BILL FILED LIFTING BANK SECRECY IN TAX CASES IN RESPONSE TO VETO MESSAGE OF PRESIDENT ON TAX AMNESTY + BIR RELEASES NEW & ENHANCED BIR FORMS UNDER TRAIN LAW ANEW
Other Relevant Tax Updates:
- BIR ISSUANCES ON NEW & ENHANCED BIR FORMS UNDER TRAIN LAW, TAX AMNESTY, BOOKKEEPING & NEW INVOICING REQUIREMENTS & SALE OR DISPOSITION OF SHARES OF STOCKS
- COURT OF TAX APPEALS (CTA) DIGESTS
- TAX & BUSINESS-RELATED NEWS [FEBRUARY 26-MARCH 7]
I. BIR ISSUANCES ON NEW BIR FORMS UNDER TRAIN LAW, TAX AMNESTY, BOOKEEPING & NEW INVOICING REQUIREMENTS & SALE OR DISPOSITION OF SHARES OF STOCKS
- Revenue Memorandum Circular (RMC) No. 26-2019, dated February 26, 2019, circularizes Republic Act 11213 or the Tax Amnesty Act of 2019 which covers amnesty for Estate Tax, Other Internal Revenue Taxes, and Tax on Delinquencies together with the Veto Message of President Rodrigo R. Duterte.
- RMC No. 27-2019, dated February 21, 2019 with released date on February 26, 2019, circularizes the new and enhanced BIR Forms under TRAIN Law:
- 1901-Application for Registration for Self-Employed (Single Proprietor/Professional), Mixed Income Individuals, Non-Resident Alien Engaged in Trade/Business, Estate & Trust
- 1902-Application for Registration for Individuals Earning Purely Compensation Income (Local & Alien Employee)
- 1903-Application for Registration For Corporations, Partnerships (Taxable/Non-Taxable), Including Government Agencies and Instrumentalities (GAIs), Local Government Units (LGUs), Cooperatives & Associations
- 1904-Application for Registration for One-Time Taxpayer and Person Registering under E.O. 98 (Securing a TIN to be able to transact with any government office)
- 1905-Application for Registration Information Update/Correction/ Cancellation
- 1906-Application for Authority to Print Receipts and Invoices
- RMC No. 28-2019, dated February 22, 2019 with released date on February 26, 2019, prescribes the use of the BIR Printed Receipt/Invoice (BPR/BPI) in order for business to immediately commence business operations after registration while securing their Authority to Print (ATP). The BPI/BPR shall be secured from the New Business Registrant Center and shall be valid only for a period of 15 days.
- RMC No. 29-2019, dated February 22, 2019 with released date on February 26, 2019, provides the guidelines on keeping and maintaining of books of accounts and the registration deadline.
- Taxpayers may maintain any one of the following:
Manual Books of Accounts
Before the deadline for filing of the 1st Quarterly Income Tax Return (ITR) or Annual ITR whichever comes earlier.
All entries shall be hand written. Printouts of the accounting records are prohibited.
Loose-Leaf Books of Accounts (with Permit to Use)
On or before 15 days after the end of each taxable year or within 15 days from closure of business operations, whichever comes earlier
Shall be accompanied with a sworn statement attesting to the correctness of the entries made, and the number of all invoices, receipts, books of accounts used for the period covered
Computerized Books of Accounts (with Permit to Use)
On or before 30 days after the end of each taxable year or within 30 days from closure of business operations, whichever comes earlier
- Business whose gross annual sales, earning, receipts or output exceed Php 3 Million shall have their books of accounts audited and examined yearly by independent Certified Public Accountants.
- Taxpayers are required to preserve their accounting records for a period of ten (10) years. Accounting records shall be retained in hard copies for the first five (5) years while may be retained in electronic copies for the succeeding years.
- RMC No. 30-2019, dated February 22, 2019, clarifies Section 100 of the Tax Code particularly on the issue of “deemed gift.” Starting January 1, 2018, when shares of stock not traded in stock exchange are sold for less than its fair market value, the excess of the fair market value over the selling price shall be treated as gift subject to donor’s tax imposed by Section 100 of the Tax Code, as amended, except when it is sold at arm’s length, free from any donative intent (in the ordinary course of business). The determination whether the sale is at arm’s length is a question of fact and not of law. The party seeking to apply the exception should prove that the sale involves no irregularity.
