FORMER AFP TREASURER LIGOT & WIFE ACQUITTED OF MULTI-BILLION TAX EVASION CASE + CEBU NETS PHP 1 BILLION FROM BUSINESS PERMITS

Other relevant tax updates for this week:

  • COURT OF TAX APPEALS (CTA) DIGESTS
  • TAX NEWS FROM JANUARY 21-25
  • TAX NEWS FROM JANUARY 14-18

COURT OF TAX APPEALS (CTA DIGESTS)

  1. Execution Of Defective Waiver Resulted To Set-In Of Prescription On The Right Of The Bir To Assess & Collect
  2. Creditable Withholding Tax (Cwt) Certificates Are Prima Facie Evidence Of Actual Remittance Of Tax; Taxpayer Need Not Prove The Actual Remittance Of Taxes To The Bir; Cwt At Source Is Sufficient To Prove That Taxes Were Indeed Withheld
  3. In Request For Tax Refund, The Burden Rests Upon The Taxpayer To Prove His Entitlement Thereto
  4. Accused Former Controller Of Afp Acquitted For Failure Of The Prosecution To Prove Beyond Reasonable Doubt; Formally Offering Documentary Evidence To The Court & Its Authenticity Vital In Proving Beyond Reasonable Doubt
  5. Absence Of Authority Of Revenue Officers To Examine Taxpayer’s Accounting Records Results To Void Assessment
  6. Transfer Of A Revenue Officer To Another Bir Office Valid, However, Issuance Of New Letter Of Authority (Loa) Needed For Another Officer To Continue The Audit Of Taxpayer’s Books; Otherwise Assessment Is Void
  7. Compromise Penalties Imposed For Violation Of Keeping Accounts & Other Financial Records Should Be Commensurate To Schedules; Issuance Of Formal Assessment Notice (Fan) Applies Only When Internal Revenue Taxes Are The Ones Being Collected
  8. Formal Assessment Notice (Fan)/Formal Letter Of Demand (Fld) Issued Prior To Expiration Of 15-Day Period To Respond On Preliminary Assessment Notice (Pan) Violates Right To Due Process Of Taxpayers; Bir Cannot Demand What Type Of Supporting Documents Should Be Submitted By The Taxpayer Within The 60-Day Period Reckoned Upon Filing Of Protest

[EXECUTION OF DEFECTIVE WAIVER RESULTED TO SET-IN OF PRESCRIPTION ON THE RIGHT OF THE BIR TO ASSESS & COLLECT]

The Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking for the reversal of the earlier decision of the Court in Division cancelling the assessment issued to the Respondent 2100 Customs Brokers, Inc. on the ground of the set-in of prescription. The Petitioner argued that the waiver was executed resulting to the extended period within which to assess the Respondent. However, the Court ruled out that the subject assessment was issued beyond the prescriptive period emphasizing that the executed waiver did not extend the period to assess as it was not compliant with the mandatory requisites for their validity particularly on the lacking of notarized written authority of the representative to sign. Furthermore, the Court ruled that Petitioner cannot hide behind the doctrine of estoppel to cover its failure to comply with the memorandum order which the BIR itself had issued. Consequently, the Petition for Review is DENIED. [COMMISSIONER OF INTERNAL REVENUE VS. 2100 CUSTOMS BROKERS, INC. CTA EN BANC CASE NO. 1729, JANUARY 15, 2019]

[CWT CERTIFICATES ARE PRIMA FACIE EVIDENCE OF ACTUAL REMITTANCE OF TAX] [TAXPAYER NEED NOT PROVE THE ACTUAL REMITTANCE OF TAXES TO THE BIR] [CWT AT SOURCE IS SUFFICIENT TO PROVE THAT TAXES WERE INDEED WITHHELD]

The Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking reversal of the earlier decision of the Court in Division ordering the Petitioner to refund the excess and unutilized CWT in favour of the Respondent Sonoma Services, Inc. The Petitioner argued that the CWT withheld do not constitute conclusive evidence of payment. In ruling, the Court referred to a number of Supreme Court pronouncements that proof of actual remittance by the taxpayer is not needed in order to prove withholding and remittance of taxes. The CWT at Source issued by the withholding agents is already prima facie proof of actual payment. Consequently, the Petition for Review was DENIED and the earlier decision and resolution were AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. SONOMA SERVICES, INC., CTA EN BANC CASE NO. 1691, JANUARY 14, 2019]

