SEC MOVES THE DEADLINE FOR THE SUBMISSION OF AUDITED FINANCIAL STATEMENTS AND GENERAL INFORMATION SHEET.

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)