UPCOMING COMPLIANCE UNDER TRAIN LAW + PROPRIETARY HOSPITALS MAY STILL BE TAXED AT PREFERENTIAL RATE OF 10% WITHOUT LOSING ITS TAX-EXEMPT STATUS
Other relevant tax updates for this week:
- NEW YEAR TAX REMINDERS
- SUPREME COURT DIGEST
- COURT OF TAX APPEALS DIGEST FOR DECEMBER 17-21
- COURT OF TAX APPEALS DIGEST FOR JANUARY 2-11
- BIR ISSUANCE ON ADDITIONAL COVERAGE OF TAX VERIFICATION NOTICE (TVN)
- BIR MEDIA RELEASES [DECEMBER 26-28]
- TAX NEWS [JANUARY 5-11]
- TAX NEWS [JANUARY 2-4]
- TAX NEWS [DECEMBER 22-27]
- TAX NEWS [DECEMBER 15-21]
- NEW YEAR TAX REMINDERS
Registration of Books of Accounts
Withholding Tax on Compensation
Expanded Withholding Tax
- SUPREME COURT DIGEST
[CHOICE OF WRONG REMEDY RENDERS ASSESSMENT ON DOCUMENTARY STAMP TAX (DST) FINAL & EXECUTORY] [REMEDY UPON RECEIPT OF FINAL DECISION ON DISPUTED ASSESSMENT (FDDA) IS NOT AN ACTION FOR DECLARATORY RELIEF BUT AN APPEAL TAKEN IN DUE COURT TO THE COURT OF TAX APPEALS]
The Petitioner Commissioner of Internal Revenue filed a Petition for Review on Certiorari, challenging the judgment and order rendered by the Regional Trial Court (RTC). Issues were whether the RTC has the authority to order the enforcement or implementation of Section 108 and Section 184 of the Tax Code of 1997, with respect to the taxes to be paid by non-life insurance companies, through an original action for declaration. The Respondent Standard Insurance Company, Inc. received a copy of FDDA, declaring its liability for the DST deficiency, including interest and compromise penalty. The Respondent commenced Civil Case No. 14-1330 in the RTC for the judicial constitutionality of Section 108 and Section 184 of the Tax Code. Due to the pendency of deliberations on House Bill (H.B.) No. 3235 entitled An Act Rationalizing the Taxes Imposed on Non-Life Insurance Policies, the RTC assailed a decision permanently ordering the CIR from proceeding with the enforcement of Section 108 and Section 184 until the Congress has enacted and passed HB 3235 into a law. The Court ruled that Section 218 of the Tax Code expressly provide that, “no court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the Tax Code.” Also, pursuant to Section 11 of R.A. No. 1125, assessing any tax, or levying, or distraining, or selling any property of taxpayers are immediately executory, unless in the opinion of the Court of Tax Appeals. The Respondent’s adequate remedy upon receipt of the FDDA was not the Action for Declaratory Relief but an Appeal taken in due course to the Court of Tax Appeals. The choice of the wrong remedy rendered the assessment for the DST deficiency final and executory. Consequently, the Court GRANTS the Petition for Review on Certiorari; ANNULS and SETS ASIDE the decision rendered in Civil Case No. 14-1330 by the Regional Trial Court, and ORDERS the Respondent to pay the costs of suit. [COMMISSIONER OF INTERNAL REVENUE VS. STANDARD INSURANCE COMPANY, INC., G.R. NO. 219340, NOVEMBER 7, 2018]
III. COURT OF TAX APPEALS (CTA) DIGESTS [DECEMBER 17-21]
- Proprietary Hospitals May Still Be Taxed At A Preferential Rate Of 10% Without Losing Its Tax-Exempt Status
- Failure To Timely File A Protest Against The Formal Assessment Notice (Fan) Would Render The Assessment Final & Executory Resulting To Dismissal Of Petition For Review In Cta
- Criteria For Claiming Input Vat Refund & Corresponding Documentary Requirements Vital For The Entitlement Of Refund
- Failure To Replace Manually Prepared Letter Of Authority (Loa) With Electronic Loa Shall Invalidate The Entire Investigation; Issuance Of Waiver After The Prescribed Assessment Period Will Not Extend The Prescription Period
- Bir Assessment Affirmed After Failure Of Taxpayer To Support Undeclared Receipts
[PROPRIETARY HOSPITALS MAY STILL BE TAXED AT A PREFERENTIAL RATE OF 10% WITHOUT LOSING ITS TAX-EXEMPT STATUS]
The Petitioner Perpetual Succour Hospital of Cebu, Inc. filed a Petition for Review seeking the cancellation of the income tax assessment issued by the Respondent Commissioner of Internal Revenue covering taxable year 2010. The Petitioner argued that its exemption from income tax has long been honored by Court of Tax Appeals and Supreme Court citing CTA Case No. 7304, CTA EB Case No. 781, and G.R.201905 which has become final and executory therefore invoking res judicata or doctrine of conclusiveness of judgment which states that a ruling in a prior assessment bars the Petitioner from being subject to new assessment. On the other hand, the Respondent strongly interposed that res judicata cannot be made applicable to the case at hand. Further, it argued that the Petitioner has not fully complied with the requirements of the Tax Code in order to exempt its income from taxes. In resolving the issue, the Court stated that in order for res judicata to be made applicable between the first and second cases, there must be among others identity of parties, identity of subject matter and identity of causes of action. However, the subject matter and cause of action are dissimilar, thus, making it inapplicable to the present case. As provided in the Tax Code, in order to exempt non-stock non-profit corporations from income tax, no part of its net income or asset shall inure to the benefit of any of its members, organizers or any specific person. In this case, evidence shows that certain contributions inured to the benefit of its members. Nonetheless, the Court clarified that proprietary hospitals may still be taxed for “activities conducted for profit” at a preferential tax rate without losing its tax-exempt status for its not-for-profit activities. The Petition for Review was PARTIALLY GRANTED and the Petitioner was ordered to pay the basic deficiency income tax while payments for interest and compromise penalty were cancelled on the basis of good faith and honest belief that it is not subject to tax. [PERPETUAL SUCCOUR HOSPITAL OF CEBU, INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9166, DECEMBER 11, 2018]
