BIR RELEASED DRAFT REGULATIONS ON TAX AMNESTY IMPLEMENTATION FOR PUBLIC COMMENT + DIGEST OF REVISED CORPORATION CODE-1ST PART]
Other Relevant Tax Updates are as follow:
- LAW DIGESTS ON REVISED CORPORATION CODE OF THE PHILIPPINES-TITLES 1 & 2, UNIVERSAL HEALTH CARE LAW, EXPANDED MATERNITY LEAVE LAW, SSS RATIONALIZATION LAW
- COURT OF TAX APPEALS (CTA) DIGESTS
- TAX & BUSINESS-RELATED NEWS FOR MARCH 8-15
I. LAW DIGESTS
- REVISED CORPORATION CODE OF THE PHILIPPINES-TITLES 1 & 2
- UNIVERSAL HEALTH CARE LAW
- EXPANDED MATERNITY LEAVE LAW
- SSS RATIONALIZATION LAW
- REVISED CORPORATION CODE OF THE PHILIPPINES
Last February 20, 2019, the President has signed Republic Act No. 11232 otherwise known as the Revised Corporation Code of the Philippines. The salient provisions and highlights of Titles 1 and II are summarized below. Other highlights of amendments will be sent in tranches, given the substantial amendments made, in reference to our next weekly tax updates
TITLE 1: GENERAL PROVISIONS, DEFINITIONS & CLASSIFICATIONS
- Section 6 on classification of shares
Issuance of no-par value shares of stocks. It now includes pre-need corporations and other corporations authorized to obtain or access funds from the public.
- Section 7 on founders’ shares
Amendment on the right given to founders’ shares. It now provides that the exclusive right to vote or be voted and be voted for in the election of directors shall not be allowed if the same is violative of the Anti-Dummy Law, Foreign Investments Act of 1991, and other pertinent laws.
TITLE II: INCORPORATION & ORGANIZATION OF PRIVATE CORPORATIONS
Section 10 on number & qualifications of incorporators
- Removal of minimum number of incorporators allowing one (1) person or entity to be an incorporator
- Incorporators are not limited to natural person. It now includes partnership, association or even corporation as incorporators.
- Incorporators who are natural persons must be of legal age.
- Natural persons who are licensed to practice profession, and partnerships and associations allowed to practice a profession, shall not be allowed to organize a corporation unless permitted by special laws.
- Section 11 on corporate term
- Corporations shall now have perpetual existence unless their Articles of Incorporation provide otherwise. Even corporations existing prior to the effectivity of the law shall have perpetual existence, unless majority of the stockholders elect to retain the specific corporate term in their articles of incorporation.
- Corporate term with specific period may be extended or shortened by amendment of the articles not earlier than three (3) years prior to the original or subsequent expiry dates unless justified as may be determined by the SEC.
- Corporation whose term has expired may apply for revival of corporate existence. Upon approval by the SEC, the corporation shall be deemed revived and shall also be deemed to have perpetual existence, unless its application for revival provides otherwise.
- Section 13 on the contents of Articles of Incorporation
- Term of existence should be indicated, unless the corporation elects for perpetual existence.
- Number of directors, which shall not be more than 15, or the number of trustees which may be more than 15
- Arbitration agreement may now be provided in the articles
- Articles of incorporation and application for amendments may be filed in electronic document, in accordance with the SEC rules
- Removal of the requirement of 25%-25% subscription and paid-up capitalization requirement, except as specifically provided in special laws.
