SEC IMPLEMENTS THE MANDATORY 60-DAY GRACE PERIOD FOR ALL LOANS WITH FINANCING COMPANIES, LENDING COMPANIES AND MICROFINANCE NGOS.

• Among other institutions, financing and lending companies and microfinance NGOs shall implement a one-time 60-day grace period to be granted for the payment of all existing, current and outstanding loans falling due or any part thereof, on or before December 31 2020.
• The grace period shall apply to each loan whether the borrower has a single loan or multiple loans with the financing companies (FC), lending companies (LC), and Microfinance NGOs (MF-NGOs).
• FCs, LCs, and MF-NGOs shall not charge or apply interest on interest, penalties, or other charges during the mandatory one-time 60-day grace period to future payment or amortizations of the borrowers.
  • Furthermore, FCs, LCs, and MF-NGOs are prohibited from requiring their clients to waive the application of the provisions of the Bayanihan to Recover As One Act.
  • No waiver previously executed by borrowers covering payments falling due until 31 December 2020 shall be valid.
• The accrued interest for the one-time 60-day grace period may be paid by the borrower on the staggered basis until 31 December 2020. Nonetheless, this shall not preclude the borrower from paying the accrued interest in full on the new due date.
• The parties may agree on a grace period longer than 60 days, and/or the payment of accrued interest on a staggered basis beyond 31 December 2020
• For your easy reference, the SEC Notice may be accessed (SEC Notice, 21 September 2020)

SEC PROVIDES GUIDELINES IN THE FILING, INVESTIGATION, AND RESOLUTION OF COMPLAINTS FOR VIOLATION OF THE RIGHT TO INSPECT AND/OR REPRODUCE CORPORATE RECORDS.

• The Circular is issued pursuant to the Revised Corporation Code which provides that corporate records shall be open for inspection by any director, trustee, stockholder or member of the corporation and refusal to provide records is punishable by law. Thus, the SEC promulgates the guidelines in enforcing the right of the members to inspect and/or reproduce corporate records and the procedure for the conduct of investigation for violation of the same.
• For your reference, the SEC Circular may be accessed (MC No. 25. S. 2020, 20 August 2020)

Bureau of Internal Revenue

BIR DEADLINES from September 5 to 11, 2020. A gentle reminder on the following deadlines, as may be applicable:

NOTICE OF DISCREPANCY REPLACES NOTICE OF INFORMAL CONFERENCE; TAXPAYER SHALL PRESENT EXPLANATION/DOCUMENTS WITHIN 30 DAYS FROM THE RECEIPT OF THE NOTICE OF DISCREPANCY; FAILURE TO SETTLE SHALL REQUIRE INVESTIGATING OFFICER TO ENDORSE THE CASE FOR ISSUANCE OF THE PRELIMINARY ASSESSMENT NOTICE WITHIN 10 DAYS FROM CONCLUSION OF THE DISCUSSION.

• The Secretary of Finance has issued RR No. 22-2020, amending its previous rules on informal conference. The amendment pertains to the preparation of a Notice of Discrepancy instead of a Notice of Informal Conference.
• It provides that ifthe taxpayer disagrees with the discrepancy/ies found during the audit/investigation, the taxpayer must present an explanation and provide documents to support his explanation within thirty (30) days from receipt of the Notice of Discrepancy.
• If despite the discussion of discrepancy, the taxpayer is found liable for deficiency taxes and the taxpayer does not agree to the discrepancy or address the same by paying the deficiency taxes, the investigating office shall endorse the case for issuance of a Preliminary Assessment Notice within ten (10) days from the conclusion of the discussion.
• For your reference, a copy of the issuance may be accessed (Revenue Regulations No. 22-2020, 15 September 2020)

OVERSEAS FILIPINOS INVESTING IN PERSONAL EQUITY AND REQUIREMENT ACCOUNT ARE REQUIRED TO SECURE TAX IDENTIFICATION NUMBER EITHER MANUALLY OR E-MAIL.