[FAILURE TO TIMELY FILE A PROTEST AGAINST THE FAN WOULD RENDER THE ASSESSMENT FINAL & EXECUTORY RESULTING TO DISMISSAL OF PETITION FOR REVIEW IN CTA]
The Petitioner M. Tech Products Philippines, Inc. filed a Petition for Review seeking the cancellation of assessment issued by the Respondent Commissioner of Internal Revenue for taxable year 2010 on the ground of prescription. In the course of the presentation of evidence, it was noted that attached to the Preliminary Assessment Notice is a Waiver of the Defense of Prescription under the Statute of Limitations as executed by the Respondent. Subsequent to the issuance of PAN, the Respondent issued a Formal Assessment Notice. However, three (3) months after, the petitioner submitted a letter alleging that the assessment must be cancelled for having been issued beyond the three-year prescriptive period, invoking the invalidity of the Waiver it executed. However, the Respondent invoked that the assessment has already become final and executory and that the tax docket has already been forwarded to the Collection Division for failure of the Petitioner to file a protest letter. Considering the failure of the Petitioner to file a valid protest letter within the 30-day period as required under Section 228 of the Tax Code and Revenue Regulations No. 18-2013, the assessment has already become final, executory and unappealable. Consequently, the Court DISMISSED the Petition for Review for lack of jurisdiction. [M. TECH PRODUCTS PHILIPPINES VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9331, DECEMBER 11, 2018]
[CRITERIA FOR CLAIMING INPUT VAT REFUND & CORRESPONDING DOCUMENTARY REQUIREMENTS VITAL FOR THE ENTITLEMENT OF REFUND]
The Petitioner Taganito Mining Corporation filed a Petition for Review seeking for the refund of its alleged unutilized input VAT amounting to Php 28,926,837.00. As to the Court’s determination on whether Petitioner is entitled to the full amount of its claim for refund, the following criteria must be met: (1) that there must be zero-rated or effectively zero-rated sales and (2) that input taxes were incurred or paid and were not applied against any VAT liability. As to the first criteria, the Court finds that a portion of zero-rated sales has no corresponding proof of foreign currency inward remittances. Also, Petitioner failed to prove that its non-resident foreign clients were doing business outside the Philippines, thus, must be denied VAT zero-rating. As to the second criteria, a portion of input VAT on importations must be disallowed for the following reasons: (1) input VAT Supported by Import Entry and Internal Revenue Declarations (IEIRD) and Security Bank’s Debit Advice but the payment reflected in the Debit Advice is insufficient; (2) input VAT Supported by IEIRD and Sales Invoice but without proof of VAT payment; and (3) input VAT Supported by unreadable IEIRD and Security Bank’s Debit Advice. Notwithstanding the above findings and due to the exhaustion of input VAT on vatable sales, the Petitioner’s remaining output VAT liability shall be offset against the input VAT credit on zero-rated sales which is the subject of the claim. Having sufficiently proven its entitlement to a refund, the Court PARTIALLY GRANTED the Petition for Review, ordering the Respondent to refund or issue a Tax Credit Certificate in favor of the Petitioner in the reduced amount of Php 25,946,279.40. [TAGANITO MINING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9369, DECEMBER 06, 2018]
[FAILURE TO REPLACE MANUALLY PREPARED LOA WITH ELECTRONIC LOA SHALL INVALIDATE THE ENTIRE INVESTIGATION; ISSUANCE OF WAIVER AFTER THE PRESCRIBED ASSESSMENT PERIOD WILL NOT EXTEND THE PRESCRIPTION PERIOD]
The Petitioner Robinsons Daiso Diversified Corporation filed a Petition for Review seeking the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue citing prescription as well as invalidity of the LOA issued for failure of the Respondent to replace a manually-prepared LOA into electronic LOA. In the resolution, the Court clarified that there is nothing in the BIR issued guidelines of which the Petitioner has presented that failure to replace the manually prepared LOAs with electronic LOAs shall invalidate the entire investigation conducted pursuant to the previously issued LOAs. Accordingly, the Court ruled that the Petitioner failed to cite relevant provisions supporting the invalidity. On the issue of prescription, the Court observed the Petitioner’s execution of Waiver. However, upon closer look of the executed waivers, the Court noted the right of the Respondent to assess the Petitioner on Expanded Withholding Tax, Final Withholding Tax, and Withholding Tax on Compensation for the period January to March 2009, Income Tax Documentary Stamp Tax have lapsed citing the set-in of prescriptive period prior to the execution of Waiver. However, for VAT and Withholding Tax on Compensation from April to December 2009, the Court PARTIALLY upheld the assessment issued by the Respondent. [ROBINSONS DAISO DIVERSIFIED CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9149, DECEMBER 6, 2018]