[IN REQUEST FOR TAX REFUND, THE BURDEN RESTS UPON THE TAXPAYER TO PROVE HIS ENTITLEMENT THERETO]

The Petitioner Oncho Philippines Inc. filed a Petition for Review seeking refund on the alleged unutilized input VAT from local purchases of goods and services attributable to its zero rated sales for calendar year 2014, amounting to Php 7,486,676.34. In resolving the case, the Court cited that in order to be entitled to refund or tax credit, it is important to prove that the taxpayer is VAT-registered; the claim for refund is filed within the prescriptive period both in the administrative and judicial levels; that there must be zero-rated or effectively zero-rated sales; that input taxes were incurred or paid; that the input taxes due or paid were attributable to zero-rated sales or effectively zero-rated sales; and that the input taxes were not applied against any output VAT liability. Of the aforementioned requisites, the Court finds the Petitioner compliant. However, upon further verification the Court disallowed some input VAT for the reasons, namely: (1) unsupported purchases of services by documents other than VAT official receipts; (2) unsupported purchase of goods by documents other than VAT invoices; (3) purchases supported by computer-generated receipts and invoices with alterations but without countersignature of the issuer; (4) VAT invoices or official receipts not in the name of Petitioner; (6) VAT amount was not separately indicated in invoices and receipts; (7) invalid receipts and invoices due to out-dated Authority to Print. Based on the foregoing, the Court PARTIALLY GRANTED the Petition for Review ordering the Respondent Commissioner of Internal Revenue to refund the Petitioner in the modified amount of Php 2,563,990.68. [ONCHO PHILIPPINES, INC. VS. COMMISIONER OF INTERNAL REVENUE, CTA CASE NO. 9442, JANUARY 14, 2019] 

[ACCUSED FORMER CONTROLLER OF AFP ACQUITTED FOR FAILURE OF THE PROSECUTION TO PROVE BEYOND REASONABLE DOUBT] [FORMALLY OFFERING DOCUMENTARY EVIDENCE TO THE COURT & ITS AUTHENTICITY VITAL IN PROVING BEYOND REASONABLE DOUBT]

Accused Jacinto C. Ligot and Erlinda Y. Ligot (Spouses Ligot) are charged for violations of Sections 254 and 255 of the Tax Code of 1997, as amended, for failure to supply correct and accurate information in their joint Income Tax Return (ITR) for Taxable Year (TY) 2001 and for failure to report in their ITRs for TYs 2002, 2003, and 2004, other income they received for those respective TYs. The four cases were consolidated in a single case. On the discussion of the Court on the factual bases which led the allegations of the prosecution, one of the major bases is the bank accounts of the Spouses Ligot where withdrawals from various banks and financial institutions were noted, the influx of money, and how they spent it are listed. Advertently, all evidences whether testimonial or documentary, relating to the accused Spouses Ligot’s bank accounts have been disallowed by the Court by virtue of the Law on the Secrecy of Bank Deposits. On the other basis such as real properties purchased, car purchased, improvements to the poultry farm they own and properties in the US, the documents which the prosecution relied upon have either been excluded or were found to have scant probative value due to the failure of the prosecution to establish their authenticity and due execution, which the Court cannot rely upon to prove beyond reasonable doubt that these were purchased from undeclared income. The ownership of the accused Spouses Ligot of these properties, even those alleged to have been purchased through “dummies”, have not been established. More unfortunate is the fact that a number of exhibits that would have served as building blocks for the prosecution’s case have simply not been offered in evidence. Having no assets purportedly purchased with other income, they could not have willfully violated Sections 254 and 255 of the Tax Code. After careful consideration of the testimonial and documentary evidences presented by both parties, the Court finds that the prosecution was not able to prove the guilt of the accused Spouses Ligot beyond reasonable doubt. Consequently, the case is DISMISSED for failure of the prosecution to prove beyond reasonable doubt the guilt of both accused. The Accused are ACQUITTED of the crimes charged. [PEOPLE OF THE PHILIPPINES VS. JACINTO & ERLINDA LIGOT, CTA CRIMINAL CASE NO.’s 0-241, 0-242, 0-243, 0-244, JANUARY 8, 2019]

