Competence. Integrity. Commitment.

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

BIR CIRCULARIZES THE LIST OF EXPIRED TAX CREDIT CERTIFICATES. (RMC No. 70-2020, July 17, 2020). For your easy reference, the list of expired tax credit certificates may be accessed HERE.

 BIR CLARIFIES THE ISSUANCE OF THE  AUTHORITY TO RELEASE IMPORTED GOODS (“ATRIG”) FOR VAT EXEMPTION ON THE SALE AND IMPORTATION OF PRESCRIPTION DRUGS AND MEDICINES. It provides:

• The following drugs are exempted from VAT:
  • Diabetes, high cholesterol and hypertension – beginning January 27, 2020
  • Cancer, mental illness, tuberculosis and kidney diseases – beginning January 1, 2023
• For VAT purposes, the ATRIG shall be issued on all importations of articles exempt from VAT.
• Revenue District Office No. 33 - Intramuros-Ermita-Malate shall process application for ATRIG by the manufacturers, distributors, wholesalers and retailers of drugs and medicines included in the "list of approved drugs and medicines" issued by the Department of Health.
• The policies, guidelines and procedures set forth in RMO No. 35-2002 shall be strictly followed and observed (RMO No. 23-2020 dated July 15, 2020). For your easy reference, the issuance may be accessed 

BIR STREAMLINES HANDLING OF CITIZEN’S COMPLAINTS. The BIR prescribes the policies, guidelines and procedures in the handling/resolution of complaints received through the 8888 Citizens' Complaints Center, Presidential Complaint Center, BIR eComplaint System, Contact Center ng Bayan, Anti-Red Tape Authority and other Feedback Mechanisms.

• It classifies the type of complaints, the concerned offices and the monitoring offices.
• The type of complaints includes system and non-system related problems, tax evasion, non-issuance of receipts/invoice, misdemeanor/discourtesy of BIR personnel, corruption and other personnel-rated issues, among others.
• The Public Information and Education Division (“PIED”) shall be the initial recipient of the BIR-related complaints and concerns transmitted to the BIR. It shall classify the complaint and endorse the same to the concerned office for further action (RMO No. 22-2020, June 25, 2020). For your easy reference, the guidelines may be accessed 

SUPREME COURT/Court of Tax Appeals Decisions

ACCUSED ACQUITTED OF TAX EVASION: THE CTA LACKS JURISDICTION OVER THE CRIMINAL CASE FOR FAILURE TO ALLEGE THAT THE PRINCIPAL AMOUNT OF UNPAID TAX IS AT LEAST PHP 1 MILLION; TO SUSTAIN CRIMINAL CONVICTION, FAILURE TO PAY TAX MUST BE ATTENDED WITH WILLFULNESS; LETTER OF AUTHORITY MUST BE PRESENTED TO THE TAXPAYER WITHIN 30 DAYS FROM THE DATE OF ISSUE.

• The accused was acquitted for lack of CTA’s jurisdiction.
  • The law provides that the CTA has jurisdiction over criminal offenses arising from violation of tax and customs law provided that the principal amount of taxes and fees, exclusive of charges and penalties, claimed is at least Php 1 Million; otherwise, if the amount of tax is less than Php 1 Million or no specified amount is claimed, the regular courts shall have jurisdiction over the case.
  • In this case, the information alleged that the accused failed to pay tax in the amount of Php3.8Million, however, the amount is too ambiguous to qualify it as referring to the “principal amount of taxes and fees, exclusive of charges and penalties.”
  • The information did not state that the amount refers to the basic or principal amount of tax liabilities, exclusive of charges and penalties.
  • The allegation is the basis in determining jurisdiction of the court and evidence could not cure the defect in the information. If the information fails to allege matters that specifically vest jurisdiction on the court, the court has no jurisdiction to hear and decide on the case.
• One of the elements of tax evasion is the willfulness character of the taxpayer’s failure to pay.
  • A willful act or omission is described as one done intentionally, knowingly and purposely, without justifiable excuse. It is also shown by circumstantial evidence. Willfulness was not proved as the taxpayer did not receive the BIR notices in the first place/
• Examination of the taxpayer is undertaken through a letter of authority (LOA). A LOA must be presented to the taxpayer within 30 days from the date of issue, otherwise, it is void.
  • In this case, the CTA ruled that it cannot be concluded that the accused received the LOA because it was not proved that the person who received the LOA  is an authorized representative of the Company.
  • Further, the CTA did not accept the prosecution’s evidence of constructive receipt when the staff refused to accept the LOA even though the BIR tried several times. It held that the constructed receipt must be attested to, witnessed and signed by at least 2 BIR officers other than the BIR officer who allegedly constructively served the LOA.
  • The prosecution must prove that the accused received the assessment notices. Failure to do so will render the assessment notices void, hence, the accused has no obligation to pay the tax liabilities. Also, when a taxpayer denies receipt of the BIR notices, the BIR has the burden to prove that the notices were received. In this case, the BIR notices were sent via registered mail as evidenced by the transmittal letters and registry receipts. However, these only prove the fact of mailing but not necessarily fact of actual receipt. Registry return cards must be offered in evidence to show that the accused actually received the notices. Lastly, the fact that lack of return to sender card does not necessarily prove actual receipt. (People of the Philippines, v Robigie Corporation Grace G. Sucksuphan, CTA Crim. Case No. O-639, June 17, 2020)

PHP 4 MILLION TAX ASSESSMENT CANCELLED:  REQUEST TO PAY TAX IS NOT CONSIDERED A DEMAND; A STATEMENT THAT TAX WILL BE ADJUSTED IF PAID AFTER A CERTAIN DATE RENDERS THE TAX LIABILITY INDEFINITE.

• The CTA cancelled the assessment due to lack of demand and definiteness of the tax liability.
  • An assessment must contain a demand for payment. To demand means “to require a person to do” and is also defined as “the assertion of a legal right”. A request is not considered a demand.
  • In this case, the assessment states that the taxpayer is “requested to pay for your deficiency value-added.” Such phrasenegates the imperative nature of the requirement to pay as it gives the taxpayer the option not to pay if it is not amenable to the assessment.
• The tax liability in the assessment must be definite. If it states that “the interest and the total amount due will have to be adjusted if paid beyond October 31, 2016,” the liability remains indefinite, as the assessment is still subject to modification or adjustment depending on the date of payment of the taxpayer.
• Hence the assessment is void (Clark Water Corporation v. CIR, CTA Case No. 9519, June 17, 2020).

PHP 58 MILLION INPUT VAT REFUND PARTIALLY GRANTED; SUBSTANTIATION REQUIREMENTS MUST BE STRICTLY COMPLIED WITH.

• The CTA granted PHP 10Million out of PHP 58 Million input VAT arising from zero-rated sales. Among others, it ruled:
  • Sale to PEZA-registered entities are subject to zero-rated VAT because PEZA-registered entities are VAT-exempt as they are considered foreign territory.
  • The official receipt must indicate that the sales were zero-rated. The term “zero-rated” shall be written or printed prominently on the official receipt. Otherwise, the sale shall not be treated as zero-rated sales and the claimed input VAT corresponding for the same quarter of the sales should be denied outright. Only the input VAT for the quarter attributable to valid zero-rated sales may be the proper subject of refund.
  • Certificate of Inward remittance is not required for zero-rated sales to ECOZONES.
  • Some Input VAT were also denied for failure to comply with substantiation requirements such as incomplete date, receipt does not bear the TIN of the taxpayer and the amount of input VAT is not separately indicated, among others. (S&WOO Construction Philippines, Inc. v. CIR, CTA Case No. 9533, June 24, 2020)

PHP 50 MILLION REFUND OF INTEREST AND SURCHARGE GRANTED FOR RELYING IN GOOD FAITH ON PREVIOUS RULES AND HONEST BELIEF THAT THE TAXPAYER IS NOT SUBJECT TO DOCUMENTARY STAMP TAX; COMPROMISE PENALTY CANNOT BE IMPOSED UNLESS MUTUALLY AGREED UPON BY THE BIR AND THE TAXPAYER.

The CTA En Banc affirmed the decision of the CTA Division to refund the taxpayer’s interest, surcharge and compromise penalty.