[BIR ASSESSMENT AFFIRMED AFTER FAILURE OF TAXPAYER TO SUPPORT UNDECLARED RECEIPTS]
The Petitioner Level Up!, Inc. filed a Petition for Review with Motion to Suspend Collection of Taxes seeking for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue. Several issues were raised but the bulk of the assessment is centered on the VAT assessment as a result of findings of undeclared receipts pursuant to the computerized matching conducted by the Respondent based on the information submitted by Petitioner’s customers and in reference to the Summary List of Sales and Purchases. The Petitioner argued that the assessment has no basis and that the result of the computerized matching is erroneous since the sales as captured are not sales of the Petitioner but instead that of and for the account of Playweb, a corporation which is a separate and distinct entity from the Petitioner. Likewise, the Petitioner argued that Playweb Inc.’s clients erroneously placed Level Up, Inc.’s TIN in their declarations of transactions with Playweb, as supported by an Affidavit as submitted by the Finance Head of Playweb. However, the Respondent countered that the Petitioner failed to prove as such and that the Affidavit will not suffice to disprove the findings of the Respondent. In the appreciation and resolution, the Court is not convinced with the arguments of the Petitioner for it failed to prove with sufficient evidence that it did not under-declare its receipts. Consequently, the Petition for Review was PARTIALLY GRANTED. [LEVEL UP! INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9424, DECEMBER 06, 2018]
- COURT OF TAX APPEALS (CTA) DIGEST [JANUARY 2-11]
- Holding Company Not Deemed A “Non-Bank Financial Intermediary” (Nbfi) For The Imposition Of Local Business Tax (Lbt)] [Nbfi Are Authorized By The Bangko Sentral Ng Pilipinas (Bsp) & Cannot Merely Be Deemed As One Based On Functions Seen In The Articles Of Incorporation (Aoi)
- Waiver Issued Must Be Properly Executed In Accordance With The Bir’s Existing Rules & Regulations To Extend Its Right To Assess Taxpayer Beyond Three (3) Years
- Lbt On Dividends & Interest Income From Money Market Placements Are Only Imposed To Banks & Other Financial Intermediaries; Holding Company Not Deemed A “Non-Bank Financial Intermediary” (Nbfi) For The Imposition Of Lbt; Nbfis Are Authorized By The Bsp & Cannot Merely Be Deemed As One Based On Functions Seen In The Aoi
- Requisites For Valid Input Vat Refund Arising From Zero-Rated Sales
- Mission Order Cannot Be A Valid Source Of Authority For The Bir To Issue An Assessment
- Court May Rule On Matters Not Raised By The Parties Which Are Necessary To Resolve The Case; Letter Notice (Ln) Is Not Equivalent To Letter Of Authority (Loa); Absence Of Loa Renders The Assessment Null & Void
- Passive Income Such As Dividend Income Of Holding Company Not Subject To Lbt; Local Government Units (Lgus) Are Prohibited From Imposing Tax On Income Already Taxed By National Government Except For Banks & Financial Institutions
- Acquittal From A Criminal Case Does Not Exonerate Taxpayer From Civil Liability Which Only Requires Preponderance Of Evidence
[HOLDING COMPANY NOT DEEMED A “NON-BANK FINANCIAL INTERMEDIARY” FOR THE IMPOSITION OF LBT] [NBFI ARE AUTHORIZED BY THE BSP & CANNOT MERELY BE DEEMED AS ONE BASED ON FUNCTIONS SEEN IN THE AOI]
Petitioner, City of Davao, represented by the City Mayor, filed a Petition for Review seeking the reversal and setting aside of the Decision and Resolution of the Court’s Third Division ordering the refund of Php 1,102,285.50 representing erroneously paid LBT by Respondent Roxas Shares, Inc. (RSI) for the 1st and 2nd quarters of taxable year 2011. Since October 2009, RSI is the registered owner of 52,815,194 preferred shares of stock in San Miguel Corporation (SMC).The dividends received were deposited in a trust account, which earned interest from money market placements. For the first and second quarters of 2011, the Petitioner collected from RSI LBT at the rate of 0. 55% for each quarter on the dividends arising from the SMC preferred shares and interest on the money market placements received by RSI, in the aggregate amount of Php 1,102,285.50. The imposition of the LBT is based on the position of the Petitioner that RSI’s act of investing in equity securities or holding assets consisting of SMC shares of stocks, and the placement of funds in the same company on a regular and continuing basis are the very acts that characterize NBFI. The Court ruled that RSI is a holding company and cannot be deemed as a NBFI since there is no indication that Respondent was authorized by the BSP to perform quasi-banking activities as a NBFI, it has not actually engaged in the activities enumerated in the BSP Manual, and does not hold itself out nor advertised itself as an NBFI or as a lending, investing, or financing company. In addition, while the Respondent’s primary purpose, as stated in its Amended AOI, may involve one of the activities enumerated in the BSP Manual, there was no proof that Respondent performed these activities as its principal function and on a regular and recurring basis. Wherefore, the Petition for Review was DISMISSED for lack of merit. [CITY OF DAVAO VS. ROXAS SHARES, INC., CTA CASE NO. 1663, DECEMBER 19 2018]