• Overseas Filipino (OF) investors who wish to invest in Digital Personal Equity and Retirement Account (PERA) platform are required to secure a Tax Identification Number (TIN) before they can open an account with the banks and become eligible to invest in PERA.
• OFs may secure their TIN manually through authorized representatives; or via E-mail application.
  • For purposes of this registration, Overseas Filipinos shall not be issued any TIN Card. For applications filed manually, the BIR Form No. 1904 duly stamped received indicating the TIN issued shall serve as proof of registration. On the other hand, for applications filed through email, the acknowledgment receipt/reply to the email is sufficient proof of receipt of such application.
• For your reference, a copy of the issuance may be accessed HERE. (Revenue Memorandum Circular No. 103-2020, 14 September 2020)

Court of Tax Appeals Decisions

PHP 13 MILLION LOCAL BUSINESS TAX ASSESSMENT UPHELD: TAXPAYER SHOULD APPEAL WITHOUT AWAITING THE DECISION OF THE LOCAL TREASURER AFTER THE LATTER FAILED TO ACT ON ITS PROTEST WITHIN 60 DAYS FROM THE DATE OF FILING OF THE SAID PROTEST.

• The CTA En Bancdenied the taxpayer’s petition to cancel the local treasurer’s assessment for lack of jurisdiction due to failure to appeal on time.
• Under the rules, in case of notice of assessment issued by the local treasurer, the taxpayer has 60 days from receipt of the notice to file a written protest. The treasurer shall decide the protest within 60 days from the time of filing. The taxpayer shall have 30 days from receipt of the denial of its protest or from the lapse of 60-day period within which to appeal with the court of competent jurisdiction. Otherwise, the assessment becomes conclusive and unappealable.
• In this case, the taxpayer filed its complaint with the court within 30 days from issuance of the decision of the local treasurer. However, the local treasurer issued its decision after the lapse of 60-day period to decide. The decision of the local treasurer is moot and academic considering that the 60-day period has lapsed. Therefore, the assessment is upheld. (Kuehne + Nagel, Inc., v. City of Paranaque et. Al., CTA EB No. 2208, CTA AC No. 206, September 9, 2020).

PHP 1 MILLION LOCAL BUSINESS TAX ASSESSMENT CANCELLED: HOLDING COMPANIES ARE EXEMPT FROM LOCAL BUSINESS TAX ON DIVIDEND AND INTEREST INCOME.

• The CTA En Bancaffirmed the CTA Division’s decision cancelling the local business tax assessment as dividend and interest income derived by a holding Company is not subject to local business tax.
• The Local Government Code imposes tax on dividends earned by banks and other financial institution. In its enumeration of banks and other financial institutions, a holding company is not expressly mentioned.
  • In this case, Makati City cannot expand the law and legally impose local business tax on dividend income earned by holding companies when the law itself does not expressly provide. (Makati City and the Office of the City Treasurer v. Allons Holdings, Inc., CTA EB No. 2146, CTA AC No. 195 September 01, 2020; see also Makati City Treasurer and City of Makati v. Mermac, Inc., CTA EB No. 2131, CTA AC No. 193, September 2, 2020)

LOCAL GOVERNMENT UNIT’S PETITION DISMISSED DUE TO FAILURE TO SUBMIT CITY TREASURER’S AUTHORITY TO FILE THE CASE.

• The CTA En Bancaffirmed the decision of the CTA Division dismissing the case for the City Treasurer’s lack of authority to file the case.
• Under the rules and prevailing jurisprudence, the City of Treasurer must be authorized by the Sangguniang Panglungsodthrough an ordinance.
  • In the instant case, the City Treasurer failed to submit her authority to file the case. Thus, the case was dismissed (City Treasurer and City of Makati v. Mermac, Inc., CTA EB No. 2131, CTA AC No. 193, September 2, 2020).

PRINTED SCREENSHOTS OF OFFICIAL WEBSITE OF FOREIGN GOVERNMENT’S REGISTRY OF COMPANIES ARE SUFFICIENT PROOF IN LIEU OF THE CERTIFICATES/ARTICLES OF FOREIGN INCORPORATION/ASSOCIATION.