• In 2011, the Supreme Court rendered a decision in FilinvestCase that instructional letter and journal and cash vouchers evidencing advances qualified as loan agreements on which DST may be imposed.
• The BIR also issued RMC No. 48-2011 in the same year to circularize the decision in Filinvest Case.
• In 2014, the BIR assessed the taxpayer for DST, among other taxes, for the taxable year of 2011.
• The taxpayer paid the DST to stop the running of interest and with a view of filing a claim of refund.
• The CTA ruled that the DST cannot be refunded for the DST for the following reasons:
  • The Filinvest Case and RMC 48-2011 may be retroactively applied because it merely interprets an existing rule. It may be applied prospectively if the old doctrine is overruled by a subsequent decision adopting a new doctrine. Thus the interpretation in Filinvest Case is deemed constituted as part of the law
  • The DST was properly imposed. The DST is actually an excise tax because it is imposed on the transaction rather than on the document. It may be imposed even no formal documents or formal promissory notes are executed. Thus, it may be imposed on advances on the basis of the taxpayer's Notes to Financial Statements.
  • The DST assessment was not prescribed because the taxpayer did not file a return. In case of failure to file a return, the tax may be assessed at any time within 10 years after the discovery of the omission.
• But the taxpayer may be refunded for the interest and surcharge for relying on previous rulings and decisions which states that inter-company loans and advances covered by inter-office memoranda are not subject to  DST.
  • Good faith and honest belief that the taxpayer is not subject to tax on the basis of previous interpretations of the BIR are sufficient justification to delete the imposition of surcharge and interest. The taxpayer’s reliance on the previous rulings and decisions justifies the non-imposition of surcharges and interest.
• The taxpayer was also refunded the compromise penalty it paid. Compromise penalty must be mutual as well. If the payment was made under protest, it means that there was no agreement that had effectively been reachedbetween the parties. (San Miguel Holdings Corp. v. CIR, CTA EB No. 1935, CTA Case No. 9401; CIR v. San Miguel Holdings, CTA EB No. 1941, CTA Case No. 9401, June 25, 2020)

PHP 25 MILLION TAX ASSESSMENT CANCELLED: MEMORANDUM REFERRAL RE-ASSIGNING THE AUDIT TO ANOTHER  EXAMINER IS EQUIVALENT TO LETTER OF AUTHORITY BUT MUST BE SIGNED BY THE REVENUE REGIONAL DIRECTOR.

• The CTA cancelled the Php25 Million tax assessment for failure of the Revenue Regional Director ("RRD") to sign the Memorandum Referral.
• Under the rules, the Commissioner of Internal Revenue ("CIR") has the power to authorize the examination of the taxpayer. The CIR’spower may be delegated by him. The issuance of a LOA is one of the delegable powers.
• Issuing a LOA is a delegable power which the CIR may devolve to the Revenue Regional Director (RRD).
• A LOA is a contract of agency, where the CIR is the principal and the RRD is the agent.
• The RRD may appoint a sub-agent applying the Civil Code provision. The power to appoint a sub-agent includes the power to revoke and transfer or re-assign the authority. Memorandum Referrals which transfer the authority to audit the taxpayer’s books is equivalent to a Letter of Authority.
  • The law only requires that the grant of authority be in writing.
  • The document may not be entitled a LOA but it contains all the necessary elements to establish a contract of agency between the CIR and the new revenue officer. The intent of the parties should determine the contract.
• In this case, the LOA was issued by the HeadRevenue Executive Assistant. Later, the OIC-Chief of the LT Regular Audit Division 1 issued. Memorandum Referral referring the docket to another examiner to continue the audit. The subsequent examiners also recommended the audit.
  • The subsequent examiners may be deemed authorized to audit without the need of a new LOA but only if the Memorandum Referrals were signed by the RRD.
• Thus, the assessment was cancelled because the Memorandum Referrals were signed by OIC-Chief of the LT Regular Audit Division 1 and not by the RRD (Nyk-Filjapan Shipping Corp v. CIR, CTA Case No. 9120, June 25, 2020)

PHP 10.9 MILLION INPUT VAT REFUND DENIED FOR FAILURE TO SUBMIT PROOF THAT THE FOREIGN CLIENTS ARE NOT DOING BUSINESS IN THE PHILIPPINES, THAT THE SERVICES WERE PERFORMED IN THE PHILIPPINES AND THAT THE SERVICES WERE PAID IN ACCEPTABLE FOREIGN CURRENCY.

• The CTA denied the taxpayer’s refund of input VAT in the amount of P10.9M for the following reasons:
  • The taxpayer failed to submit the SEC Certificate of Non-registration of the foreign clients to prove that they are not doing business in the Philippines.
  • The Service Agreement submitted indicates that the taxpayer is not one of the parties.
  • There was no evidence to prove that the services are performed in the Philippines.
  • The taxpayer did not submit proof that the services were paid in acceptable foreign currency in the form of Certificate of Inward Remittance (SC Johnson Philippines, ROHQ v. CIR, CTA Case No. 9602, June 25, 2020).

PHP 9 MILLION TAX ASSESSMENT CANCELLED FOR BIR'S FAILURE TO REVALIDATE THE LETTER OF AUTHORITY AFTER 120 DAYS FROM ITS ISSUANCE.

• Under the rules, an examiner has 120 days from the date of the issuance of the LOA to conduct his audit and submit the result of his investigation. If the report is not completed before the lapse of the 120-day period, the revenue officer shall return the LOA for revalidation. The revalidation is done by issuinga new LOA.
• In this case, the examiner submitted the memorandum report a month after the 120-day Instead of continuing the audit beyond the 120-day, the examiner should have just submitted a progress report and surrendered the LOA for revalidation, that is, for the issuance of a new LOA, which is lacking in this case. Since there is no revalidated LOA before the expiration of the 120-day period, the existing LOA is invalid and the resulting assessment is void (Tektite Insurance Brokers, Inc. v. CIR, 9184, June 25, 2020)

PHP 32 MILLION INPUT VAT REFUND DENIED FOR FAILURE TO SUBMIT PROOF OF PAYMENT OF GOODS.

• The court denied the taxpayer’s refund of input VAT from its zero-rated sales.
• To prove VAT zero-rated direct export sales, the following documents must be presented, among other requirements:
  • Sales invoice as proof of sale of goods;
  • Export declaration and bill of lading or airway bill as proof of  actual shipment of goods from the Philippines to a foreign country;
  • Bank credit advice, certificate of inward remittance or any other document proving payment of goods in acceptable foreign currency or its equivalent in goods and services.
• The refund was denied because the taxpayer failed to submit proof of payment of the goods (Carmen Copper Corporation v. CIR, CTA Case No. 9543, June 25, 2020).

PHP 3 MILLION ENVIRONMENTAL TAX UPHELD; THE CTA HAS JURISDICTION OVER CASES INVOLVING LOCAL TAXES; ENVIRONMENTAL TAX IS NOT A LOCAL TAX BUT A MERE REGULATORY FEE.

• The Court denied the taxpayer’s petition to cancel the Php3 Million environmental tax imposed by the Davao City Treasurer for lack of jurisdiction.
• The Court ruled that it has jurisdiction to rule on local tax cases on appeal, but the environmental tax is not a local tax but a mere regulatory fee. The said fee is used to implement the Watershed Code, particularly for the watershed protection, conservation and management programs and projects. If regulation is a primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax.(DOLE Philippines, Inc. – Stanfilco Division v. City of Davao, CTA AC No. 215, June 25, 2020)

ACCUSED ACQUITTED OF TAX EVASION; INCREASE IN ASSET IS NOT NECESSARILY CONSIDERED INCOME; AMENDMENT OF THE TAX RETURN BEFORE THE ISSUANCE OF LOA NEGATES THE WILLFULNESS ELEMENT OF THE TAX EVASION.

• The court acquitted the accused of tax evasion case for lack of evidence that he committed the crime and for reasonable doubt.
• In this case, there was a significant increase in assetsfrom P3.6M to P87M and liability from P1.9M to P84M. The taxpayer later amended its tax return to omit such declaration. The taxpayer argued that the increase in the asset was not sourced from the business revenues but through bank loans. While the taxpayer failed to prove the loans, the BIR, upon cross-examination during the trial, admitted that the increase is a loan.
• Further, the court ruled that in tax evasion cases, willfulness is one of the elements. The fact of amendment of the return prior to the LOA (audit) or filing of the criminal charges belies the element of willfulness. The accused filed the amended ITR a few months before the BIR issues the LOA.