[WAIVER ISSUED MUST BE PROPERLY EXECUTED IN ACCORDANCE WITH THE BIR’S EXISTING RULES & REGULATIONS TO EXTEND ITS RIGHT TO ASSESS TAXPAYER BEYOND THREE (3) YEARS]
The Petitioner RCBC Savings Bank filed a Petition for Review seeking the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue. Several assessment issues are contained in the income tax assessment but the bulk is centered on the disallowance of bad debts written off due to failure to support as required under Revenue Regulations (RR) No. 05-99 as amended by RR 5-02. It was the position of the Respondent that the Certificate of Eligibility presented by the Petitioner does not automatically merit the allowance of bad debt expense being deducted from the gross income. On the other hand, the Petitioner attacked the right of the Respondent to assess the Petitioner for 2006 has already lapsed, and that the Formal Assessment Notice received was issued beyond the three-year period provided under Section 203 of the 1997 Tax Code, as amended. The Petitioner also asserted that the 1st Waiver is null and void for failure to comply with the requirements set by Revenue Memorandum Order No. 20-1990 and Revenue Delegated Authority Order No. 05-01, thus, the subsequent waivers are also null and void. In ruling, the Court GRANTED the Petition for Review and CANCELLED the assessment citing the set-in of 3-year prescriptive period. [RCBC SAVINGS BANK VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9001, DECEMBER 18, 2018]
[LBT ON DIVIDENDS & INTEREST INCOME FROM MONEY MARKET PLACEMENTS ARE ONLY IMPOSED TO BANKS & OTHER FINANCIAL INTERMEDIARIES] [HOLDING COMPANY NOT DEEMED A “NON-BANK FINANCIAL INTERMEDIARY” FOR THE IMPOSITION OF LBT] [NBFIs ARE AUTHORIZED BY THE BSP & CANNOT MERELY BE DEEMED AS ONE BASED ON FUNCTIONS SEEN IN THE AOI]
Petitioners, City of Davao and its City Treasurer filed a Petition for Review praying for the reversal of Decision and Resolution rendered by the CTA Third Division ordering the refund or credit of Respondent Rock Steel Resources, Inc. (RSRI) the amount of Php 1,215,272.00, representing the 0.55% LBT it paid under protest for the first and second quarters of taxable year 2011. Since October 2009, Respondent is the registered owner of 58,237,403 preferred shares of stock in San Miguel Corporation. The dividends received by Respondent from its SMC Preferred Shares were deposited in a trust account which earned interest from money market placements. In 2010, Respondent received dividends in the amount of Php 436,780,522.50 and interest amounting to Php 5,136,581.12 of which the Petitioner imposed LBT at a rate of 0.55% for the first and second quarters of 2011. Petitioners claim that Respondent is deemed a “bank and other financial institution”, specifically as a “non-bank financial intermediary” by virtue of its investment in San Miguel Corporation and money market placements. The Court ruled that RSRI is a holding company and cannot be deemed as a NBFI since there is no indication that Respondent was authorized by the BSP to perform quasi-banking activities as a NBFI, it has not actually engaged in the activities enumerated in the BSP Manual, and does not hold itself out nor advertised itself as an NBFI or as a lending, investing, or financing company. In addition, although the purpose clause in Respondent’s Amended Articles of Incorporation is broad and does allow for the acquisition of shares of stock of other corporations and “to receive, collect and dispose of the interest dividends and income arising from such property”, it is clear from a reading of the same that its primary purpose is not to engage in business as a non-bank financial intermediary or an investment company. The receipt of dividend and interest income is patently incidental. Wherefore, the Petition for Review is DENIED. [CITY OF DAVAO VS. ROCK STEEL RESOURCES, INC. CTA EN BANC CASE NO. 1703, DECEMBER 18, 2018]
[REQUISITES FOR VALID INPUT VAT REFUND ARISING FROM ZERO-RATED SALES]
The Petitioner Colt Commercial, Inc. filed a Petition for Review seeking refund of unutilized and accumulated input VAT arising from zero-rated sales in the amount of Php 3,446,040.51 attributable to first and second quarters of taxable year 2014. In resolving the Petition, the Court discussed the criteria that a claimant-taxpayer must satisfy in order to be entitled to refund of unutilized input VAT attributable to zero-rated sales. Accordingly, the claims should be filed within the prescribed period, there must be zero-rated sales, the input VAT should be incurred or paid, the input VAT should be attributable to zero-rated sales, and that the input VAT should not be applied against any output VAT liability. In the appreciation of support, it was noted that the Petitioner is compliant with all the foregoing requisites except that some input VAT on zero-rated sales were disallowed for failure to support with proof that some of its customers are PEZA and SBMA registered. Likewise, some of the invoices and receipts are not compliant with the strict requirements of Revenue Regulations No. 16-2005, as amended. The Court PARTILLY GRANTED the Petition for Review and ordered the Respondent Commissioner of Internal Revenue to refund or issue Tax Credit Certificate in favour of the Petitioner in the amount of in the amount of Php 3,155,032.77. [COLT COMMERCIAL INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9356, DECEMBER 18, 2018]