- Removal of the minimum paid-up capital of Php 5,000
- Section 14 on forms of Articles of Incorporation
- Inclusion of OPC (One-Person Corporation) along with Inc., or Corporation on the name corporation, if it is a single corporation
- Removal of Treasurer’s Affidavit
- Section 17 on corporate name now contains a more detailed guidelines and requirements to avoid deception and confusion
- Section 18 on commencement of corporate existence now includes a provision on the requirements for the registration and incorporation of corporation prior to the commencement of corporate existence
- Section 21 on effects of non-use of charter and continuous inoperation
- Changed the lead time period of continuous inoperation of a corporation from two (2) years to five (5) years before it is deemed revoked
- Provided a more detailed guidelines as to the revocation of corporation
- UNIVERSAL HEALTH CARE LAW
Seeks to give all Filipinos health care coverage and benefits and mandates expanded coverage of the Philippine Health Insurance Corporation (PhilHealth) on free consultation and laboratory and diagnostic tests. The funds shall be financed by the national government, no PhilHealth ID shall be required upon availment of any health service, and no co-payment shall be charged for services rendered on basic accommodation. [REPUBLIC ACT NO. 11223, FEBRUARY 20, 2019]
- EXPANDED MATERNITY LEAVE LAW
Expands the paid-maternity leave of all mothers in the government and private sectors from the current 60 days to 105 days, regardless of civil status or legitimacy of her child. Seven (7) days can be transferred to father or to an alternate caregiver who may be a relative within the fourth degree of consanguinity or the current partner of the female worker sharing the same household. Solo parents are granted an additional of 15 days of paid maternity leave. It also gives mothers an option to extend for 40 days without pay. For cases of miscarriage, 60 days maternity leave with full pay shall be granted. In an event that the beneficiary female worker dies or is permanently incapacitated, the balance of her maternity leave benefits shall accrue to the father of the child or to a qualified caregiver. [REPUBLIC ACT NO. 11210, FEBRUARY 20, 2019]
- SSS RATIONALIZATION LAW
SSS members and employers will gradually contribute more from 11% to 12% effective January 2019. It will further increase by 1% every other year until it reaches 15% in 2025. It also provides mandatory SSS coverage of OFWs. [REPUBLIC ACT NO. 11199, FEBRUARY 7, 2019]
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II COURT OF TAX APPEALS (CTA) DIGESTS
- Assessment Cancelled Due To Delivery Of Notices To Wrong Address
- Taxpayer Has The Liberality To Present Any Sufficient Evidence To Prove The Refund Claimed
- Zero-Rated Entities Engaged In Development Of Renewable Energy Source Cannot Claim Refund Of Unutilized Or Excess Input Vat Since No Input Vat Should Be Paid Thereof
- Application Of Doctrine In Pari Delicto On The Execution Of Waiver; Failure To Comply With The 120-Day Period To Finish The Assessment Has No Bearing On The Assessment
[ASSESSMENT CANCELLED DUE TO DELIVERY OF NOTICES TO WRONG ADDRESS]
Petitioner Bostik Philippines, Inc. filed a Petition for Review praying for the cancellation and withdrawal of the Assessment Notices, Preliminary Collection Letter (PCL) and Demand Notice Before Suit issued by the Respondent Commissioner of Internal Revenue. Respondent sent the Letter Notice (LN) and Post Reporting Notice to Petitioner’s correct address at 35th Floor, Raffles Corporate Center, Pasig City. However, the Preliminary Assessment Notice (PAN), Formal Assessment Notice (FAN), and Formal Letter of Demand (FLD) were sent to a different address, hence were not received by the Petitioner. For unknown reasons, the PCL and Demand Notice Before Suit, requiring Petitioner to pay its alleged tax liabilities were served at the correct address. Petitioner claims that its right to due process was violated as neither the PAN, FAN, and FLD was served upon it rendering the subject assessment void. With a void assessment, the subsequent issuance of the PCL and Demand Notice Before Suit were also void. Likewise, the LN that was issued by Respondent was not converted to a Letter of Authority. Accordingly, the Court GRANTED the Petition for Review. The Assessment Notices, PCL and Demand Before Suit are CANCELLED and SET ASIDE. [BOSTIK PHILIPPINES, INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9019, MARCH 5, 2019
[TAXPAYER HAS THE LIBERALITY TO PRESENT ANY SUFFICIENT EVIDENCE TO PROVE THE REFUND CLAIMED]