• Under the rules, to be entitled to zero-rating, each entity must be supported at the very least by both SEC Certificate of Non-Registration and Proof of Certificate/Articles of Foreign Incorporation.
  • The CTA En Banc has already given imprimatur on the presentation of printed screenshots of the foreign government’s registry of companies in lieu of the Certificates/Articles of Foreign Incorporation/Association.
  • Being official government registry of corporation, the Court accepts printed screenshots of the official websites of other foreign government’s registry of companies as sufficient proof in lieu of the Certificates/Articles of Foreign Incorporation/Association. (CIR v. AIG Shared Services Corporation (Philippines, CTA EB No. 2071, CTA Case No. 9100, September 07, 2020)

PHP 2.9 MILLION INPUT VAT REFUND PARTIALLY GRANTED: INPUT TAX, WHICH CANNOT BE DIRECTLY ATTRIBUTED TO A SPECIFIC TYPE OF SALE, SHALL BE ALLOCATED PROPORTIONATELY ON THE BASIS OF VOLUME OF SALES; IF TAXPAYER-PURCHASER ERRONEOUSLY ASSUMED THE INPUT TAX, ITS RECOURSE IS REIMBURSEMENT FROM THE SUPPLIERS.

• The CTA En Banc affirmed the amended decision of the CTA Division partially granting refund of input VAT.
• Among other, the Court ruled:
  • If the input tax cannot be entirely attributed to a specific type of sale, it must be allocated proportionately on the basis of volume of sales.
  • In case where no input VAT should have been paid, and the taxpayer paid the same, its recourse should have been to seek reimbursement from its suppliers.  There was no distinction which would limit the application of the said doctrine only to a VAT exempt PEZA-registered entity.
  • Machine validated IEIRD is required to properly substantiate the payment of duties and taxes on imported goods.(Taganito Mining Corporation v. CIR, CTA EB No. 1972, CTA Case No. 9057, September 3, 2020)

PHP 94 MILLION TAX ASSESSMENT PARTIALLY REDUCED; REQUISITES OF ZERO-RATED SALES; IN PROVING REIMBURSEMENT, TAXPAYER MUST ESTABLISH THE REASONABLE CONNECTION THAT EXPENSES WERE BILLED BY ANOTHER ON BEHALF OF THE TAXPAYER.

• For the supply of services to qualify as VAT zero-rated, the following requisites must be satisfied:
  • The services must be other than processing, manufacturing, or repacking of goods (as shown by the contract);
  • The payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulation (as shown by certificate of inward remittance; unsupported booking commissions in the inward remittance is subject to VAT); and
  • The recipient of such services must be doing business outside the Philippines (as shown by SEC Certificate of Non-Registration of the Company and Memorandum and Articles of Association)
• The taxpayer must prove that communication expenses and marketing expenses are reimbursement in order to be exempt from withholding tax. It should show a reasonable connection or basis that the said expenses were billed by another on behalf of the taxpayer. (Commissioner of Internal Revenue v. Sabre Travel Network (Philippines), CTA EB No. 1932, CTA Case No. 8678; Sabre Travel Network (Philippines) v. CIR, CTA EB No. 1937, CTA Case No. 8678, September 2, 2020)

P1M TAX ASSESSMENT UPHELD: IT IS THE DUTY OF THE TAXPAYER TO SUBMIT DOCUMENTS UPON RECEIPT OF SUBPOENA DUCES TECUM; TAXPAYER CANNOT INSIST ON BIR TO CHECK THE RECORDS INSIDE ITS OFFICE PREMISES.

• As the rules compel submission of documents in case of subpoena duces tecum,it is incumbent upon the taxpayer to ensure prompt and timely transmittal of the records to the BIR. If it wants to prove correctness of the tax return, it should comply with the Subpoena Duces Tecum. It cannot insist that BIR check the records inside its office premises. (8199 Convenience Corporation v. CIR, CTA EB No. 1912, CTA Case No. 8853, September 3, 2020)