[MISSION ORDER CANNOT BE A VALID SOURCE OF AUTHORITY FOR THE BIR TO ISSUE AN ASSESSMENT]
The Petitioner Builders Steel Corporation filed a Petition for Review seeking the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue. The assessment arose from the issuance of a Mission Order which granted the authority on the part of the examiners to conduct stocktaking. As result of stocktaking activities, the BIR has come up with assessment findings on unaccounted inventory translated into undeclared sales. In the resolution, the Court ruled that before any revenue officer may conduct examination and issue an assessment, there must be a valid grant of authority in his/her favour under Section 6 of the 1997, Tax Code. Also, citing the Supreme Court case in the Commissioner of Internal Revenue vs. Sony Philippines, Inc., a Letter of Authority serves as the authority given to revenue examiners to perform assessment functions. Without which, the examiner cannot proceed with the examination of the taxpayer’s books of accounts and accounting records. Consequently, the Court GRANTED the Petition for Review resulting to the CANCELLATION of the assessment. [BUILDERS STEEL CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9050, DECEMBER 17, 2018]
[COURT MAY RULE ON MATTERS NOT RAISED BY THE PARTIES WHICH ARE NECESSARY TO RESOLVE THE CASE] [LN IS NOT EQUIVALENT TO LOA] [ABSENCE OF LOA RENDERS THE ASSESSMENT NULL & VOID]
The Petitioner MSEI Corporation filed a Petition for Review praying for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue covering the taxable year 2009. The Respondent argued that the requirement of due process was properly complied with in issuing the assessment notices. Further, the case falls under the exceptions from the three (3) year prescriptive period to assess in which the ten (10) year prescriptive period should be applied since the returns filed by the Petitioner were false or fraudulent. In resolving the issue, the Court found out that no LOA was issued against the Petitioner but instead received only an LN. Since this issue was not raised by any of the parties, the Court stated that it may also rule upon related issues necessary to achieve an orderly disposition of the case and not only be bound by the issues raised by the parties. It is worthy to note that LOA is the authority given to appropriate revenue officer to perform assessment functions. In the absence of such, the assessment or examination is a nullity. Further, the Court cannot convert the LN into an LOA required under the law even if the same was issued by the Respondent himself. In addition, LN is entirely different and serves a different purpose than an LOA. Due process demands that the revenue officer should have properly secured a LOA before proceeding with further examination and assessment of petitioner. Unfortunately, this was not done in this case. Consequently, the Petition for review was GRANTED resulting to the CANCELLATION of the assessment issued against the Petitioner. [MSEI CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO 9167, DECEMBER 17, 2018]
[PASSIVE INCOME SUCH AS DIVIDEND INCOME OF HOLDING COMPANY NOT SUBJECT TO LBT] [LGUs ARE PROHIBITED FROM IMPOSING TAX ON INCOME ALREADY TAXED BY NATIONAL GOVERNMENT EXCEPT FOR BANKS & FINANCIAL INSTITUTIONS]
The Petitioner City of Makati filed a Petition for Review seeking the reversal of the earlier decision of the Court cancelling the LBT assessment issued against the Respondent CEMCO Holdings. The Petitioner assessed the Respondent for LBT on its alleged undeclared gross sales per audit, which were more or less equivalent to the dividend income. In resolving the case, the Court held that the dividends realized on Respondent’s investments on stocks/securities as a holding company were passive income which was not derived in the active pursuit of business, hence, does not form part of its gross receipts for purposes of imposing LBT. In addition, LGUs are prohibited from imposing taxes, fees or charges of any kind, on items of gain or yield which was already levied income tax by the national government except to banks or financial institutions. Since the Respondent is neither a bank nor a financial institution on which LBT may be imposed on its dividend income, the Court DENIED the Petition for Review. [THE CITY OF MAKATI & THE CITY TREASURER OF MAKATI VS. CEMCO HOLDINGS, INC., CTA EN BANC CASE NO. 1661, DECEMBER 12, 2018]
[ACQUITTAL FROM A CRIMINAL CASE DOES NOT EXONERATE TAXPAYER FROM CIVIL LIABILITY WHICH ONLY REQUIRES PREPONDERANCE OF EVIDENCE]