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II. COURT OF TAX APPEALS (CTA) DIGESTS
- Immediacy Test Should Be Met To Be Exempt From Improperly Accumulated Earnings Tax (IAET); Minutes Of Meeting Evidencing Appropriation Crucial In Claiming Exemption From Iaet
- Letter Notice (LN) Is Entirely Different & Serves A Different Purpose Than Letter Of Authority (Loa); Assessment Pursuant To Ln Without Loa Is A Nullity
- It Is A Due Process Requirement For The Taxpayer To Actually Receive The Assessment
- Elements Constituting Willful Failure To Pay & Supply Correct & Accurate Information; Denial Of Receipt Of Assessment Notices By Taxpayer Shifts The Burden Of Proof To The Bir; Speculations Cannot Substitute For Proof In Establishing Guilt Of The Accused
- Requisites Of Input Vat Refund Arising From Zero-Rated Sales
- Requisites To Be Considered As Non-Resident Foreign Corporation (Nrfc) Doing Business Outside The Philippines For Purposes Of Input Vat Refund Arising From Zero-Rated Sales
[IMMEDIACY TEST SHOULD BE MET TO BE EXEMPT FROM IAET] [MINUTES OF MEETING EVIDENCING APPROPRIATION CRUCIAL IN CLAIMING EXEMPTION FROM IAET]
Petitioner 1Maple Sales Inc. filed a Petition for Review seeking the reversal of the earlier decision of the Court 2nd Division upholding the assessment issued by the Respondent Commissioner of Internal Revenue on IAET assessment for the year 2009. The IAET assessment was based on the accumulated earnings declared as appropriated through the Petitioner’s Board Resolution on February 12, 2010. The Court ruled that being issued in 2010, the Board Resolution shall of no moment since appropriation pertains to retained earnings in the taxable year 2009, which evidently forms part of the financial statements and books of account of Petitioner for 2009. Moreover, that Petitioner was only able to declare dividends in the taxable year 2013 (and subsequently pay them on April 2014), makes the appropriation of retained earnings as of December 31, 2009, taxable, as Petitioner’s declaration of dividends was made only after more than one year following the close of the taxable year 2009. In addition, after tracing the planned expansion stated in the Secretary’s Certificate to justify its retained earnings through the execution of Executive Marketing Agreement, the Petitioner failed to present the Minutes of Meeting. A mere Secretary’s Certificate without mentioning a definite planned expansion, as well as self-serving testimonies without supporting evidence of the definite planned expansion linked to the accumulation of retained earnings, will not suffice. The supposed unforeseeable events also run counter to the “immediacy test”. The retained earnings were not immediately utilized as there was increase of the same in the succeeding years. The allegation that the increase was due to the success in the planned expansion is of no moment as the need to immediately utilize the retained earnings will matter for such to be exempted from IAET. Also, it was only in 2013 when the retained earnings were reverted and declared as dividends would already negate the immediacy test and what was required by law for the retained earnings to be exempt from IAET. The IAET assessment is UPHELD. [1MAPLE SERVICES INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 1662, FEBRUARY 21, 2019]
[LN IS ENTIRELY DIFFERENT & SERVES A DIFFERENT PURPOSE THAN LOA] [ASSESSMENT PURSUANT TO LN WITHOUT LOA IS A NULLITY]
Petitioner Ermilo Tan Ng Hua filed a Petition for Review seeking the reversal of the earlier decision holding him liable for deficiency assessments issued by the Respondent Commissioner of Internal Revenue. Petitioner argued that no LOA was issued instead an LN was issued requiring him to reconcile the discrepancies noted based on the computerized matching of the information/data provided by third-party sources as against the declarations per VAT returns. On the other hand, the Respondent countered that it is the Petitioner’s failure to overcome the audit findings which led to the issuance of the assessment. In the resolution, the Court rendered the assessment void in the absence of valid LOA. It emphasized that an LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions, in the absence of such, the assessment or examination is a nullity. Further, the Court reiterated the Supreme Court pronouncement in the landmark case of Medicard wherein it ruled that LN is not equivalent to LOA. Accordingly, LN must be converted into an LOA before the revenue officer proceed on tax examination and assessment of the taxpayer. The Petition for Review is GRANTED. Consequently, the assessment was CANCELLED and SET ASIDE for failure of the BIR to establish authority in the conduct of tax examination. [ERMILO TAN NG HUA VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9291, FEBRUARY 21, 2019]
