SEC EXTENDS THE DEADLINES AND PROVIDES FOR INTERIM PROCEDURES FOR THE SUBMISSION OF PRINTED/HARD COPIES OF ANNUAL REPORTS.

• Corporations whose fiscal years ended November 30, 2019 or December 31, 2019, regardless of their SEC registration or license numbers shall have until September 30, 2020 to submit the printed/hard copies of their AFS to the SEC Main Office and Extension Offices.
• Corporations whose fiscal years ended between January 31, 2020 and June 30, 2020 shall have the following new deadlines:

• Corporations, which held their annual stockholders’ or members’ meetings during the previously imposed ECQ and MECQ, shall have until September 30, 2020 to submit the printed or hard copies of their GIS to the SEC Main Office and Extension Offices
• For your easy reference, the Circular may be accessed HERE(SEC Notice, 11 August 2020).

SEC EXTENDS THE DEADLINES FOR POSTING OF ADDITIONAL SECURITIES DEPOSIT AND SUBSTITUTION OF SECURITIES DEPOSIT TO ALIGN THE SAME WITH THE DEADLINE OF THE AUDITED FINANCIAL STATEMENTS.

• Posting of additional securities deposit for branch offices whose submission of AFS was extended pursuant to MC No. 17and MC No. 18, all series of 2020 shall be extended until October 29, 2020.
• The extension for posting of additional securities deposit and substitution of securities deposit shall automatically be applied without the need for a request from the affected branch offices.
• For corporations incorporated prior to February 23, 2019, the adjustment in the computation of additional securities deposit based on the new figures of Section 143 of the Revised Corporation Code (RCC) and compliance with the increase in initial deposit amounting to P500,000 will commence on August 1, 2020, unless the foreign corporation opts to comply with the minimum amount of P500,000 imposed by the RCC.
• For foreign corporations licensed on February 23, 2019, or onwards, the minimum of P500,000 shall be imposed, as required by Section 143 of the RCC. Any additional securities deposit for these corporations shall adopt the adjustment in the computation based on the figures of Section 143 of the RCC.
• In relation to the change of resident agent, the following applications will not incur penalty if payment of appropriate fees are made on or before September 30, 2020. Hence, penalty shall commence to run on October 1, 2020:
  • Applications on request for change of resident agent filed and reviewed before March 16, 2020 with issued Payment Assessment Form (PAF)
  • Applications on request for change of resident agent filed before the quarantine period (ECQ, MECQ, GCQ, MGCQ) but issued a PAF during the quarantine period
  • Applications on request for change of resident agent filed and reviewed during the quarantine period but without issuance of PAF
• For your easy reference, the Circular may be accessed HERE(SEC Memorandum Circular No. 24, 25 August 2020).

Bureau of Internal Revenue

BIR DEADLINES from September 6 to 14, 2020 . A gentle reminder on the following deadlines, as may be applicable:

BIR FURTHER EXTENDS THE DEADLINE FOR BUSINESS REGISTRATION OF THOSE INTO DIGITAL TRANSACTIONS UNTIL SEPTEMBER 30, 2020 WITHOUT PENALTY FOR LATE REGISTRATION.

• For your reference, a copy of the issuance may be accessed (Revenue Memorandum Circular No. 92-2020, September 1, 2020)

Court of Tax Appeals Decisions

PHP 3 MILLION REFUND ERRONEOUSLY PAID PERCENTAGE TAX; GROSS REVENUE TAX OF 5% IMPOSED ON NON-BANK FINANCIAL INTERMEDIARIES IS BASED ON RECEIPTS.

• The BIR partially granted the taxpayer’s refund of erroneously paid tax from P3.9M to P3.4M arising from overpaid percentage taxes.
• The following are the requirements in order to prove a claim for refund of taxes erroneously paid or illegally collected.
  • The taxpayer should file a written claim for refund with the BIR within 2 years from the date of payment of tax or penalty;
  • If denied or not acted upon within the 2-year period, the petition for refund should be filed with the CTA within 30 days from receipt of the denial AND within said 2-year period from the date of payment of tax or penalty regardless of any supervening clause
  • The claim for refund must be a categorical demand for reimbursement; and
  • There must be proof of payment of erroneously or illegally collected taxes.
• In this case, the taxpayer was able to prove the foregoing requirements.The taxpayer is a non-bank financial intermediary subject to 5% percentage tax on its gross receipts (Gross receipt tax or GRT). Under the rules, GRT shall only apply to income actually or constructively received during a taxable period, and the claim of refund is based on error of computation in computation of gross receipts.
  • The Court confirmed that the tax base for GRT purposes should be the income actually or constructively received. Considering that the income subjected to GRT was on accrual basis, the taxpayer erroneously computed its GRT (Aeon Credit Service (Philippines), Inc.  v. CIR, CTA Case No. 9770, July 15, 2020).

PHP 2.3 MILLION INCOME TAX REFUND DENIED; SALARIES PAID BY ADB TO FILIPINO CITIZENS ARE SUBJECT TO INCOME TAX.

• The CTA En Bancaffirmed the CTA Division’s decision denying the claim of refund of income tax paid by the ADB employees.
• Pursuant to the 1965 ADB Charter Agreement, salaries of ADB employees are not subject to tax. However, when the Philippine government ratified the Agreement, it provided for a reservation that it retains the right to tax salaries and emoluments paid by the bank to the Filipino citizens. The BIR issued RMC No. 31-2013 which implements the foregoing rule, which took effect on May 2, 2013.
  • The rules should operate prospectively. Since the tax payments being sought to be refunded pertain to taxable year 2013 and BIR’s RMC took effect on May 2, 2013, the income earned are subject to income tax.
  • Thus, the taxpayer’s claim for refund was denied (Canzon et. al., v. CIR, CTA EB No 2040, CTA Case No. 9384, July 16, 2020).