Since the accused is not criminally liable, he is also not civilly liable from the tax evasion case. However, he is not relieved of his tax obligations pursuant to any pending tax assessment (People of the Philippines v.  Joselito Yap, CTA Crim Case No. O-668 and O-669, June 29, 2020).

The SEC adjusts the procedures and deadlines for the submission of Annual Financial Statements and General Information Sheet

• Audited Financial Statements – Corporation shall strictly observe the following schedule, based on their SEC registration or license numbers:

• General Information Sheet (“GIS”) – Corporations, which held their annual stockholders’ meetings during the Enhanced Community Quarantine and Modified Enhanced Community Quarantine in the National Capital Region, will still have until 31 August 2020 to submit their GIS.
• Modes of filing –
  • Courier - Submissions to the SEC Main Office shall be made through courier only using the SENS facility at SENSwhile the SEC Main Office remains closed. Corporations may request for their return copies by including in their submissions prepaid return envelopes with stamps. No request for return copies may be processed on the same day.
  • Email – Corporations may continue sending the scanned copies of their duly signed and, if applicable, notarized reports through email. The documents shall be considered received on the date stated in the Acknowledgment Receipt (“AC”) the Commission shall send through email. Accordingly, the printed copies may be submitted through courier or the Philippine Postal Corporation following the filing schedule provided above, but the reckoning of the date of receipt shall be based on the AC. Corporations shall follow the pertinent guidelines posted on the SEC website HERE.
  • Submissions to the SEC Extension Offices - Corporations headquartered outside the National Capital Region may continue filing their reports with the SEC Extension Offices. Please note, however, that the SEC - Cebu Extension Office shall be closed while Cebu City remains under Enhanced Community Quarantine (SEC Notice, 12 July 2020)For your easy reference, a copy of the Notice may be accessed 

Bureau of Internal Revenue

BIR DEADLINES from JULY 20 to July 24. A gentle reminder on the following deadlines, as may be applicable:

BIR MANDATES SUBMISSION OF INFORMATION RETURN ON RELATED PARTY TRANSACTIONS. The BIR prescribes the use of the new BIR Form No. 1709, replacing Form No. 1702H, Series of 1992.​ RR 19-2020. It provides:

• BIR 1709 refers to Information Return on Related Party Transactions (Domestic and/or Foreign).
• The BIR requires the submission of this return and its supporting documents following the guidelines prescribed by the related revenue issuances for the submission of the required attachments to the annual income tax return.
• In determining whether a person or entity is a related party, the following rules shall be observed:
  1. A person or a close member of that person’s family is related to a reporting entity if that person:
     1. Has control or joint control of the reporting entity;
     2. Has significant influence over the reporting entity; or

• Is a member of the key management personnel of the reporting entity or of a parent of the reporting entity

1. An entity is related to a reporting entity if any of the following conditions applies:
   1. The entity and the other reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others)
   2. One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member)

• Both entities are joint ventures of the same third party

1. One entity is a joint venture of a third party and the other entity is an associate of the third party
2. The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or any entity related to the reporting entity. If the reporting entity is itself such a plan, the corresponding employers are also related to the reporting entity.
3. The entity is controlled or jointly controlled by a person identified in (a)

• A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity)
• The entity or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.

• Related party transactions shall include, but not limited to the following:
  1. Purchases or sales of goods (finished or unfinished);
  2. Purchases or sales of property and other assets;
  3. Rendering or receiving of services;
  4. Leases;
  5. Transfers of research and development;
  6. Transfers under license agreements
  7. Transfers under finance arrangements (including loans and equity contributions in cash or in kind)
  8. Provision of guarantees or collateral;
  9. Commitments to do something if a particular event occurs or does not occur in the future, including executory contracts (i.e. contracts under which neither party has performed any of its obligations or both parties have partially performed their obligations to an equal extent (recognized and unrecognized); and
  10. Settlement of liabilities on behalf of the entity or by the entity on behalf of that related party
• Attachments to BIR Form 1709:
  1. Certified true copy of the relevant contracts or proof of transaction;
  2. Withholding tax returns and the corresponding proof of payment of taxes withheld and remitted to the BIR;
  3. Proof of payment of foreign taxes or ruling duly issued by the foreign tax authority where the other party is a resident;
  4. Certified true copy of Advance Pricing Agreement, if any; and
  5. Any transfer pricing documentation.
• Any violation of the provisions of this issuance shall be subject to penalties provided in Section 250 (“Failure to File Certain Information Returns”), and other pertinent provisions of the NIRC, as amended (RR No.. 19-2020, July 8, 2020). For your easy reference, a copy of the regulation may be accessed 

NEW ALPHANUMERIC TAX CODE FOR EXCISE TAX ON TOBACCO PRODUCTS ET. AL. The BIR creates and modifies the Alphanumeric Tax Code (ATC) for Excise Tax on Tobacco Products, Heated Tobacco Products and Vapor Products pursuant to the implementation of Republic Act Nos. 11346, 11467 and 10351 (RMC No. 20-2020, July 8, 2020). For your easy reference, the issuance may be accessed HERE.

GUIDELINES AND PROCEDURE FOR THE DESTRUCTION/DISPOSAL OF WASTE OR OBSOLETE GOODS/ASSETS. The BIR prescribes the policies, guidelines and procedures for the inspection or supervision of the destruction/disposal and determination of deductible expense pertaining to inventory of goods/assets which have been declared as waste or obsolete It provides:

• The taxpayer should file an application for destruction/disposal of goods/assets with the BIR at least 7 days before the proposed scheduled date of destruction/disposal of the inventories/equipment.
• Deduction of losses for income tax purposes arising from inventory destruction or disposal shall be allowed after witnessing (physical or virtual means) and issuance of the Certificate of Deductibility of Goods/Assets Destructed/Disposed).
• The claim for deductibility of the value shall be denied in case the inventories/assets applied for disposal are for any reason or cause, are replaced/substituted by its supplied, or the taxpayer shall become entitled to reimbursement for the partial or equivalent value thereof by an insurance company. Any scrap or salvage value as may be subsequently determined shall be declared as other income.
• During the disposal/destruction, the BIR/third-party duly appointed shall supervise and witness the conduct of actual destruction/disposal of goods considered as waste or obsolete; ensure that the goods were actually destroyed through incineration, dumping, or other methods of destruction to ascertain that such goods cannot be resold and/or used in production or operations in its original form; and request the taxpayer to take pictures of the goods during the destruction/disposal activity (RMO No. 21-2020, July 10, 2020). For your easy reference, the registration guidelines may be accessed 

CANCELLATION OF PERMIT TO USE CASH REGISTER MACHINES, POINT OF SALES MACHINE ET. AL. The BIR prescribes the procedures in the cancellation of permit to use (PTU) Cash Register Machines (CRM), Point-of-Sale machines and other similar sales machines generating receipts/invoices (POS) It provides:

• The cancellation of the PTU CRM/POS machine shall be processed by the Revenue District office/Large Taxpayer Office having jurisdiction over the taxpayer’s business address where the machine was registered.
• The taxpayer shall notify the concerned BIR office in writing on their request for the cancellation of the PTU within 5 days from the date the machine was last used/withdrawn from use stating the cancellation and other information. The taxpayer shall also submit documents as attachment to the letter.
• Actual inspection of the CRM/POS shall be mandatory in case of its withdrawal from use or its transfer to another branch of the Company. However, in case of modification/upgrading of the software being used, actual inspection of the machine may be dispensed with so as not to disrupt the normal business operation of the taxpayer, subject to conditions.
• In case of withdrawal from use or transfer of the CRM/POS to another branch of the taxpayer, the assigned RDO shall conduct an inspection of the machine.
• Non-payment of the penalties at the time of the request for cancellation of the PTU shall not be a ground for the non-issuance of the Cancellation Certificate.
• The assigned Revenue Officer shall submit a Memorandum Report on the result of the inspection upon completion of the machine inspection and submission of the required documents by the taxpayer. Such report shall be approved by the Commissioner, LTS/RDO. Upon the approval of the Memorandum Report, the PTU and MIN of the machine shall be cancelled and the Cancellation Certificate shall be generated, which must be issued within 7 days from receipt of the letter request by the BIR. In case when inspection shall be dispensed with, the Cancellation Certificate must be issued within 3 working days from receipt of the complete requirements by the BIR.
• The BIR shall approve the application for PTU through eAccReg within 3 days from receipt of such application as mandated under the BIR Citizen’s Charter.
• BIR’s approval must be secured in adding distinct prefix/suffix in the serial number of the sales machine to allow registration of the new software. (RMC No. 69-2020, July 13, 2020). For your easy reference, the registration guidelines may be accessed 

SUPREME COURT/Court of Tax Appeals Decisions

PHP 430 MILLION and PHP30 MILLION TAX ASSESSMENTS CANCELLED: ASSESSMENTS ARE VOID FOR LACK OF LETTER OF AUTHORITY (“LOA”). RE-ASSIGNMENT OF AUDIT TO ANOTHER EXAMINER REQUIRES A NEW LOA; MEMORANDUM OF ASSIGNMENT IS NOT SUFFICIENT.