[IT IS A DUE PROCESS REQUIREMENT FOR THE TAXPAYER TO ACTUALLY RECEIVE THE ASSESSMENT]
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 Clark Water Corporation. The Petitioner argued that the Preliminary Assessment Notice (PAN) and Formal Assessment Notice (FAN) were sent to Respondent’s registered principal office through registered post mail. However, the Respondent denied having received any assessment notice. To counter, the Petitioner claimed that a letter duly directed and mailed was received in the regular course of mail, which is in accordance with Section (v) Rule 131 of the Rules of Court. Conversely, the Court enunciates that the presumption being relied upon by the Petitioner is not a conclusive presumption, but merely a disputable one. Likewise, the requisites to raise and to prove this presumption are: (1) the letter was properly addressed with postage prepaid; and (2) it was mailed. In the appreciation, the Court ruled that the Petitioner failed to discharge the burden of proof to show that Respondent actually received the PAN and the FAN. The persuasiveness of the right to due process reaches both substantial and procedural rights and the failure to strictly comply with the requirements laid down by law and its own rules is a denial of the taxpayer’s right to due process. The Petition for Review is DENIED and the decision of the CTA 2nd Division is AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. CLARK WATER CORPORATION, CTA EN BANC CASE NO. 1693, FEBRUARY 21, 2019]
[ELEMENTS CONSTITUTING WILLFUL FAILURE TO PAY & SUPPLY CORRECT & ACCURATE INFORMATION] [DENIAL OF RECEIPT OF ASSESSMENT NOTICES BY TAXPAYER SHIFTS THE BURDEN OF PROOF TO THE BIR] [SPECULATIONS CANNOT SUBSTITUTE FOR PROOF IN ESTABLISHING GUILT OF THE ACCUSED]
Both Accused Generosa P. Ortega and Lalaine P. Ortega of La Chilo Chinese Cuisine, Inc., in their capacity as President and Treasurer, were charged for violation of Section 255 of the Tax Code for willful failure to pay the correct amount of Income Tax and VAT for taxable year 2007. Both accused argued that they were not aware of the assessment conducted by the BIR since assessment notices were never received. The prosecution, on the other hand, counters that such notices were sent by registered mail. Further, the presumption of receipt applies when mail is sent by registered mail. Upon verification of records, the Court noted that the accused was indeed required to pay Income Tax and VAT. Further, the latter failed to supply correct and accurate information in its tax returns. However, the Court ruled that the failure committed by the accused is not considered as willful. The rule is settled that “willfulness” connotes a bad purpose to either disobey or disregard the law. In all criminal cases, mere speculations cannot substitute for proof in establishing the guilt of the accused. In this case, as argued by the prosecution, the notices were actually sent via registered mail to the accused but receipt of such was denied by the latter. If the taxpayer denies receiving an assessment from the BIR, it is incumbent upon the latter to prove by competent evidence that such notice was indeed received by the addressee. After further examination, the prosecution failed to confirm actual receipt of notices by the accused. Likewise, it is apparent that there is no competent or sufficient evidence which would show that the failure of the accused was willful. Accordingly, the accused were ACQUITTED of the offense charge for failure of the prosecution to prove guilt beyond reasonable doubt. [PEOPLE OF THE PHILIPPINES VS. GENEROSA P. ORTEGA, LALAINE P. ORTEGA, LA CHILO CHINESE CUISINE INC., CTA CRIMINAL CASE NO. O-606 & CTA CRIMINAL CASE NO. O-607, FEBRUARY 20, 2019
REQUISITES OF INPUT VAT REFUND ARISING FROM ZERO-RATED SALES]