[ABSENCE OF AUTHORITY OF REVENUE OFFICERS TO EXAMINE TAXPAYER’S ACCOUNTING RECORDS RESULTS TO VOID ASSESSMENT]

The Petitioner Securities Transfer Services, Inc., filed a Petition for Review seeking for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue. The petitioner has several claims on the validity of the assessment however the Court found that the assessments was intrinsically void and thus, should be cancelled and set aside. The invalidity of such deficiency tax assessments resulted from the absence of authority on the part of the revenue officers who conducted the examination of petitioner’s books of accounts and other accounting records pursuant to Section 13 of the Tax Code. Even though it was not specifically raised as an issue, the Court is not precluded from considering the same given that a void assessment bears no fruit. Since the revenue officers named under LOA were different from those who actually examined the petitioner’s books of accounts and other accounting records thus rendered the lack of authority of the revenue officers to conduct the audit. Consequently, the Petition for Review is GRANTED resulting to the CANCELLATION of the assessment. [SECURITIES TRANSFER SERVICES, INC., VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 8961, JANUARY 8, 2019]

[TRANSFER OF A REVENUE OFFICER TO ANOTHER BIR OFFICE VALID, HOWEVER, ISSUANCE OF NEW LOA NEEDED FOR ANOTHER OFFICER TO CONTINUE THE AUDIT OF TAXPAYER’S BOOKS; OTHERWISE ASSESSMENT IS VOID]

The Petitioner Marketing Convergence Inc. filed a Petition for Review seeking the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Several factual issues were raised but the Court instead resolved to set aside the resolution of all factual issues citing the absence of the authority on the part of the BIR officers to conduct tax audit. In the course of the trial, it was found out that the revenue officers authorized by the Officer in Charge to examine the books of account and other records are not the same with those who recommended the issuance of the tax assessments against the Petitioner. In reference to the landmark case of Medicard, unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be undertaken. The Respondent contended that transfer or reshuffling of revenue officers indicated in the LOA need not be the one to complete the audit; that there will be instances where the revenue officers would either retire, be reassigned, be taken ill, or die, prior to the completion of the audit investigation. The Court recognizes these instances, however, what is unacceptable to the Court is that the Respondent argues with these excuse to not issue an LOA. Consequently, the Court GRANTED the Petition resulting to the CANCELLATION of the assessment. [MARKETING CONVERGENCE INC. VS. COMMISIONER OF INTERNAL REVENUE, CTA CASE NO. 9301, JANUARY 4, 2019]

[COMPROMISE PENALTIES IMPOSED FOR VIOLATION OF KEEPING ACCOUNTS & OTHER FINANCIAL RECORDS SHOULD BE COMMENSURATE TO SCHEDULES] [ISSUANCE OF FAN APPLIES ONLY WHEN INTERNAL REVENUE TAXES ARE THE ONES BEING COLLECTED]

The Petitioner Wholesome Foods, Inc. filed a Petition for Review seeking for the refund or issuance of Tax Credit Certificate (TCC) in the amount of Php 11,000,000 representing the alleged erroneously collected and/or imposed penalties by the Respondent Commissioner of Internal Revenue. Petitioner claims that it was deprived of due process since BIR Form No. 0605 merely indicates the total amount of penalties imposed with neither basis nor breakdown for it to refute or rebut them. Likewise, such imposition has no basis in fact and in law of the alleged violations as stated in the BIR Form No. 0605 issued against it. On the other hand, the Respondent counters that the petitioner is not entitled to the refund sought as the amount it paid was in the nature of compromise penalties for the various violations it committed, namely, no subsidiary sales book, no official receipts, no back-end report, and unaccounted POS machines. In resolving the case, the Court states that due process through the issuance of a FAN informing the taxpayer of the law and the facts upon which the assessment is based applies only when internal revenue taxes are the ones being collected, to wit, income tax, VAT, estate tax, excise tax, donor’s tax, documentary stamp tax, capital gains tax, and other percentage taxes. In other words, if what is being collected is not in the enumeration, then such is not an internal revenue tax which requires strict compliance with the due process requirement of issuance of FAN. In conclusion, the Court ruled in favour of the Petitioner noting that the Php 11,000,000 penalty is excessive since upon examination of the schedule, the penalties that should correspond to the noted violations only amounts to Php 150,000. Thus, the Petition for Review was PARTIALLY GRANTED. Accordingly, Respondent is ordered to refund or issue TCC in favour of the Petitioner in the amount of Php 10,850,000. [WHOLESOME FOODS, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9362, JANUARY 4, 2019]