• In two separate cases, the Court of Tax Appeals (“CTA’) cancelled PHP 430 Million PHP 30 Million tax assessment for lack of Letter of Authority.
• In this case, the BIR issued an LOA authorizing the BIR examiners to audit the books of the taxpayer. However, the audit was re-assigned to another examiners without issuance of another LOA; but a Memorandum of Assignment was issued to support the re-assignment.
• In cancelling the assessment, the Court ruled that the authority of the revenue officer to examine or recommend the assessment of any deficiency tax must be exercised pursuant to a Letter of Authority. In the absence of an LOA, the tax assessments issued by the BIR is void.
• Re-assignment of cases to another examiner requires the issuance of a new letter of authority. Considering that the new examiners were not duly authorized by a new LOA, the assessment is void. Thus the assessment was cancelled. (Watsons Personal Care Store (Philippines), Inc.), CTA Case No.9303, June 11, 2020; Global Energy Supply Corporation v. CIR, CTA Case No. 9673, June 11, 2020) 

PHP58 MILLION TAX ASSESSMENT AFFIRMED: APPEAL TO THE CTA MUST BE MADE WITHIN 30 DAYS AFTER THE LAPSE OF BIR’S 180-DAY PERIOD TO DECIDE COUNTED FROM THE FILING OF PROTEST-REQUEST FOR RECONSIDERATION.

• The Court denied the taxpayer’s appeal to cancel the P58 Million assessment for filing the petition out of time.
• The taxpayer has 30 days to appeal with the CTA, counted from:
• Receipt of the BIR’s decision or
• After the expiration 180 days without BIR’s decision (as the inaction within the period shall be considered denial). 180 days is counted from:
• Filing of the protest – in case of request for reconsideration; or
• Submission of additional documents – in case of request for reinvestigation (additional documents must be submitted within 60 days from the filing of the protest)
• In this case, the taxpayer filed its protest on February 25, 2015 under a request for reconsideration. Thus, the BIR has 180 days or until August 24, 2015 within which to decide. Thereafter, the taxpayer should file the petition within 30 days or not later than September 30, 2014. However, the petition was filed only on June 20, 2016.
• Thus the assessment was upheld. (Getz Pharma (Phils.), Inc. v. CIR, CTA Case No. 9245, June 9, 2020)

PHP22 MILLION TAX ASSESSMENT CANCELLED: THE ASSESSMENT IS VOID FOR LACK OF LETTER OF AUTHORITY, FOR FAILURE TO ISSUE A PAN AND FOR FAILURE TO FIX THE TAX LIABILITY.

• The Court cancelled the Php22 Million assessment for lack of Letter of Authority, for failure to issue a Preliminary Assessment Notice, and for failure to set and fix the tax liability.
• Lack of Authority – The court declared that the assessment is void because it was not shown that an LOA was issued authorizing a revenue officer to examine the taxpayer’s books of accounts and other accounting records
• PAN – The Court ruled that the taxpayer was denied due process for BIR’s failure to issue the FAN. Under the rules, the BIR shall first notify the taxpayer in the form of preassessment notice, unless PAN may be dispensed with under the exceptions. But without the exceptions, the BIR shall issue a PAN for the proposed assessment, showing in detail, the facts and the law, rules and regulations, or jurisprudence on which the proposed assessment is based. The requirement must be embodied not just in the FAN, but also in the PAN.
• tax liability - The Court also cancelled the assessment since the tax liability is indefinite. A tax assessment must not only contain a computation of tax liabilities, but must also include a demand to settle the tax that is there definitely set and fixed. The assessment is not considered fixed because it states that the interest and the total amount will have to be “adjusted if paid beyond the date specified therein”.
• (Jed Marketing Corp v. CIR, CTA Case No. 9687, June 10, 2020)

PHP 43 MILLION TAX ASSESSMENTS CANCELLED: THE ASSESSMENT NOTICE MUST BE ACTUALLY RECEIVED BY THE TAXPAYER; THE BIR HAS THE BURDEN TO PROVE RECEIPT OF THE ASSESSMENT NOTICE, IF THE TAXPAYER DENIES RECEIVING THE SAME.

• The Court cancelled Php43 Million tax assessment for failure to prove that the taxpayer received the Preliminary Assessment Notice.
• Failure to comply with the notice requirements is tantamount to denial of due process. A requirement of due process requires that the assessment must be actually received by the taxpayer. It is not simply the question of whether or not the notices were sent but it is imperative that the taxpayer actually received the notices.
• If the taxpayer denies receipt of the assessment notice, the BIR has the burden to prove that the notice was received. If the notice was sent viamail, the BIR must present the registry receipt issued by the Bureau of Posts or registry return card signed by the taxpayer or his representative or at least a certification issued by the Bureau of Posts attesting to the same fact.
• Moreover, to prove receipt, the receipt must be authenticated by affidavit of the person who served the notice.
• Here, the postmaster who issued the certification was not the person who actually served the notice. The server himself was not presented as a witness in court. In fact, the postmaster admitted that upon his inquiry, the actual server admitted to him that he merely left assessment somewhere of the taxpayer’s office and it was also the server who signed the taxpayer’s name on the registry return receipt. Thus the assessment was cancelled. (Ruben Yu v. CIR, CTA Case No. 9595, June 15, 2020)

PHP12 MILLION REFUND OF EXCESS AND UNUTILIZED CREDITABLE WITHHOLDING TAXES PARTIALLY GRANTED; REQUISITES OF REFUND; VALIDITY OF PRIOR YEAR EXCESS TAX CREDIT MUST ALSO BE ESTABLISHED.

• The court partially granted the taxpayer’s request for refund of P12M excess and unutilized creditable withholding taxes.
• The court granted the refund as the taxpayer was able to prove the following requisites:
  • The claim was filed within the 2-year prescriptive period;
  • The fact of withholding was established by BIR Form 2307; and
  • The income was included in the income tax return of the recipient.
• The Court denied some 2307 due to errors in the information per 2307 such as lack of Tax Identification Number or incomplete name of the taxpayer or the amount per 2307 is lower than the schedules.
• The court also deducted the amount of tax due for the current year from the claim of refund because it should be established that prior year’s tax credit exists and it is in fact in excess of the tax due. The Court compared the income tax due from the previous years and the amount of prior year tax credit. (Tullet Prebon (Philippines), Inc., v. CIR, CTA Case No. 9804, June 15, 2020)

PHP 4MILLION AND PHP88 MILLION INPUT VAT REFUND DENIED: THE BIR’S FAILURE TO ACT ON THE REFUND CLAIM WITHIN 120 DAYS (NOW 90 DAYS) IS DEEMED DENIAL OF THE CLAIM. THE CLAIMANT NEED NOT WAIT FOR THE DECISION OF THE BIR AFTER THE LAPSE OF THE SAID PERIOD.