Petitioner Kurimoto (Philippines) Corporation filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) on input VAT arising from zero-rated sales in the amount of Php 9,390,402.45. In the resolution, the Court cited that in order to be entitled to refund or TCC, it is important to prove that the taxpayer is VAT-registered; that the claim for refund should be filed within the prescriptive period; that there must be zero-rated or effectively zero-rated sales; that input taxes were incurred or paid; that such input taxes are attributable to zero-rated or effectively zero-rated sales; and that the input taxes were not applied against any output VAT liability. In the appreciation, the Court finds that the Petitioner is compliant except on some amounts which were disallowed due to the following reasons, namely: (1) the administrative claim for the 1st quarter has prescribed; (2) failure to comply with the requisite to prove the existence of zero-rated sales; and (3) failure to meet the substantiation requirements. The Court PARTIALLY GRANTED the Petition for Review ordering the Respondent Commissioner of Internal Revenue to refund the Petitioner or issue TCC in the modified amount of Php 1,977,907.07. [KURIMOTO (PHILIPPINES) CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9211, FEBRUARY 06, 2019]
[REQUISITES TO BE CONSIDERED AS NRFC DOING BUSINESS OUTSIDE THE PHILIPPINES FOR PURPOSES OF INPUT VAT REFUND ARISING FROM ZERO-RATED SALES]
Petitioner Financial Times Electronic Publishing Philippines, Inc. filed an instant Petition for Review seeking for the refund or the issuance of TCC on input VAT arising from zero-rated sales. In the resolution, the Court cited that in order to be entitled for refund or TCC attributable to such sales, it is important to prove that taxpayer is VAT-registered and engaged in zero-rated or effectively zero-rated sales. Further, the input taxes were due or paid and were not applied against output taxes during and in the succeeding quarters. Also, input taxes claimed are attributable to zero-rated or effectively zero-rated sales. Lastly, the claim should be filed within two (2) years after the close of the taxable quarter when such sales were made. In the appreciation, the Court finds that the petitioner is compliant except on its failure to submit Securities and Exchange Commission (SEC) Non-Registration Certificate to prove that its client is indeed an NRFC doing business outside the Philippines. Further, the Court emphasized that in order to be considered as an NRFC doing business outside the Philippines, the latter must be supported, at the very least, by both SEC Certificate of Non-Registration and Certificate of Foreign Incorporation. The Petition for Review was DENIED. [FINANCIAL TIMES ELECTRONIC PUBLISHING PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO 9434, FEBRUARY 4, 2019]
If you wish to get a copy of complete text of CTA cases, please e-mail us at firstname.lastname@example.org.
III. TAX & BUSINESS-RELATED NEWS [FEBRUARY 26-MARCH 7]
- Gov’t loses P3B/mo in tax revenues from foreign Pogo workers
- Benjamin Diokno prioritizes continued banking reforms
- BSP sees continued easing of price increases
- Inflation eases further in February
- Delinquency tax take to rise – DoF
- SSS: Increase in contribution to 12% likely to start by April or May
- BSP wants powers over conglomerates
- Gov’t to monitor proper tax payment of POGO workers
- SSS eases rules on pension loan program
- Bill filed lifting bank secrecy in tax cases
- Government eyes P27.5 B revenue from Tax Amnesty Law
- PH’s biggest firms show Train’s success
- 2018 BSP rate hikes continue to crimp loan growth
- Inflation seen to ease below 3% level in third quarter of 2019
- Fuel marking could earn govt P40B – DoF official
- Trabaho bill to buoy local office market
- SEC junks plea to void San Miguel share swap
- BSP assures confidential information will remain private
- SSS to set aside P75B for offshore investments
- DoF: Higher tobacco tax to prompt smokers to quit
Gov’t loses P3B/mo in tax revenues from foreign Pogo workers [Philippine Daily Inquirer, March 07, 2019]
The government is losing at least P3 billion in tax revenues a month from foreign workers in the Philippine offshore gaming operators (Pogo) industry who do not pay personal income taxes, Finance Secretary Carlos Dominguez III said on Wednesday.
Benjamin Diokno prioritizes continued banking reforms [Philippine Star, March 07, 2019]
Newly appointed Bangko Sentral ng Pilipinas Governor Benjamin Diokno laid down yesterday his priorities at the central bank after relinquishing his post as head of the Department of Budget and Management (DBM).