The Petitioner People of the Philippines filed a Petition for Review seeking for reconsideration on the earlier decision and resolution of the Court on the civil aspect of the decision acquitting the accused from the crime charged for failure of the prosecution to prove beyond reasonable doubt the guilt of both accused Robert Sia and John Kenneth L. Campo. In the earlier decision and resolution, the Court cancelled the assessment for failure of the Petitioner to prove the receipt of assessment notice by the Respondents. The Petitioner contends that the assessment has already become final, executory and demandable, for failure of the Respondents to file a protest within the prescribed period. Likewise, the Petitioner posits that the Respondents received the assessment notice in the regular course of mail. On the other hand, the Respondents counter that there was no valid assessment for it is not enough that the notice is sent by registered mail since the letters and notices were sent to the old address of the Respondents making it impossible for the Respondents or its duly authorized officers to have knowledge of such letters. In the final resolution, the Court ruled that the Petition for Review lacks merit since the absence of a valid LOA renders the subject assessment void for upon investigation it was found out that the authority of the Revenue Officer to carry out the assessment did not emanate from an LOA as required by law and jurisprudence. Further, the Petitioner failed to comply with the due process requirements in the issuance of tax assessments due to the absence of proof of valid service on the subject assessment unequivocally renders the said assessment void. The Petition for Review is DENIED and the assailed Decision and Resolution are hereby AFFIRMED. [PEOPLE OF THE PHILIPPINES VS. ROBERT SIA & JOHN KENNETH L. CAMPO, CTA CASE ED CRIM NO. 045, DECEMBER 12, 2018]
- BIR ISSUANCE ON ADDITIONAL COVERAGE OF TAX VERIFICATION NOTICE (TVN)
The BIR has issued Revenue Memorandum Order (RMO) 48-2018, dated October 24, 2018 with released date on November 5, 2018 which prescribes the additional cases to be covered by a Tax Verification Notice (TVN). Currently, TVN is issued only in the verification of estate taxes wherein the decedent has no other tax liabilities and for processing of VAT refund claims filed. The issuance of this order authorizes the use of TVN, instead of Letter of Authority, in the verification of claims for refund of job order personnel and claims arising from erroneous or double payment of taxes, which can be considered as simple cases that will not require an in-depth audit/investigation. Further, the additional cases to be covered by the TVN shall be submitted by the Revenue Officer within 30 days from submission of complete documents to support the claim. In addition, the TVN shall be manually issued until such time that the TVN System is in place and shall be signed by the Head Office authorized to process the estate tax return or claim for tax refund.
- BIR AMENDS THE 90-DAY PROCESSING OF CLAIM FOR VAT REFUND
The BIR has issued Revenue Regulations (RR) No. 13-2018, dated December 21, 2018 with released date on December 27, 2018 which amends certain provisions of RR 13-2018 to implement the 90-day processing of claim for VAT refund under Section 112 (C) of the Tax Code of 1997, as amended by TRAIN Law.
The following are the highlights of the amendment:
- All applications for VAT refund filed from January 1, 2018 shall be processed and decided within 90 days from the filing.
- The processing and decision period shall start from the filing of the application up to the release of the payment of VAT refund.
- The application is considered to have been filed only upon submission of the official receipts or invoices.
- All pending VAT refund claims as of December 31, 2017 shall be fully paid in cash by December 31, 2019.
- The Department of Finance shall establish a VAT refund center in the BIR and in the Bureau of Customs that will handle the processing and granting of cash refunds of creditable input tax.
- Denial of application shall be made in writing.
- Failure on the part of the BIR officer to act on the application within the 90-day period or he was found to have deliberately caused the delay in the processing shall be punishable under Section 269 of the Tax Code of 1997, as amended. In the event that the 90-day period has lapsed without having the refund released to the taxpayer-claimant, the VAT refund claim may still continue to be processed administratively.
VII. BIR MEDIA RELEASES [DECEMBER 26-28]
- BIR ordered closure of 18 MANN HANN restaurants after the BIR made a comparison of the results of the Z-readings and the declarations made showing substantial under-declaration by 120.19% in 2017.
- BIR padlocked Hennan Resort in Bohol pursuant to the Oplan Kandado The case against HENANN stemmed from a complaint for non-issuance of official receipt. Results of the investigation to verify the complaint showed that HENANN issued to its customers only a printed billing statement “stamped PAID.”
- BIR launches its Electronic Tax Software Providers Certification (eTSPCert) System which is an online electronic tax preparation, filing and payment solutions certification system for TSPs. TSPs are individuals or organizations offering tax services (filing, filing with payment) through third party solutions and tax preparation software that will generate required tax returns.