[FAN/FLD ISSUED PRIOR TO EXPIRATION OF 15-DAY PERIOD TO RESPOND VIOLATES RIGHT TO DUE PROCESS OF TAXPAYERS] [BIR CANNOT DEMAND WHAT TYPE OF SUPPORTING DOCUMENTS SHOULD BE SUBMITTED BY THE TAXPAYER WITHIN THE 60 DAY PERIOD RECKONED UPON FILING OF PROTEST]

The Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking the reversal of the earlier decision of the Court 2nd Division cancelling the assessment issued against the Respondent Freelife Distribution, Inc. The Petitioner argued that the CTA 2nd Division committed reversible errors in declaring that it failed to observe due process in serving notices to the taxpayer. Further, the assessment is not yet final, executory and demandable, thus making the Respondent not liable for deficiency taxes.  Also, it was argued that the Respondent failed to submit relevant documents in support of its protest within the 60-day period which makes the assessment final and executory. In defense, the Respondent countered that the submission of documents within the 60-day period is discretionary and that the filing of a protest without supporting documents does not invalidate such. Moreover, it argued that the Petitioner failed to observe due process when it sent FAN/FLD through electronic mail before expiration of the 15-day period to respond to PAN. In the resolution, the Court ruled that upon receipt of PAN, a taxpayer has 15 days from receipt to file protest with the BIR. If during the said period, the taxpayer failed to file protest against the PAN, it is only then that it can be considered at default and correspondingly cause the issuance of a FAN/FLD. In the instant case, Respondent received a copy of PAN on January 10, 2013 in which the Petitioner had to wait for 15 days from said date or until January 25, 2013 to respond. It is only after the lapse of the said period that the Petitioner may issue the FAN/FLD. As a consequence, Respondent was denied of due process. Nevertheless, the instant petition was considered as timely filed. Wherefore, in light of the foregoing considerations, the instant petition is DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS. FREELIFE DISTRIBUTION, INC.-PHILIPPINE BRANCH, CTA EN BANC CASE NO. 1714, JANUARY 04, 2019]

TAX NEWS [JANUARY 21-25]

  1. Treasurer’s office nets P1 billion from business permits
  2. BIR destroys seized cigarettes, equipment
  3. Wage, tax concerns weigh down Japanese firms’ business plans
  4. Customs orders post-clearance audit of imports
  5. BSP tightens computation of banks’ net worth
  6. Clark income breaches P1 billion mark in 10 months
  7. BSP profit more than triples to P42.7 billion

Treasurer’s office nets P1 billion from business permits [The Philippine Star, January 25, 2019]

CEBU, Philippines — In just 20 days, the Cebu City Treasurer’s Office has collected P1 billion from the renewal of mayor’s business permits in the city.

Source: https://www.philstar.com/the-freeman/cebu-news/2019/01/25/1888030/treasurers-office-nets-p1-billion-business-permits

BIR destroys seized cigarettes, equipment [The Philippine Star, January 24, 2019]

The Bureau of Internal Revenue (BIR) yesterday smashed various illegally operated cigarette-making equipment and fake cigarettes to show the government’s commitment to fight tobacco smuggling and counterfeiting.