BSP sees continued easing of price increases [Philippine Daily Inquirer, March 06, 2019]
Consumer prices around the country are expected to rise at an even more moderate pace in the coming months as policy interventions undertaken by various government agencies work their way through the economy, the Bangko Sentral ng Pilipinas said on Tuesday.
Inflation eases further in February [Manila Bulletin, March 05, 2019]
The rate of increase in consumer prices further slowed down in February, falling within the Duterte administration’s target range.
Delinquency tax take to rise – DoF [Manila Times, March 04, 2019]
The government could collect a portion of an estimated P80 billion in unpaid delinquency taxes following partial approval of an amnesty law, a senior Finance department official said.
SSS: Increase in contribution to 12% likely to start by April or May [Philippine Daily Inquirer, March 04, 2019]
The hike in the Social Security System (SSS) contribution rate to 12 percent will likely be implemented by April or May, the state-run pension fund’s president and chief executive Emmanuel F. Dooc said Monday.
BSP wants powers over conglomerates [Manila Times, March 04, 2019]
The Bangko Sentral ng Pilipinas (BSP) wants to subject large corporations, particularly those that own banks, to its scrutiny and will push for further amendments to its charter, a senior official said.
Gov’t to monitor proper tax payment of POGO workers [Philippine Star, March 04, 2019]
The Department of Finance (DOF) and Bureau of Internal Revenue (BIR) have sought the cooperation of other government agencies to ensure that foreign nationals working in Philippine offshore gaming operators (POGOs) are properly monitored and are paying their taxes.
SSS eases rules on pension loan program [Philippine Star, March 04, 2019]
State-run Social Security System (SSS) has relaxed the rules on the application for its pension loan program to allow more than 1.2 million pensioners easier access to financial assistance from the state fund.
Bill filed lifting bank secrecy in tax cases [Philippine Star, March 03, 2019]
Quirino Rep. Dakila Carlo Cua is heeding President Duterte’s call for the filing of a bill lifting bank secrecy in tax cases.
Government eyes P27.5 B revenue from Tax Amnesty Law [Philippine Star, March 02, 2019]
The newly enacted Tax Amnesty Law is expected to raise P27.541 billion in additional revenues for the government this year, according to the Department of Finance (DOF).
PH’s biggest firms show Train’s success – DoF [Manila Times, March 02, 2019]
The performance of the country’s biggest companies best shows that the first package of tax reforms is “a hundred-percent success” in boosting the spending power of Filipino consumers, the Department of Finance (DoF) said.
Inflation seen to ease below 3% level in third quarter of 2019 [Philippine Star, February 28, 2019]
Swiss investment bank UBS expects Philippine inflation to ease below three percent in the third quarter after falling within the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP) on easing oil and food prices within the next few months.
Fuel marking could earn govt P40B – DoF official [Manila Times, February 28, 2019]
A newly launched fuel marking program could generate as much as P40 billion in revenues during the first year of implementation, a Finance department official said on Wednesday.
Trabaho bill to buoy local office market [Manila Times, February 28, 2019]
THE second package of the Tax Reform for Acceleration and Inclusion (Train) law is expected to boost the domestic property market as it will allow locators to lease anywhere, a global property services firm.
SEC junks plea to void San Miguel share swap [Philippine Star, February 27, 2019]
The Securities and Exchange Commission (SEC) has ruled in favor of San Miguel Group in a petition filed by a minority shareholder seeking to nullify a share swap transaction between San Miguel Food and Beverage Inc. (SMFB) and San Miguel Corp. (SMC).
BSP assures confidential information will remain private [Manila Bulletin, February 26, 2019]
Data obtained from individuals or entity such as banks and corporates will only be used for statistical and policy development purposes and confidential information will remain private, the central bank said.
SSS to set aside P75B for offshore investments [Manila Times, February 26, 2019]
The state-run Social Security System (SSS) is looking to diversify its investments following President Rodrigo Duterte’s approval of changes to the pension fund’s charter.
DoF: Higher tobacco tax to prompt smokers to quit [Manila Times, February 26, 2019]
Higher tobacco taxes can reduce the number of smokers in the country, the Finance department said on Monday as it again urged Congress to consider raising planned tax hikes.