VIII. TAX NEWS [JANUARY 5-11]
- Sin tax bill did not make it to Senate agenda
- BoC orders strict implementation of TRAIN2, sin tax
- Poe appeals to oil firms: comply with the law on fuel excise tax implementation
- Duterte certifies bill raising sin taxes as urgent
- Tax informer files P33-billion estafa case vs Diokno
- Davao City to allow online payment of taxes for local businesses
- QC businesses given the option to just pay higher business tax and avoid audit
Sin tax bill did not make it to Senate agenda [Manila Bulletin, January 11, 2019]
The proposed law raising the excise tax rates for tobacco and alcohol products might have to wait until the next Congress as it failed to join the Senate’s list of priority measures for its remaining session days.
BoC orders strict implementation of TRAIN2, sin tax [Manila Bulletin, January 11, 2019]
The Bureau of Customs (BoC) has ordered the strict implementation of the second tranche of the Tax Reform for Acceleration and Inclusion (TRAIN) Law and the sin tax as the bureau “tightens its grip on revenue collection” this year.
Poe appeals to oil firms: comply with the law on fuel excise tax implementation [Manila Bulletin, January 11, 2019]
Senator Grace Poe has appealed to oil companies to comply with the law in implementing the second tranche of the fuel excise tax under the Tax Reform for Acceleration and Inclusion (TRAIN) law.
Duterte certifies bill raising sin taxes as urgent [Manila Bulletin, January 9, 2019]
President Duterte has agreed to certify as urgent a bill increasing the excise tax rate on alcohol and tobacco products to raise funds for the government’s health care program.
Tax informer files P33-billion estafa case vs Diokno [Manila Bulletin, January 7, 2019]
A tax informer has filed an estafa case against Budget Secretary Benjamin Diokno for turning down his P33.7-billion informer’s reward claim on the alleged ill-gotten and untaxed wealth of the late President Marcos.
Davao City to allow online payment of taxes for local businesses [Manila Bulletin, January 5, 2019]
DAVAO CITY – The city government of Davao will open an online payment system to provide business owners a more convenient way to settle their taxes starting January 7, 2018, City Treasurer’s Office acting head Erwin Alparaque said.
QC businesses given the option to just pay higher business tax and avoid audit [Manila Bulletin, January 5, 2019]
The Quezon City government will now exempt all business owners and operators from audit and examination of their books of accounts for 2016 to 2018, provided they voluntarily pay 30 percent more than their previous year’s local business tax (LBT) payment.
- TAX NEWS [JANUARY 2-4]
- Fuel excise tax hike, worrisome start for new year — Aquino
- DOF questions beverage tax payments
- Bill strengthening PH’s gross international reserves, exempting small-scale miners from tax gains ground in the Senate
- Gov’t still hopeful on tax package approval
- BIR, BOC intensify campaign against tax evaders
- DOE keeps close watch on remaining 2018 oil inventories
Fuel excise tax hike, worrisome start for new year — Aquino [Manila Bulletin, January 3, 2019]
Opposition Senator Paolo “Bam” Aquino IV on Thursday said the Duterte government is starting the year 2019 on the wrong foot when it decided to push through with the second tranche of additional taxes on petroleum products based on the Tax Reform for Acceleration and Inclusion (TRAIN).
DOF questions beverage tax payments [Manila Bulletin, January 3, 2019]
The beverage manufacturers are likely not paying the correct taxes, Finance Undersecretary Karl Kendrick T. Chua declared after the government saw its below-target revenue collections from sugar-sweetened drinks in January to October last year.
Bill strengthening PH’s gross international reserves, exempting small-scale miners from tax gains ground in the Senate [Manila Bulletin, January 2, 2019]
The Senate is expected to approve soon a bill that seeks to strengthen the country’s gross international reserves (GIR) by helping local small-scale miners who are selling gold.
Gov’t still hopeful on tax package approval [Philippine Daily Inquirer, January 2, 2019]
Even as the remaining months leading to the 2019 midterm elections in May will likely keep legislators running for reelection busy, the Department of Finance (DOF) is hopeful that Congress can still pass the remaining tax reform packages, especially the second batch aimed at reducing corporate income tax while rationalizing the fiscal incentives being enjoyed by investors.
BIR, BOC intensify campaign against tax evaders [Manila Bulletin, January 1, 2019]
The government continued to intensify its campaign against smuggling and tax evasion through the combined efforts of the Bureaus of Customs (BOC) and of Internal Revenue (BIR) last year, the Department of Finance (DOF) said.
DOE keeps close watch on remaining 2018 oil inventories [Manila Bulletin, December 28, 2018]
Prior to the implementation kick-off of the second tranche of the Tax Reform for Acceleration and Inclusion (TRAIN) Act this New Year, the Department of Energy (DOE) assured the public that it will prudently validate the level of inventories first of the oil companies.
TAX NEWS [DECEMBER 22-27]
- Suarez says suspension of fuel tax still possible
- Concerns over Trabaho bill revival grip firms
- Tax-free sale of gold to BSP gets priority from senators
- Tax Academy to offer public finance online courses off-campus in 2019
- ‘Adding MVUC billions to natl budget eases pressure of taxation’
- BOI project approvals breach P907 billion in 2018
- GSIS extends housing loan condonation program
- Palace pleased that House now agrees to abolish road users’ tax
Suarez says suspension of fuel tax still possible [Manila Bulletin, December 27, 2018]
House Minority Leader Danilo Suarez (Lakas-CMD, Quezon) vowed on Thursday to “sound off” to the leadership of the House of Representatives the idea of putting on hold the imposition of fuel excise tax and its replacement with the road user’s tax in 2019.