PHP 2.7 BILLION TAX ASSESSMENT CANCELLED; CHIEF OF LARGE TAXPAYER AUDIT DIVISION CANNOT VALIDLY SIGN A MEMORANDUM OF ASSIGNMENT; PAGCOR’S LICENSEES AND CONTRACTEES ARE EXEMPT FROM INCOME TAX ON GAMING REVENUES.

• The CTA En Bancaffirmed the decision of the CTA Division declaring the assessment void, cancelled and withdrawn.
• Under the rules, a Memorandum of Assignment (MOA) may be construed as equivalent to new letter of authority where the authority of a newly designated revenue officer emanates from, provided that it contains all the necessary elements to establish a contract of agency between the CIR or his duly authorized representative and the new revenue officer.
• The Revenue Regional Director (RRD) is authorized to issue an LOA. The position equivalent to a RRD for the Large Taxpayers Division, who is authorized to issue the LOA, is the Assistant Commissioner or Head Revenue Executive Assistants (HREA)
  • In the instant case, only the OIC-Chief signed the MOA. He is neither the CIR, RRD nor HREA. Thus the MOA is void and the resulting assessment is also void.
• Jurisprudence has ruled that PAGCOR’s licensees and contractees, such as the taxpayer in this case,  are exempt from income tax on their gaming revenues.
• Therefore, the assessment was declared void, cancelled and withdrawn(CIR v. Travellers International Hotel Group, Inc., CTA EB No. 2047, CTA Case No. 9168, July 17, 2020).

PHP 37 MILLION LOCAL BUSINESS TAX ASSESSMENT CANCELLED; CITY TREASURER MUST BE AUTHORIZED TO FILE A CASE IN THE FORM OF CITY CHARTER OR RESOLUTION; COMMON CARRIERS ARE EXEMPT FROM LOCAL BUSINESS TAX.

• A local government unit (LGU) has the power to sue through its officials. However, before a city official can exercise the LGU’s power to sue, a law granting such prerogative must first be passed (e.City Charter). Otherwise, a city official can only exercise such power if a resolution is passed by the Sangguniang Panglungsod authorizing him to sue on behalf of the City.
  • In the instant case, the Charter does not provide an express grant of power to the treasurer to initiate and prosecute suits. Neither was there a resolution passed as proof of the treasurer’s authority.
• Under the Local Government Code, taxes on the gross receipts of transportation contractors and person engaged in the transportation of passengers or freight by hire or common carriers are not subject to local business tax.
  • In this case, the taxpayer is engaged in the business of freight forwarding. It is engaged in international freight and/or cargo consolidation and forwarding by means of air and sea transportation. It is a common carrier not subject to local business tax(City of Paranaque v. Kuehne + Nagel, Inc., CTA EB No. 2130, CTA AC No. 189, Civil Case No. 07-0370, July 17, 2020)

PHP 54 MILLION REAL PROPERTY TAX ASSESSMENT UPHELD; REAL PROPERTY TAX EXEMPTION ARISING FROM TAX INCENTIVES IS A QUESTION OF FACT SUBJECT TO PRIOR EXHAUSTION OF ADMINISTRATIVE REMEDIES.

• The CTA En Banc affirmed the decision of the CTA Division dismissing the taxpayer’s appeal for lack of jurisdiction.
• When a taxpayer assails the reasonableness of the amount of the real property tax (RPT) or where the issue involves a question of fact, the proper recourse is to pay the assailed the RPT assessment and protest the same with the local treasurer and/or assessor, as the case may be within 30 days from the date of payment. The treasurer and/or assessor shall have 60 days from receipt within which to decide the protest. If the decision is unfavorable, the taxpayer has 60 days to appeal to the local board of assessment appeals, which if the latter decides unfavorably, the matter may be appealed to CBAA within 30 days. If the CBAA’s decision is unfavorable, the taxpayer may appeal with the CTA En Banc(“Prior exhaustion of administrative remedies”).
• Claiming exemption from RPT raises a question as to the correctness or reasonableness of an assessment, thus, it involves a question of fact which requires exhaustion of administrative remedies.
  • In this case, the taxpayer’s claim of RPT exemption arising from availment of incentives is a question of fact which should be subject to prior exhaustion of administrative remedies. The taxpayer should not have directly resorted to the regular court.
• Therefore, the resulting assessment issued against the taxpayer is upheld (Jetti Petroleum, Inc. v. Tolentino, CTA EB No. 2093, July 14, 2020)

PHP 12 MILLION REFUND OF CUSTOMS DUTIES GRANTED; PETROLEUM FUEL PURCHASED AND DELIVED TO AN ECOZONE FOR THE PRODUCTION OF GLASS PRODUCTS IS EXEMPT FROM CUSTOMS DUTIES AND TAXES.

• The CTA En Banc affirmed the decision of the CTA Division granting refund.
• Under the rules, supplies brought into the Ecozone by a duly-registered PEZA enterprise and to be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed, manipulated, manufactured, mixed with foreign or domestic merchandise, whether directly or indirectly related in such activity, shall not be subject to customs laws and regulations and thus exempt from customs duties and taxes.
  • In this case, the petroleum fuel purchased by the taxpayer which was delivered to its factory inside the economic zone was to be used for the production of glass products. Accordingly, being a PEZA-registered ecozone export enterprise, the passed-on customs duties on the said purchases may be a proper subject of a claim for refund.

Therefore, the refund was granted (BOC v. Pioneer Float Glass Manufacturing, Inc., CTA EB No. 1973, CTA Case No. 8752, July 14, 2020)