall be availed by an official or employee only once. Prohibition against double availment does not apply to separation by reason of retrenchment. (BIR Ruling No. OT-038-21, February 26,2021)
• 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. VAT-041-21)
• Sale of land by a corporation to homeowner’s association under Community Mortgage Program (CMP) is exempted from capital gains tax under the Urban Development and Housing Act of 1992. However, the transaction is subject to documentary stamp tax. (Certificate of Tax Exemption No. CMP-043-21, February 26, 2021; CMP-044-21, February 26, 2021; CMP-048-21, March 1, 2021; CMP-049-21, March 1, 2021; CMP-050-21, March 1, 2021)