• In one case, the court denied the PHP4 Million claim of input VAT refund for failure to file the petition on time.
  • The Court ruled that refunds of input VAT from zero-rated sales shall be filed within 2 years after the close of the taxable quarter when the sales were made. The BIR has 120 days (now 90 days) within which to decide the claim. If the BIR fails to decide on the 120^thday, the taxpayer has 30 days to file his judicial claim with the CTA.
  • In this case, the taxpayer filed his claim with the BIR within the 2-year prescriptive period. However, it appealed the decision of the BIR which was received after 6 years. The court ruled that the claimant need not wait for the decision of the BIR. The BIR’s inaction  on the claim is deemed denial of the refund claim.
  • The taxpayer harped on the provision where the taxpayer may wait for the decision of the BIR before it can file the petition. However, such provision applies only in assessment cases and not in refund of input VAT cases.Thus, the refund was denied. (Luzon Hydro Corporation, CTA Case No. 9188, June 11, 2020)
• In another case, the Court denied the taxpayer’s claim for refund of excess input VAT amounting to Php88 Million arising from zero-rated sales for failure to file the judicial claim on time.
  • It was ruled that under the rules, the taxpayer has 2 years after the close of the taxable quarter when the sales were made to apply for a refund/tax credit certificate with the BIR (administrative claim).
  • Upon the filing of the administrative claim, the BIR has 120 days (now 90) from the date of submission of the complete supporting documents to either grant or deny the claim.
  • If the BIR fully or partially denies the claim within the 120-day (now 90) period, or if BIR failed to act on the claim within 120 days (now 90), the taxpayer has 30 days from receipt of the decision denying the claim or expiration of 120-day (now 90) in case of inaction, to file an appeal with the CTA (120+30 day rule)
  • The taxpayer need not wait for the decision of the BIR to file an appeal as the lapse of 120-days period (now 90) without action from the BIR is already considered a denial of the claim for refund.

Here, the court denied the claim because the taxpayer filed the petition with the court after the lapse of 120 (now 90) day to decide and 30-day period to file the appeal. The taxpayer filed the appeal within 30 days after it received the decision of the BIR issued beyond the 120-day period. The court noted that the taxpayer should not have waited for the decision as the lapse of 120-day period is deemed denial of the claim. (Carmen Copper Corporation v. CIR, CTA Case Nos. 8902 and 8958) 

• Regular Corporate Income Tax

• CREATE retains exemption of PEZA-registered entities from Branch Profit Remittance Tax.
• Regional Operating Headquarters

• Passive Income of Resident Foreign Corporation and Non-resident Foreign Corporation

• Interest Arbitrage (Limitation on Interest Deduction)

• Net Operating Loss Carry-Over

• Retains 40% Optional Standard Deductions for Individuals and Corporations subject to tax except for Non-Resident Alien

• Rationalization of Fiscal Incentives for entities with income tax incentives:

• Enhanced deductions may be granted in lieu of ITH and SCIT and in no case shall be granted simultaneously with the SCIT; availment period:

Sunset Provisions or Transitory Incentives for Existing Registered Activities

Bureau of Internal Revenue

BIR DEADLINES from JULY 11 to July 16. A gentle reminder on the following deadlines, as may be applicable:

Court of Tax Appeals Decisions

TAXPAYER ACQUITTED: IN TAX EVASION CASES, IT MUST BE ESTABLISHED THAT THE ACCUSED FAILED TO PAY THE TAX AT THE TIME PRESCRIBED BY LAW AND SUCH FAILURE TO PAY THE TAX WAS WILLFUL.

• The accused was acquitted in a tax evasion case as the deadline for the payment of tax was not made clear in the FAN and the element of willfulness was not present.
• To sustain conviction for failure to pay tax, the following elements should be established:
  • First, Accused is a person required by the NIRC or rules and regulations to pay the tax;
  • Second, Accused failed to pay the tax at the time required by law; and
  • Third, Failure to pay the tax was willful.
• As regards the second element, the time or deadline for payment of the tax must be clear. If the deadline in the Formal Assessment Notice ("FAN") is blank and the interest computation was only up to June 31, 2011, but the FAN was issued on 02 November 2011, which means that total amount of liability will have to be adjusted, the element of “at the time required by law” is not present.
• As regards the third element, it must be shown that the accused was aware of his obligation to pay the tax, but he nevertheless voluntarily, knowingly and intentionally failed to pay it. If the Collection Notices were not received by the taxpayer, and the time to pay the tax is not clear, the accused is not considered to be made fully aware of his obligation, and thus, the element of “willfulness” is not present (People of the Philippines v Bonner Purpura Armada (CTA Crim Case Nos. O-617 and O-618, June 8, 2020)

PHP10 MILLION TAX ASSESSMENT CANCELLED: A TAX ASSESSMENT IS VOID IF THE EXAMINERS NAMED IN THE LETTER OF AUTHORITY (“LOA”) IS DIFFERENT FROM THE EXAMINERS WHO ACTUALLY EXAMINED THE BOOKS OF THE TAXPAYER.

• The Court cancelled the BIR’s Php 10 Million assessment for lack of LOA.
• A tax assessment without LOA is a violation of the taxpayer’s right to due process and therefore void.
• In this case, there was an LOA, but BIR examiners named in the LOA are not the ones who actually examined the taxpayer’s books as evidenced in the Assessment Notice later issued.
• The examiners who actually examined the books are not really authorized without the LOA. Thus, the subject assessment is considered void (Republic of the Philippines v. Robigie Corporation, CTA OC Case No. 023, June 08, 2020)

PHP 18 MILLION TAX REFUND GRANTED: IN THE REFUND OF ERRONEOUSLY PAID TAX, THE WITHHOLDING AGENT HAS PERSONALITY TO FILE THE CASE; THE CLAIM MUST BE FILED WITH THE BIR AND THE COURT WITHIN 2 YEARS FROM THE DATE OF PAYMENT OF TAX; INCOME DERIVED BY A JAPANESE CORPORATION IN THE PHILIPPINES IS EXEMPT FROM 30% WITHHOLDING TAX APPLYING THE RP-JAPAN TAX TREATY.

• The Court granted the P18M tax refund applying the Republic of the Philippines-Japan Tax Treaty.
• The withholding agent has the personality to file the claim for refund for the reason that it is required to deduct and withhold tax, and made personally liable for such tax.
• In refund cases for erroneously paid taxes, both administrative claim with the BIR and CTA must be filed within 2 years from the date of payment of tax.
• An income earned by non-resident foreign corporation (“NRFC”) from sources within the Philippines may be exempt from 30% withholding tax, to the extent required by any treaty obligation binding upon the Philippines
  • Pursuant to RP-Japan Tax Treaty, profits of NRFC is taxable only in Japan and not in the Philippines as long as the NRFC does not carry on business in the Philippines through a permanent establishment
  • Proof of NRFC are SEC Certifications and Articles of Incorporation of the NRFC
  • Permanent establishment is defined to include activities in the Philippines for a period or periods aggregating more than 6 months within any twelve-month period. This is shown by the number of days as indicated in the passport (Toledo Power Company v. CIR, CTA Case No. 9465, June 8, 2020).

PHP18 MILLION TAX REFUND DENIED: TO REFUND INPUT VAT FROM ZERO-RATED SALES TO BOI-REGISTERED ENTITY, A CERTIFICATION ISSUED BY THE BOI IS REQUIRED.

• Sale of goods, properties or services made by a VAT-registered supplier to a Board of Investment (BOI)-registered manufacturer/producer whose products are 100% exported are considered export sales. A certification to this effect must be issued by the BOI which shall be good for one year unless subsequently re-issued by the BOI.
• The Certificate’s validity period of the BOI Certificates should cover the period of refund.
• Where the taxpayer’s covered period of refund is January 1 to March 31 2015, but the BOI Certification covers 2016 to 2017,  the court cannot consider the sales to BOI-registered entities as subject to zero-rated VAT (Orica Philippines, Inc., CIR, CTA Case No. 9647, June 4, 2020).

P24M TAX ASSESSMENT CANCELLED: THE BIR HAS 3 YEARS WITHIN WHICH TO ASSESS THE TAXPAYER COUNTED FROM THE DATE OF THE ACTUAL FILING OF THE RETURN OR FROM THE LAST DATE PRESCRIBED BY LAW, WHICHEVER IS LATER; IT ALSO HAS 5 YEARS TO COLLECT; THE PRESCRIPTIVE PERIOD IS INTERRUPTED IF THE TAXPAYER’S REQUEST FOR TAX INVESTIGATION IS GRANTED; THE GRANT MUST BE ESTABLISHED, OTHERWISE, PERIOD IS NOT INTERRUPTED.