Source: https://www.philstar.com/business/2019/01/19/1886242/bir-destroys-seized-cigarettes-equipment

Wage, tax concerns weigh down Japanese firms’ business plans [The Philippine Star, January 23, 2019] Fewer Japanese firms operating in the Philippines expect to expand this year and in 2020 compared to the previous year, amid concerns on rising wages and taxation procedures, a survey from Japan External Trade Organization (JETRO) showed.

Source: https://www.philstar.com/business/2019/01/23/1887270/wage-tax-concerns-weigh-down-japanese-firms-business-plans

Customs orders post-clearance audit of imports [The Philippine Star, January 22, 2019]
The Bureau of Customs will now require the conduct of post-clearance audit on importers and brokers, as well as the prior disclosure in their goods declarations in a bid to further improve its revenue co

Source: https://www.philstar.com/business/2019/01/22/1886998/customs-orders-post-clearance-audit-imports

BSP tightens computation of banks’ net worth [The Philippine Star, January 21, 2019]

The Bangko Sentral ng Pilipinas (BSP) has revised the method in computing the required capital of banks to ensure that it is comprised only of instruments that are of the highest quality to absorb losses.

Source: https://www.philstar.com/business/2019/01/21/1886720/bsp-tightens-computation-banks-net-worth

Clark income breaches P1 billion mark in 10 months [The Philippine Star, January 20, 2019]

Clark Development Corp. (CDC) earned P1.19 billion in the 10 months to October last year, surging past the full-year income in 2017.

Source: https://www.philstar.com/business/2019/01/20/1886456/clark-income-breaches-p1-billion-mark-10-months

III. TAX NEWS [JANUARY 14-18]

  1. JPE bats for tax incentives, growth centers all over PH to help decongest metro
  2. Delinquent taxpayers owe Imus gov’t P1.3 billion
  3. Bacolod tax take exceeds 2018 target
  4. Angara sets ways and means committee meeting on tobacco excise tax
  5. Bautista clarifies real property tax payment still based on old fair market values in QC
  6. CEZA reports $8.13-billion investment pledges in 2018
  7. DTI slaps P8.40/bag punitive duty on imported cement
  8. Banking system strong, BSP insists
  9. DoJ throws out Rappler appeal in tax evasion case
  10. DOF chief urges swift passage of TRABAHO bill in Congress
  11. TRAIN law caused 16% drop in auto sales in 2018
  12. Peza pledges down 41%
  13. TRAIN misses first 9-month revenue target
  14. Labor seeks review of govt policy on tax incentives, cheap labor at ecozones after Hanjin crash

JPE bats for tax incentives, growth centers all over PH to help decongest metro [Manila Bulletin, January 18, 2019]

Former Senate President Juan Ponce Enrile on Friday urged the government to decongest the nation’s capital by giving tax incentives to create economic centers in other areas in the archipelago.

Source: https://news.mb.com.ph/2019/01/18/jpe-bats-for-tax-incentives-growth-centers-all-over-ph-to-help-decongest-metro/

Delinquent taxpayers owe Imus gov’t P1.3 billion [Manila Bulletin, January 18, 2019]

IMUS CITY, Cavite – Business and real property tax delinquents owed the local government of this capital district over P1.3 billion which, if collected, would be intended for the construction of vital facilities in the area.

Source: https://news.mb.com.ph/2019/01/18/delinquent-taxpayers-owe-imus-govt-p1-3-billion/

Bacolod tax take exceeds 2018 target [Manila Bulletin, January 18, 2019]

BACOLOD CITY – The City Trea­surer’s Office collected P1,444,728,501 in property taxes and other non-tax revenues in 2018.

Source: https://news.mb.com.ph/2019/01/18/bacolod-tax-take-exceeds-2018-target/

Angara sets ways and means committee meeting on tobacco excise tax [Manila Bulletin, January 18, 2019]

The Senate ways and means committee will hold the next hearing on the measure seeking an increase in the excise tax on tobacco products after deliberations on the bicameral conference committee on the proposed P3.757-trillion national budget for 2019 has wrapped up.

