- Regular Corporate Income Tax
|Current Tax Code||CREATE|
- CREATE retains exemption of PEZA-registered entities from Branch Profit Remittance Tax.
- Regional Operating Headquarters
|Current Tax Code||CREATE|
|10%||Regular Corporate Income Tax after 2 years|
- Passive Income of Resident Foreign Corporation and Non-resident Foreign Corporation
|Current Tax Code||CREATE|
|7.5% on interest income from Foreign Currency Denominated Units (Applicable to Resident Foreign Corporations)||15%
|5%/10% Capital Gains Tax on shares not listed in the Local Stock Exchange (Applicable to Resident and Non-resident Foreign Corporations)||15%|
- Interest Arbitrage (Limitation on Interest Deduction)
|Current Tax Code||CREATE|
- Net Operating Loss Carry-Over
|Current Tax Code||CREATE|
|3 Years||5 Years
Exception: Not applicable to Large Taxpayers
- 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:
|Income Tax Holiday||
Categories shall be based on both location and industry of the registered project or activity, to be determined in the Strategic Priority Plan (SIPP).
|Reduced/Special Corporate Income Tax Rate (SCIT)||Rates:
Period of Incentive:
· Special rate shall be in lieu of all national and local taxes
· May be extended by 3 or 4 years, at any one time, provided that the total period of incentive availment shall not exceed 12 years
· Existing registered projects or activities prior to the effectivity of the law may qualify to register and avail of the ITH and then SCIT or enhanced deduction for the prescribed period subject to the criteria and conditions set forth in the SIPP.
|Depreciation Allowance of Assets Acquired||
· Acquired directly for production of goods and services
|Additional Deduction for Labor Expense||50% on increment of labor expenses (excluding indirect labor, salaries, and wages and other personnel costs of admin and other support services)|
|Domestic Input Expense||Maximum of 50% additional deduction of the domestic input expense (directly related to and actually used in the registered export activity of the registered entity)|
|Training Deduction||Additional 100% (given to the Filipino Employees engaged directly in the production)|
|Enhanced NOLCO||Net operating losses during the first 3 years – carried over within the next 5 years|
|Reinvestment Allowance – Manufacturing Industry||Maximum of 50% deduction within 5 years (deduction for reinvestment allowance shall be determined in the SIPP|
|Deduction for Power Expense||50% additional deduction of power utilized for registered project or activity|
|Additional Deduction on Research and Development||Additional 100% on the Research and Development Expense (directly related to the registered activities)|
|Customs Duty Exemption for Capital Equipment, Raw Materials, Spare Parts and Accessories||· Exemption extends to spare parts and accessories directly related or exclusively used for the registered activity
· Approval of IPA must be secured before the sale, transfer or disposition within the first 5 years of importation. After 5 years, notice is required.
· Liable to pay duties based on net book value of the capital equipment, raw materials, spare parts or accessories if:
o Sold/transferred to a non-tax exempt entity; or
o There was violation of the registration terms and conditions even if the disposition was made after 5 years from importation and with notice to the IPA
· Liable to pay twice the duties if disposed without prior approval
|VAT exemption on importation and zero-rating on domestic purchases of capital equipment and raw materials||Exemption and zero-rating for those directly and exclusively used in the registered project or activity by registered enterprise located inside an ECOZONE or freeport.|
- 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
|ITH Only||· Remaining ITH period
· Period specified in the registration if not yet availed upon effectivity of this bill into law
|ITH and entitled to 5% GIT after ITH||5% based on schedule below|
|GIT > 10 years||4 years 5% GIT|
|GIT for 5 to 10 years||5 Years 5% GIT|
|GIT < 5 years||7 Years 5% GIT|
|Availing GIT and projects satisfying certain conditions:
· 100% export
· Employees at least 10,000 Filipinos directly engaged in production, or engaged in footloose projects
|9 Years 5% GIT|
Bureau of Internal Revenue
BIR DEADLINES from JULY 11 to July 16. A gentle reminder on the following deadlines, as may be applicable:
|July 11, 2020||e-filing of 1601C – eFPS filers under Group E – Month of June 2020|
|June 13, 2020||e-filing of 1601C – eFPS filers under Group C – Month of June 2020|
|June 14, 2020||e-filing of 1601C – eFPS filers under Group B – Month of June 2020|
|June 15, 2020||· e-filing and e-payment of 1601C – eFPS filers under Group A – Month of June 2020
· e-filing/filing and e-payment/payment of 1702RT, MX and EX with required attachments – FY ending March 31, 2020
· Registration of Bound Loose Leaf Books of Accounts/Invoices/Receipts and other Accounting Records – FY ended June 30, 2020
· e-payment of 1601C for Group E, D, C and B – Month of June 2020
· Submission of Quarterly List (with monthly breakdown) of Contractors of Government Contracts entered into by the Provinces/Cities/Municipalities/Barangays – CQ ending June 30, 2020
· Filing and payment of 1704 – Fiscal Year ending June 30, 2019 (IAET)
· Filing and payment of 1707A by Corporate Taxpayers – Fiscal Year ending March 31, 2020
|June 16, 2020||Submission of Consolidated Return of All Transactions based on the Reconciled Data of Stockbrokers – July 1 to 15, 2020|
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)