• The Court cancels  the Php24M assessment by the BIR on the ground of prescription.
• The BIR has 3 years, counted from the actual filing of the return or from the last date prescribed by law for the filing of such return, whichever comes later, to assess the taxes or to begin a court proceeding for the collection thereof without an assessment.
• Following the assessment of tax, the BIR has another 3 years [now 5] to collect by distraint or levy or by a proceeding in court
• The running of the prescriptive period to collect shall be suspended when the taxpayer requests for tax investigation and the BIR grants the same.
  • The grant may be in the form of communication or implied actions by the BIR’s authorized representatives. The BIR has the burden of proof that it grants the request
  • In this case, the BIR failed to prove that such grant was received by the taxpayer. The BIR relied on the Notice of Hearing (supposedly granting the request) by arguing that it was mailed to the taxpayer. However, the court rejected the claim because there was no proof of mailing.
  • To prove the fact of mailing, the registry receipt and registry return card issued by the postmaster of the Bureau of Posts bearing the signature of the taxpayer or it duly authorized representative signifying receipt of the subject mail matter must be established. The BIR failed to establish this.
• Therefore, the 3-year prescriptive period for collection was not suspended. Thus, the BIR’s assessment may no longer be collected on the ground of prescription (First Far East Development Corporation v. CIR, CTA Case No. 9678, June 4, 2020).

PHP18 MILLION TAX REFUND DENIED: PAYMENT IN FOREIGN CURRENCY MUST BE ESTABLISHED BY BANK CREDIT MEMOS OR CERTIFICATE OF INWARD REMITTANCE; BANK STATEMENTS AND EMAILS ARE NOT SUFFICIENT.

• In claims of refund or issuance of tax credit certificate of input VAT arising from zero-rated sales, payment must be in foreign currency. This is established by a statement from the BSP or any of its accredited agent banks that the proceeds of the sale in acceptable foreign currency were inwardly remitted and accounted for in accordance with applicable banking regulations or (b) Bank Credit Memos to prove inward receipts of foreign currency for export sales.
• The claimant’s failure to submit the bank-issued Bank Credit Memos or alternatively, the Certificate of Inward Remittance that the recipient bank likewise issued is fatal to its claim.
• The Court denied the taxpayer’s claim because it failed to submit the foregoing documents. The taxpayer merely presented bank statements as proof of inward remittance and emails to prove that sales were paid in foreign currency.
• The Court ruled that by simply comparing the amounts reflected in the bank statements with the aggregate amount of the export sales evidenced by invoices, it cannot be readily deduced from the bank statements that the amounts credited actually correspond to the subject export sales.
• The Court also rejected the emails submitted as evidence because the actual date of payment or remittance was not conspicuously reflected. (Id.)

PHP8 BILLION TAX REFUND DENIED: IN REFUND OF INPUT VAT FOR ZERO-RATED SALES, THE REMITTANCES MUST CORRESPOND TO THE ZERO-RATED SALES.

• The Court denied the P8 Billion claim of refund of the taxpayer for failure to establish a relationship of foreign remittance to zero-rated sales.
• In the claim of refund of input VAT for zero-rated sales, one of the requirements is that sales were paid for in acceptable foreign currency accounted for in accordance with the rules and regulations of BSP.
• The foreign currency inward remittance must pertain to the payments for the zero-rated sales
• The court denied the claim for refund because the claimant failed to reconcile the zero-rated sales visa-a-visschedule of inward remittances. The court was unable to trace the sales invoice amounts to the certification of inward remittance.

Therefore, the claimant failed to establish whether the remittances actually correspond to the zero-rated sales. (Carmen Copper Corporation v. CIR, CTA Case No. 9726, June 5, 2020)

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

NEW SIN TAX REFORM LAW IS EFFECTIVE ON JANUARY 27, 2020, not JANUARY 1, 2020. The BIR circularizes Republic Act No. 11467  or the New Sin Tax Reform Law which increases the excise tax on alcohol products, tobacco products, and adds new provisions to the National Internal Revenue Code. It provides:

• The Circular clarifies that the law shall be applicable prospectively and shall take effect immediately after its complete publication in a newspaper of general circulation on January 27, 2020 (RMC No. 65-2020, June 30, 2020). For your easy reference, issuance may be accessed 

Securities and Exchange Commission

SEC MAIN OFFICE RESUMES OPERATION beginning JULY 1, 2020; deadline for the submission of audited financial statements and general information sheet is extended. The SEC notifies the public that its main office resumes operation beginning July 1, 2020 and deadlines for annual reports are adjusted. It provides:

• The Commission shall continue operating at a limited capacity in view of the community quarantine and other health measures being implemented amid the COVID-19 pandemic.
• The Commission shall resume accepting Annual Financial Statements (AFS) and the General Information Sheet (GIS) primarily through the SEC Express Nationwide Submission (SENS) facility, which allows for the submission of reports through courier or registered mail.
• All corporations shall comply with the Commission’s directive that submissions to the SEC Main Office shall be made through courier services, including express delivery services, or through registered mail using the SENS facility at 
• For Audited Financial Statements, the following are new deadlines:

• For GIS - Corporations, which held their annual stockholders’ meetings during the ECQ and Modified ECQ in the National Capital Region, may submit their GIS until 31 August 2020, without incurring penalties. The GIS shall be submitted through courier services, including express delivery services or through registered mail using the SENS facility.
• Alternative Modes of Filing:
  • Email Submission - Corporations may continue sending the scanned copies of their duly signed and, if applicable, notarized reports through email. The documents shall be considered received on the date reflected in the Acknowledgment Receipt that the Commission shall send through email. Accordingly, the printed copies may be submitted later or after the prescribed deadlines.
  • Submission to the SEC Extension Offices – Corporations headquartered outside the National Capital Region may continue filing their reports with the SEC Extension Offices, except for Cebu, Baguio and Tarlac. For your easy reference, the issuance may be accessed 

Court of Tax Appeals Decisions

A TAXPAYER MAY BE GENERALLY ASSESSED WITHIN 3 YEARS, UNLESS EXTENDED IN THE FORM OF WAIVER; WAIVER MUST INDICATE THE NATURE AND AMOUNT OF TAX DUE; OTHERWISE, IT IS INVALID AND DOES NOT EXTEND THE 3-YEAR PRESCRIPTIVE PERIOD.

• The BIR may assess internal revenue taxes within three (3) years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later, unless extended, as when before the expiration thereof, the BIR and the taxpayer agreed in writing via
• The Waiver, must indicate the nature and the amount of the tax due, to be valid, and would have the effect of extending the three-year prescriptive period to assess. These details are material as there can be no true and valid agreement between the taxpayer and respondent absent these information.
• Where the waivers do not indicate the kind and amount of the taxes to be assessed or collected, they are invalid. Correspondingly, the same did not effectively extend the three-year prescriptive period. Hence, the assessment is void (Panay Electric Company v. CIR, CTA Case No. 9523, June 1, 2020).

A TAX ASSESSMENT STATING THAT THE “INTEREST WILL HAVE TO BE ADJUSTED” IS VOID AS THE AMOUNT REMAINS INDEFINITE.

• An assessment is a written notice and demand made by the BIR on the taxpayer for the settlement of a due tax liability that is definitelyset and fixed.
• If the Formal Letter of Demand/Formal Assessment Notice (FLD/FAN) reveals that although it provides for the computation of the taxpayer’s supposed tax liabilities, the amounts thereof remain indefinite, since the tax dues are still subject to modification. Specifically, the subject FLD-FAN states: "Please take note that the interest will have to be adjusted if paid beyond the date specified therein ().

A TAX ASSESSMENT WITH A “REQUEST TO PAY THE DEFICIENCY” IS VOID” CONSIDERING THAT IT IS NOT CONSIDERED A DEMAND.