Petitioner SM Investments Corporation filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) on the alleged excess and unutilized Creditable Withholding Tax (CWT) amounting to Php 1,170,533,633.00. The Respondent Commissioner of Internal Revenue asserts that the Petitioner failed to submit relevant supporting documents to support its claim, citing the checklist of documentary requirements listed in Revenue Memorandum Order 53-98. Nonetheless, the Court resolved the case in reference to the Supreme Court pronouncement in the case of Commissioner of Internal Revenues vs. First Express Pawnshop Company, Inc. which provides that the BIR cannot demand what type of supporting documents should be submitted and the taxpayer has the liberality to present any sufficient evidence to prove the refund claimed. Likewise, the Court determined the eligibility of the Petitioner to the tax refund which must satisfy the requirements, namely; (1) That the claim for refund was filed within two-year prescriptive period; (2) That the fact of withholding is established by a copy of a statement duly issued by payor showing the amount of tax withheld; and, (3) That the income upon which the taxes were withheld were included in the return of the recipient. Consequently, some CWTs were disallowed due to failure to substantiate and failure to prove that the corresponding income payments were properly recorded in the book. The Petition for Review is PARTIALLY GRANTED ordering the Respondent to refund or issue TCC the Petitioner in the modified amount of Php 179,295,580.72. [SM INVESTMENTS CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9322, MARCH 4, 2019]
[ZERO-RATED ENTITIES ENGAGED IN DEVELOPMENT OF RENEWABLE ENERGY SOURCE CANNOT CLAIM REFUND OF UNUTILIZED OR EXCESS INPUT VAT SINCE NO INPUT VAT SHOULD BE PASSED THEREOF]
Petitioner CBK Power Company Limited filed a Petition for Review seeking the reversal of the earlier decision of the Court Special 1st Division denying its claim of input VAT refund representing its unutilized and excess input VAT arising from zero-rated sales. In ruling, the Court cited Republic Act No. 9513 which states that all real estate developers are entitled to zero-rated VAT on its purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities, and since the Petitioner is zero-rated entity, it cannot seek a refund from the BIR of its unutilized input taxes because under R.A No. 9513 and the pronouncement of the Supreme Court in Coral Bay case, its purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities as well as the whole process of exploring and developing renewable energy sources up to its conversion into power are zero-rated. Therefore, since no input VAT should have been passed on by suppliers on its local purchases of goods and services, it is not entitled to the relief being prayed for (i.e. input VAT refund or TCC). The Court DENIED the Petition for Review and AFFIRMED the earlier decisions. [CBK POWER COMPANY LIMITED VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 1685, FEBRUARY 20, 2019]
[APPLICATION OF DOCTRINE IN PARI DELICTO ON THE EXECUTION OF WAIVER] [FAILURE TO COMPLY WITH THE 120-DAY PERIOD TO FINISH THE ASSESSMENT HAS NO BEARING ON THE ASSESSMENT]
Petitioner First Philippine Electric Corporation filed a Petition for Review praying for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue. The Petitioner argued that the assessment should be cancelled for failure of the Respondent to revalidate the Letter of Authority after the expiration of the 120-day period to assess as provided in the BIR General Audit Procedures. The Petitioner also added that that the Letter of Authority was never replaced by an electronic LOA (eLOA) despite the mandatory requirement as provided for in Revenue Memorandum Order (RMO) No. 69-2010. Likewise, the right to assess for taxable year 2009 has already lapsed citing the 3-year prescriptive period and the executed waiver has no legal effect since it was executed after the set-in of 3-year prescriptive period coupled by unauthorized signatory thereof. In the resolution, the Court ruled that RMO No. 69-2010 requires the manual LOA be retrieved, and those examinations lasted more than 120 days must be replaced with the new and revalidated eLOA. However, nowhere in the order states that the conduct of the audit pursuant to the previously-issued manual LOA will be invalidated, hence, the LOA is valid notwithstanding the failure to replace the same with an eLOA. On waiver, the Court ruled that as a general rule, the execution of waivers must strictly follow the procedures and guidelines provided in RMO No. 20-1990 and Revenue Delegation Authority Order (RDAO) No. 05-2001. However, when both parties are at fault or in ‘pari de licto’, the assessment must be upheld. The Petition for Review is PARTIALLY GRANTED resulting to the PARTIAL CANCELLATION of the assessment as a result of failure of the Petitioner to dispute the remaining findings of the Respondent. [FIRST PHILIPPINE ELECTRIC CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9199, FEBRUARY 8, 2019]
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III. TAX & BUSINESS-RELATED NEWS [MARCH 8-15]
- Tax amnesty clips government revenue target
- DBM: Gov’t workers can get salary hike sans new budget
- SSS extends deadline to pay contributions
- Duterte vetoes bill creating regional investment, infra coordinating hub in Central Luzon
- Tax reforms to make PH unattractive to investors
- DOF pushes uniform 5% royalty rate for mining
- BIR to audit oil firms
- Higher alcohol taxes to raise P237B – DoF
- BSP gives banks, financial institutions 6 months to comply with new FX rules
- BSP eases banks’ liquidity compliance
- POGOs warned vs illegal workers
- Pag-IBIG reports new record in members’ savings in 2018
- Ahead of May 13 polls, BIR reminds candidates, parties of tax obligations
Tax amnesty clips government revenue target [Philippine Star, March 15, 2019]
The Duterte administration’s economic managers have decided to cut the government’s revenue target this year following the enactment of a watered down tax amnesty law.