Source: https://news.mb.com.ph/2019/01/18/angara-sets-ways-and-means-committee-meeting-on-tobacco-excise-tax/

Bautista clarifies real property tax payment still based on old fair market values in QC [Manila Bulletin, January 17, 2019]

Quezon City Mayor Herbert Bautista clarified the payment of the real property tax (RPT) for 2018 and 2019 are still based on the old fair market values (FMV).

Source: https://news.mb.com.ph/2019/01/17/bautista-clarifies-real-property-tax-payment-still-based-on-old-fair-market-values-in-qc/

CEZA reports $8.13-billion investment pledges in 2018 [Manila Bulletin, January 17, 2019]

The Cagayan Economic Zone Authority (CEZA) reported a total of $8.131 billion investment pledges in 2018 its biggest project approvals in more than two decades following the unveiling of its cryptocurrency and blockchain hub, a first in the country, and the retooling of its online gaming industry sans the control of a duopoly.

Source: https://business.mb.com.ph/2019/01/17/ceza-reports-8-13-billion-investment-pledges-in-2018/

DTI slaps P8.40/bag punitive duty on imported cement [Manila Bulletin, January 17, 2019]

The Department of Trade and Industry (DTI) slapped an P8.40 per bag provisional punitive duty on imported cement stressing the surge in imports has injured this strategic domestic industry.

Source: https://business.mb.com.ph/2019/01/17/dti-slaps-p8-40bag-punitive-duty-on-imported-cement/

Banking system strong, BSP insists [Manila Bulletin, January 17, 2019]

The Bangko Sentral ng Pilipinas (BSP) yesterday reiterated that local banks can take on the Hanjin bankruptcy challenge because its credit risk management is strong and it has sufficient capital.

Source: https://business.mb.com.ph/2019/01/16/banking-system-strong-bsp-insists/

DoJ throws out Rappler appeal in tax evasion case [Manila Times, January 17, 2019]

The Department of Justice (DoJ) stood pat on its ruling to prosecute Rappler for tax evasion when it rejected the motion for reconsideration filed by the online news site.

Source: https://www.manilatimes.net/doj-throws-out-rappler-appeal-in-tax-evasion-case/497651/

DOF chief urges swift passage of TRABAHO bill in Congress [PhilStar January 16, 2019]

MANILA, Philippines — The Department of Finance (DOF) has once again called on Congress to swiftly pass the second package of the Comprehensive Tax Reform Program (CTRP), urging lawmakers to consider the interest of the business community.
Source: https://www.philstar.com/business/2019/01/16/1885364/dof-chief-urges-swift-passage-trabaho-bill-congress

TRAIN law caused 16% drop in auto sales in 2018 [Manila Bulletin, January 14, 2019]

Battered by the impact of the high automotive excise tax, the domestic motor vehicle industry’s sales slumped by 16 percent in 2018, worst performance since the Asian financial crisis, the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and Truck Manufacturers Association (TMA) reported.

Source: https://business.mb.com.ph/2019/01/14/train-law-caused-16-drop-in-auto-sales-in-2018/

Peza pledges down 41% [Philippine Daily Inquirer, January 14, 2019]

Investment pledges under the Philippine Economic Zone Authority (Peza) suffered a 40.97-percent drop in 2018, its worst decline in new projects since the year that followed the 9/11 bombing in the United States.
Source: https://business.inquirer.net/263524/peza-pledges-down-41#ixzz5d9a0Hoox

TRAIN misses first 9-month revenue target [Manila Bulletin, January 14, 2019]

The Duterte administration’s first tax reform law missed its net revenue target in the first nine months last year, but Department of Finance (DOF) was quick to explain that the new measure has directly benefited Filipinos through additional spending power.

Source: https://business.mb.com.ph/2019/01/13/train-misses-first-9-month-revenue-target/

Labor seeks review of govt policy on tax incentives, cheap labor at ecozones after Hanjin crash [Manila Times, January 14, 2019]

ORGANIZED labor sought a review of the government’s policy in granting tax incentives and cheap labor at ecozones as a strategy in attracting foreign direct investments (FDIs).

Source: https://www.manilatimes.net/labor-seeks-review-of-govt-policy-on-tax-incentives-cheap-labor-at-ecozones-after-hanjin-crash/496415/