• The FLD/FAN states “in view thereof, you are requested to pay your aforesaid deficiency income tax, value added tax and documentary stamp tax through the duly authorized agent bank in which you are enrolled, within the time shown in this assessment notice.”
• The request to pay is not a demand to pay. To demand means to "require (a person) to do and is also defined as "the assertion of a legal right.
• An examination of the FLD/FAN would reveal that there is no demand or requirement for the taxpayer to pay the taxes due. The phrase ''you are requested to pay your aforesaid deficiency tax negates the imperative nature and assertion of a legal right of an assessment.
• Correspondingly, the subject FLD/FAN do not purport to be a demand for payment of tax due, which a final assessment notice should supposedly be. Clearly, the subject tax assessments are void, and thus, bear no valid fruit ().

A  LETTER OF AUTHORITY (“LOA”) IS NOT SUBJECT TO THE 3-YEAR PRESCRIPTIVE PERIOD; LETTER OF AUTHORITY AND TAX ASSESSMENT DISTINGUISHED.

• The taxpayer questions the Letter of authority issued by the BIR. It argues that as of the date of the issuance of the LOA, the BIR’s right to assess and collect within the 3-year period had already prescribed. It filed the tax returns for 2012 taxable year and the LOA was issued only in 2017.
• The CTA held that the 3-year period is period within the BIR should issue a tax assessment and not an LOA.
• The issuance of an LOA is not subject to the prescriptive period.
• A tax assessment is totally different from an LOA.
  • An assessment is a written notice and demand made by the BIR on the taxpayer for the settlement of a due tax liability that is there definitelyset and fixed. It also signals the time when penalties and interests begin to accrue against the taxpayer.
  • An LOA gives notice to the taxpayer that it is under investigation for possible deficiency tax assessment; at the same time, it authorizes or empowers a designated revenue officer to examine, verify, and scrutinize a taxpayer's books and records, in relation to internal revenue tax liabilities for a particular period. The LOA commences the audit process and informs the taxpayer that it is under audit for possible deficiency tax assessment.
  • A tax assessment is preceded by an LOA, which entails the examination of a taxpayer's books of accounts and other accounting records; and the issuance of an LOA does not necessarily mean the subsequent issuance of a tax assessment. Parenthetically, the BIR is not mandated to make an assessment relative to every return filed with it (Hemisphere-Leo Burnett v. Commissioner of Internal Revenue, CTA Case Nos. 9749, June 03, 2020).

A PEZA-REGISTERED ENTITY IS A VAT-EXEMPT ENTITY AND ITS IMPORTATION IS NOT SUBJECT TO VAT, APPLYING THE CROSS-BORDER RULE; IT IS ALSO EXEMPT FROM NATIONAL AND LOCAL TAXES IN LIEU OF 5% GROSS INCOME TAX.

• Taxpayer is a PEZA-registered entity.
• The BIR assessed the taxpayer for deficiency VAT on its importation of its construction materials and equipment. It contends that the taxpayer’s tax incentive is not absolute because it is subject to the rules and regulations of PEZA and the conditions set in the Registration Agreement.
• The Court ruled that the assessment is wrong. The taxpayer is a VAT-registered entity, is a VAT-exempt entity under the law. Economic zones (PEZA) are considered a separate customs territory or legal fiction of foreign territory. Even though they are within the Philippines, theyare regarded in law as foreign soil.
  • If it’s treated as a foreign territory, the cross-border rule applies, which states that no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the  territorial border of the taxing authority. Importation into economic zones are considered importationmade into foreign territory and not subject to VAT. Importations made by PEZA-registered enterprises which are located in the ecozones are considered foreign territory and are automatically not subject to VAT.
• The CTA also ruled that the taxpayer, being a PEZA-registered entity, is likewise entitled to exemption from national and local taxes, in lieu of payment of 5% gross income tax
• The taxpayer is automatically entitled to preferentialtax rate. There is no condition imposed upon PEZA-registered entity to enjoy its privileges. Even assuming that the taxpayer is required to obtain approval of PEZA before it can avail of the incentives, the imposition is erroneous because as a PEZA-registered entity it is VAT-exempt (CIR v. Philippine International Air Terminals Co., Inc., CTA EB No. 1918, CTA Case No. 9123, June 3, 2020)

REQUISITES FOR THE CLAIM FOR INPUT VAT REFUND. Jurisprudence has laid down certain requisites which must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT.

• The claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made;
• In case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of [90] days from the date of submission of complete documents in support of the application, the judicial claim must be filed with this Court, within 30 days from receipt of the decision or after the expiration of the said [90]-day period;
• The taxpayer is a VAT registered;
• The taxpayer is engaged in zero-rated or effectively zero-rated sales;
• The acceptable foreign currency exchange proceeds have been duly accounted with BSP rules and regulations in the form of Certificate of Inward Remittance;
• 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 volumes;
• The input taxes have not been applied against output taxes during and in the succeeding quarters (Maxima Machineries, Inc. v. CIR, CTA Case No. 9268, June 1, 2020)

IN INPUT VAT REFUND, THE DOCUMENTS TO SUPPORT NRFC DOING BUSINESS OUTSIDE THE PHILIPPINES ARE SEC NEGATIVE CERTIFICATION AND FOREIGN BUSINESS REGISTRATION; SERVICE AGREEMENTS AND SCREENSHOTS OF CORPORATE PROFILE ARE NOT SUFFICIENT. 

• In a claim for refund of input VAT for zero-rated sales (e.g. sale to non-resident foreign corporation (“NRFC’) doing business outside the Philippines), each foreign entity must be supported, at the very least, by both  a) SEC certificate of non-registration of corporation/partnership and  b) proof of foreign incorporation/ association/business registration. The said basic documents are necessary because the Philippine SEC's negative certification establishes that the recipient of the service has no registered business in the Philippines, while the certificate/ articles of incorporation/ association will prove that the recipient of the service is indeed foreign. Furthermore, the former document will tend to satisfy the requirement that the service-recipient is not engaged in trade or business within the Philippines, while the latter document will indicate whether the same service recipient is engaged in business at all.
  • Service agreements and printed screenshotsor corporate profiles are not sufficient to establish that its service recipients are non-resident foreign corporations doing business outside the Philippines. The former document only shows the names of customers to whom it rendered services, but do not, in any way, establish that the service recipients are engaged in business outside the Philippines; while the latter document is self-serving, and lack (Commissioner of Internal Revenue v. Chevron Holdings, Inc., CTA EB No. 1950, CTA Case No. 8946, June 3, 2020)

IN INPUT VAT REFUND, INPUT VAT MAY BE ALLOCATED PROPORTIONATELY ON THE BASIS OF SALES VOLUME.

• If the taxpayer is engaged in zero-rated and also in taxable sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales.

The law only mandates that the input tax paid or incurred is attributable to a taxpayer's zero-rated sales. The law does not require that the input tax be directly attributable to zero-rated sales. Input taxes that bears a direct or indirect connection with a taxpayer's zero-rated sales satisfies the requirement of the law (Id.)

The BIR prescribes all persons doing business and earning income, specifically those who are into digital transactions through the use of any electronic platforms and media, to ensure that their businesses are registered and that they are tax compliant. It provides:

• All those who will register their business activity and/or update their registration status not later than July 31, 2020 shall not be imposed with penalty for late registration.
• The  business entities are likewise advised to comply with the issuance of sales invoice or receipts, keeping of registered books of accounts and other accounting records of business transactions, withholding taxes, filing of tax returns, and payment of correct taxes (RMC No. 60-2020, June 10, 2020).

For your easy reference, the registration guidelines may be accessed HERE.

TAX AMNESTY ON DELINQUENCIES MAY BE AVAILED OF UNTIL DECEMBER 31, 2020. The BIR further amends RR No. 4-2019, relative to the period and manner of availment of Tax Amnesty on Delinquencies. It provides:

• Any person, whether natural or juridical, with internal tax liabilities covering taxable year 2017 and prior years, may avail of tax amnesty on delinquencies within 1 year from the effectivity of these regulations or until December 31, 2020 (“New Period”). However, the said date may be extended if the circumstances warrant an extension such as in case of country-wide or economic reasons.
• The submission of the Tax Amnesty Return made under oath with complete documentary requirements and proof of payment shall be submitted within the New Period. The availment of Tax Amnesty on Delinquencies shall be considered fully complied with upon completion of the steps within the New Period.
• The concerned BIR Office receiving the request for Certificate of Delinquencies/Tax Liabilities shall issue said Certificate of Delinquencies/Tax Liabilities to the taxpayer within three (3) working days from the date of the request. Should the concerned BIR office find that the said Certificate of Delinquencies/Tax Liabilities cannot be issued, said BIR Office must state in writing the legal and factual basis for its denial.
• The concerned BIR Office is also required to endorse said duly accomplished TAR and APF within one (1) working day from receipt of the document. (Revenue Regulations No. 15-2020, June 19, 2020). For your easy reference, the issuance may be accessed HERE.