DBM: Gov’t workers can get salary hike sans new budget [Philippine Daily Inquirer, March 14, 2019]
Government employees whose fourth tranche of salary increase was delayed by the impasse in the approval of the P3.757-trillion national budget may receive their much-awaited pay hike through an executive order (EO) by President Rodrigo Duterte, said Acting Budget Secretary Janet B. Abuel.
SSS extends deadline to pay contributions [Philippine Star, March 14, 2019]
State-run Social Security System (SSS) has given more time for employers and individual members to settle their contribution payments for the first half.
Duterte vetoes bill creating regional investment, infra coordinating hub in Central Luzon [Philippine Star, March 14, 2019]
President Rodrigo Duterte vetoed a bill that sought to create the “Regional Investment and Infrastructure Coordinating Hub of Central Luzon,” saying the measure has several provisions that would pose “substantial fiscal risks” to the country.
Tax reforms to make PH unattractive to investors [Manila Times, March 13, 2019]
The local aerospace industry might find it hard to entice foreign companies to invest in the Philippines because of tax reforms being pushed by the government, the Aerospace Industry Association of the Philippines (AIAP) said.
DOF pushes uniform 5% royalty rate for mining [Philippine Star, March 13, 2019]
The Department of Finance (DOF) has appealed for the Senate to adopt its original proposal for mining fiscal reforms, which is projected to raise about P7.2 billion in additional revenues in the first year of its implementation.
BIR to audit oil firms [Philippine Daily Inquirer, March 12, 2019]
As part of efforts to attain its P2.3-trillion collection target for 2019, the Bureau of Internal Revenue (BIR) will audit oil companies’ inventories and tightly watch online shopping services to ensure correct tax payments.
Source: https://business.inquirer.net/266496/bir-to-audit-oil firms?utm_expid=.XqNwTug2W6nwDVUSgFJXed.1
Higher alcohol taxes to raise P237B – DoF [Manila Times, March 12, 2019]
A Senate bill calling for higher excise taxes on alcohol products could generate P237 billion in additional revenues over a five-year period, the Finance department said.
BSP gives banks, financial institutions 6 months to comply with new FX rules [Manila Bulletin, March 12, 2019]
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said banks, or regulated financial institutions, are given six months to “strictly comply” with the revised rules on foreign exchange (FX) transactions.
BSP eases banks’ liquidity compliance [Manila Bulletin, March 10, 2019]
The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), has extended up to January next year the observation period for subsidiary banks’ compliance with Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) to allow more time to adjust to the new metrics.
POGOs warned vs illegal workers [Manila Bulletin, March 10, 2019]
The Philippine Amusement and Gaming Corp. (Pagcor) warned offshore gaming operators and service providers that they will be penalized once found their companies are employing undocumented foreign nationals.
Pag-IBIG reports new record in members’ savings in 2018 [Manila Bulletin, March 09, 2019]
Pag-IBIG Fund members saved P40.27 billion in the state-run fund in 2018 setting a new record high savings in a single year.
Ahead of May 13 polls, BIR reminds candidates, parties of tax obligations [Philippine Daily Inquirer, March 08, 2019]
It’s election season once again, and the Bureau of Internal Revenue (BIR) reminded candidates, political parties and party-list groups, as well as campaign contributors not to forget paying their taxes dues.