Concerns over Trabaho bill revival grip firms [Philippine Daily Inquirer, December 27, 2018]
There is no lasting peace when a fight ends in a truce, for there is always the fear that hostilities will resume.
Tax-free sale of gold to BSP gets priority from senators [BusinessMirror, December 27, 2018]
Senate leaders are poised to front-load plenary consideration of a bill granting tax exemptions to sellers of gold bought by the Bangko Sentral ng Pilipinas (BSP).
Tax Academy to offer public finance online courses off-campus in 2019 [Manila Bulletin, December 26, 2018]
The Philippine Tax Academy (PTA) will start offering an off-campus specialized study program on public finance along with online courses beginning next year, the Department of Finance (DOF) said.
‘Adding MVUC billions to natl budget eases pressure of taxation’ [BusinessMirror, December 24, 2018]
The decision to abolish the Road Board and include some P45 billion in collections from the motor vehicle users’ charge (MVUC) in the national budget is timely, as it eases the burden to raise more taxes, Senate President Vicente C. Sotto III said on Sunday.
BOI project approvals breach P907 billion in 2018 [Manila Bulletin, December 23, 2018]
The Board of Investments (BOI) scapped the year with another record-breaking P907.2-billion new investment commitments, surpassing by a wide margin the P616.8- billion record in 2017.
GSIS extends housing loan condonation program [BusinessMirror, December 23, 2018]
Government Service Insurance System (GSIS) members who want to avail themselves of the ongoing housing condonation program have been given by the state-run pension fund until Dec. 31 next year to do so.
Palace pleased that House now agrees to abolish road users’ tax [Manila Bulletin, December 22, 2018]
Malacañang said it is glad that the House of Representatives finally listened to the wish of President Duterte to abolish the Road Board which the latter claimed as milking cow of corrupt politicians.
TAX NEWS [DECEMBER 15-21]
- Anti-tobacco groups urge Senate to pass UHC law to curb smoking, raise taxes
- Senators want Road Board taxes transferred to 2019 nat’l budget
- Proposed tax hike on tobacco nixed
- TRAIN hastens VAT refund claims
- BIR files raps vs couple in P2.6-billion excise tax charge in fake cigarettes
- BIR reminds taxpayers to immediately reply to deficiency assessment notices
- House panel to come up with bill seeking to impose excise tax on plastic bags
- Supermarket faces P250-M tax raps
Anti-tobacco groups urge Senate to pass UHC law to curb smoking, raise taxes [Manila Bulletin, December 21, 2018]
Various civil society groups and other vulnerable sectors appealed to the Senate to ensure the passage of the Universal Health Care (UHC) law that would pave the way for higher tobacco taxes next year.
Senators want Road Board taxes transferred to 2019 nat’l budget [Manila Bulletin, December 21, 2018]
Leaders of the Senate have united in seeking the transfer of road users’ tax collections to the proposed P3.757-trillion national budget for 2019.
Proposed tax hike on tobacco nixed [Manila Bulletin, December 20, 2018]
DAVAO CITY – Ilocos Norte Governor Imee Marcos has expressed her opposition to another proposed excise tax hike on tobacco products.
TRAIN hastens VAT refund claims [Manila Bulletin, December 20, 2018]
The first tax reform law has hastened the processing of all value-added tax (VAT) refund claims after the measure introduced four reforms in the system of consumption levy, the Department of Finance (DOF) said yesterday.
BIR files raps vs couple in P2.6-billion excise tax charge in fake cigarettes [BusinessMirror, December 19, 2018]
The Bureau of Internal Revenue (BIR) filed a criminal complaint against a couple for allegedly manufacturing fake cigarettes in a factory-warehouse in Lubao, Pampanga.
BIR reminds taxpayers to immediately reply to deficiency assessment notices [Manila Bulletin, December 18, 2018]
The Bureau of Internal Revenue (BIR) asked taxpayers on Tuesday to promptly answer deficiency assessment notices to avoid losing their right to question such assessments.
House panel to come up with bill seeking to impose excise tax on plastic bags [Manila Bulletin, December 17, 2018]
The technical working group (TWG) of the House committee on ways and means has agreed to come up with a substitute bill seeking to impose excise tax on plastic bags used in supermarkets, malls, shops, stores, sales outlets and other similar establishments.
BTr opens OTC window for tax-exempt institutions to access auction facility [BusinessMirror, December 17, 2018]
The Bureau of the Treasury has issued a memorandum opening an over-the-counter (OTC) window, which grants tax-exempt institutions (TEIs) access to the issuance of Treasury bills (T-bills) auctioned off by the BTr.
Supermarket faces P250-M tax raps [Manila Bulletin, December 15, 2018]
A supermarket in Cavite faces a complaint before the Department of Justice (DOJ) for allegedly owing the government over P250 million in taxes.
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