MAYOR’S PERMIT IS NO LONGER REQUIRED IN BUSINESS REGISTRATION WITH THE BIR. The BIR prescribes a revised checklist of documentary requirements of business registration and other types of applications. The requirements are streamlined by removing the Mayor’s Permit as one of the mandatory requirements. It also reminds taxpayers that it shall not process deficient or incomplete applications or requests. (Revenue Memorandum Circular No. 57-2020, June 9, 2020) For your easy reference, the issuance may be accessed HERE.

Tax credit certificate that remains unutilized for more than one (1) year at any given AN interval of time during its validity shall be converted into cash.  This requires prior notice by the BIR, subject to the availability of funds in accordance with the procedural requirements that will be issued by the BIR. (Revenue Regulations No. 14-2020, May 28, 2020) For your easy reference, the issuance may be accessed HERE.

LIST OF ACCREDITED MICROFINANCE UPDATED. The BIR published an updated list of microfinance NGOs accredited by the Microfinance NGO Regulatory Council (RMC No. 58-2020, June 9, 2020). For your easy reference, the issuance may be accessed HERE.

SUMMARY OF TEMPORARY RECEIPTS OR INVOICE SHOULD BE SUBMITTED WITHIN 90 DAYS FROM LIFTING OF COMMUNITY QUARANTINE. All taxpayers who adopted workaround procedures/temporary measures on the issuance of receipts/invoices during the period of ECQ and MCQ are required to submit their Summary of Temporary Receipts/Invoices Issued within ninety (90) days from the lifting of the ECQ and/or MECQ (RMC 59-2020, June 9, 2020). For your easy reference, the issuance may be accessed HERE.

LIST OF DRUGS EXEMPTED FROM VAT UPDATE. The BIR publishes the list of Prescription Drugs and Medicines for Diabetes, High-Cholesterol and Hypertension Exempt from VAT Beginning January 27, 2020 provided by the Food and Drug Administration of the Department of Health (RMC No. 62-2020, June 23, 2020). The list may be accessed HERE.

Securities and Exchange Commission

AUTHENTICATION/NOTARIZATION OF ARTICLES OF INCORPORATION IS NO LONGER MANDATORY IN LIEU OF CERTIFICATE OF AUTHENTICATION. The SEC prescribes the guidelines on authentication of articles of incorporation in applications for registration of new domestic corporations.

• Both the Articles of Incorporation and the Certificate of Authentication need not be notarized nor consularized. In lieu of the authentication, the SEC will accept registration of Articles of Incorporation that are accompanied by a Certificate of Authentication signed by all incorporators.
• The incorporators, if they so choose, may acknowledge the Articles of Incorporation before a notary public and the same will likewise be accepted by the Commission.
• If executed outside the Philippines, the Articles of Incorporation may be: (1) apostilled or (2) notarized or authenticated by a Philippine diplomatic or consular officer, as the case may be.
• The application for registration of a new domestic corporation with more than forty percent (40%) foreign equity shall be accompanied by an application for registration of investments of non-Philippine nationals using SEC Form F-100, if applicable. The SEC Form F-100 must be authenticated only if the same is executed outside the Philippines. Otherwise, no further authentication of said form is required (MC. No. 16 s.200, April 29, 2020). For your easy reference, the issuance may be accessed 

submission of aUDITED FINANCIAL STATEMENTS AND GENERAL INFORMATION SHEET via courier/mail is allowed; the date of submission is extended. The SEC prescribes the procedure in the filing of audited financial statements and general information sheets to the SEC after the community quarantine. It provides:

• All filers of GIS and AFS, regardless of the number of reports to be filed at SEC, may choose to avail of any of the following options:
  • SEC Nationwide Submission (SENS), where the filer proceeds to the nearest courier area for his offsite submission
  • Any courier/regular mail with no return copy of reports submitted
• The date of mailing of reports such as the GIS and AFS, as shown by the registry receipt of the courier, shall be considered as the date of submission of the GIS and AFS. For reports filed through registered mail in the Philippine Postal Corp., the reckoning date of receipt shall be the date of receipt by the PhilPost.
• For reports filed through email during the CQ, the reckoning date of receipt shall be the date stated in the Acknowledgment Confirmation (AC) stated in the email as attached to the hard copy of the reports submitted.
• To maintain an organized and orderly filing of Audited Financial Statements, all corporations, including branch offices, representative offices, regional headquarters and regional operating headquarters of foreign corporations shall file their AFS through SEC Express Nationwide Submission (SENS) using Courier or Philippine Postal Corp., depending on the last numerical digit of their SEC registration or license number in accordance with the following schedule:

(MC. No. 18 s.200, May 11, 2020).  For your easy reference, the issuance may be accessed HERE.

extended deadline for submission of annual reports and/or afs for companies with fiscal period ending january 31 2020 to march 31, 2020. The SEC extends the deadline for the submission of 2020 Annual Reports and/or Audited Financial Statements of Companies with Fiscal year ending 31 January 2020 to 31 March 2020, including the applicable quarterly reports for a period of sixty (60) calendar days from the regular filing deadlines; while for the companies with fiscal year ending 30 April 2020, an extension of the deadline for the submission of the following reports is for a period of 45 calendar days from the regular filing deadline. The report includes:

(i)             Annual Report (SEC Form 17-A) and Audited Financial Statements (AFS) of publicly-listed companies (PLC);

(ii)            Annual reports and AFS of issuers of registered securities (other than publicly-listed companies); and

(iii)           AFS of all other companies other than items (i) and (ii)

Likewise, the deadline for the submission of the quarterly reports (SEC 17-Q) for the first quarter of the covered companies is hereby extended for a period of 45 days from the regular filing deadline (MC. No. 17 s.200, May 7, 2020). For your easy reference, the issuance may be accessed HERE.

SUPREME COURT/Court of Tax Appeals Decisions

UNDERDECLARATION OF EXPENSE/PURCHASE DOES NOT RESULT IN THE IMPOSITION OF INCOME TAX.  The three (3) elements in the imposition of income tax are: (i) there must be gain or profit; (2) that the gain or profit is realized or received, actually or constructively; and (3) it is not exempted by law or treaty from income tax. Income tax is assessed on income received from any property, activity or service. Where the BIR’s imposition of tax is based on alleged discrepancies on income payments on goods per its financial statements vis-a-vis the Alphalist, the deficiency income tax assessment corresponding to the alleged unaccounted income payments should be cancelled, since the elements are not present. Further, it was held that while all presumptions are in favor of the correctness of tax assessments, the assessment itself should not be based on presumptions no matter how logical the presumption might be. In order to stand the test of judicial scrutiny, the assessment must be based on actual facts. (Marionhaud Philippines, Inc., CTA Case No. 9615, May 29, 2020).

THE BIR CANNOT USE INFORMATION FROM THIRD PARTY AS A BASIS OF ITS ASSESSMENT WITHOUT CERTIFICATION THEREFROM. The BIR compared the taxpayer’s Summary List of Withholding Taxes (SAWT) with information from third parties generated from its Computer Audit Tools and Techniques Laboratory. The differences were treated as unrecorded sales. CTA ruled that the discrepancy was not verified with the relevant suppliers and thus, the assessment is without foundation for being arbitrary and capricious. CTA also agreed with the taxpayer that the BIR must secure the Sworn Declaration of the third-party, in this case, the specific clients/ customers of the Company that such amounts were indeed sales by the Company to them. Otherwise, the BIR's data are mere hearsay evidence that will not stand the scrutiny of the Court. Thus, the supposed third-party information compared to petitioner's SAWT or any other information are mere naked assessments absent the sworn statements/declarations. Thus, the assessment must be cancelled and set aside. (Id.)