CALL CENTERS MAY NOT MAKE IT TO DOF’S TAX PERK LIST + 11 ELECTRIC COOPERATIVES NOT REMITTING COLLECTIONS TO GOVT ACCORDING TO DOF + CHINA SAYS ONLINE CASINOS ILLEGAL BUT PH TO CONTINUE COLLECTING TAXES FROM THEM
Relevant Highlights:
- SECURITIES & EXCHANGE COMMISSION (SEC) ISSUES GUIDELINES ON THE NUMBER & QUALIFICATIONS OF INCORPORATORS UNDER THE REVISED CORPORATION CODE
- SEC OFFICE OF THE GENERAL COUNSEL LEGAL OPINION DIGESTS
- COURT OF TAX APPEALS (CTA) DIGESTS
- TAX & BUSINESS-RELATED NEWS [AUGUST 6-12]
A. SEC ISSUES GUIDELINES ON THE NUMBER & QUALIFICATIONS OF INCORPORATORS UNDER THE REVISED CORPORATION CODE SEC Memorandum Circular No. 16-2019, dated and published on July 30, 2019, provides for the guidelines on the number and qualifications of incorporators pursuant to the provisions of the Revised Corporation Code of the Philippines. It may be recalled that the new law, which was passed last February 20, 2019, removed the required minimum number of incorporators.
Highlights of the circular include the following:
- New corporation should include at least two (2) but not more than 15
- Only One Person Corporation (OPC) may have a single stockholder, director, and incorporator.
- Local or foreigners, partnerships, domestic and foreign corporations are now qualified to be an incorporator.
- Partnership as incorporator requires a Partners’ Affidavit duly executed by all partners which authorized the partnership to invest in the new corporation.
- Domestic corporation as incorporator requires approval of majority of the Board of Directors/Trustees and ratification of 2/3 of the stockholders/members as well as Directors’/Trustees’/Secretary’s Certificate executed under oath indicating the necessary approvals.
- Foreign corporation as incorporator requires a copy of board resolution, Secretary’s Certificate or its equivalent duly authenticated by the Philippine Consulate authorizing the foreign corporation to invest in the new corporation.
- Signatories must indicate the capacity he is acting or representing for the foreign corporation and for whom he is executing the Articles of Incorporation (AOI)/ By-Laws.
- TIN of the principal as well as the designated signatory should be indicated in the AOI.
- Designated signatory may not be named as a Director/Trustee unless he is an owner of at least one share of stock of the stock corporation or a member of the non-stock corporation.
- Foreign nationals are subject to restrictions with respect to foreign participation in certain investment areas or activities.
- Favorable recommendation from the appropriate government agency is required for special corporations such as banks, financial intermediaries, insurance, among others.
- Processing of applications shall be done manually
B. SEC OFFICE OF THE GENERAL COUNSEL LEGAL OPINION DIGESTS
- No foreign ownership for mass media
- The law clearly allows Non-stock Corporation to raise funds so long as it is incidental to the corporation’ operations & that said funds shall be used for the furtherance of the purpose for which it was established; there are general powers that may be exercised by every corporation whether or not such powers are stated in the AOI or by-laws
- Corporation is authorized to provide in its by-laws a specific number of stockholders or members to constitute quorum
NO FOREIGN OWNERSHIP FOR MASS MEDIA
The subject corporation is engaged in the business of providing telecommunications, media and information technology services. It seeks clarification on the foreign investment ownership limit given the purposes for which it is established. In rendering an opinion, the SEC referred to the Company’s primary purpose and noted that it is engaged in the “development, production, operation and marketing of digital media except mass media”. Notwithstanding the exclusionary phrase “except mass media”, the nature of the activities still falls within the scope of mass media. Consequently, mass media requires 100% Filipino ownership and no foreign ownership may be allowed. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO. 19-27, JULY 22, 2019]
[THE LAW CLEARLY ALLOWS NON-STOCK COPORATION TO RAISE FUNDS SO LONG AS IT IS INCIDENTAL TO THE CORPORATION’ OPERATIONS & THAT SAID FUNDS SHALL BE USED FOR THE FURTHERANCE OF THE PURPOSE FOR WHICH IT WAS ESTABLISHED] [THERE ARE GENERAL POWERS THAT MAY BE EXERCISED BY EVERY CORPORATION WHETHER OR NOT SUCH POWERS ARE STATED IN THE AOI OR BY-LAWS]
The subject corporation is a non-stock, non-profit condominium corporation. It sought clarification whether it has legal right to lease its newly-owned unit pursuant to its objectives, and whether the act of leasing the unit and other similarly foreclosed units in the future is deemed as doing business, in violation of its registration as a non-stock and non-profit corporation. In rendering an opinion, the SEC cited Section 35 of the Revised Corporation Code which states that implied or incidental powers are the corporation’s powers, attributes, and properties, incidental to its existence, and essential or necessary to carry out its purpose or purposes in its AOI. Further, upon perusal of the subject corporations’ secondary purpose, the same is substantially similar to Section 35 of the law. Since the income that may be derived from leasing the newly-acquired condominium unit will be used for the same purpose for which condominium dues and fees are collected, that is, to cover for the expenses in managing and administering the condominium project and the corporation, SEC opined that the corporation is allowed to lease its owned condominium unit as long as it remains necessary in the pursuit of corporate purposes. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO. 19-26, JULY 22, 2019]
CORPORATION IS AUTHORIZED TO PROVIDE IN ITS BY-LAWS A SPECIFIC NUMBER OF STOCKHOLDERS OR MEMBERS TO CONSTITUTE QUORUM
The subject condominium corporation, a non-stock non-profit corporation, is seeking legal opinion on the proper determination of quorum during annual membership meetings. In rendering the opinion, the Supreme Court cited Lim vs. Moldex Land, Inc. wherein the Supreme Court ruled that basis in determining the presence of quorum in non-stock corporations is the numerical equivalent of all members who are entitled to vote, unless some other basis is provided in the By-Laws. “Quorum”, as defined in the By-Laws of the subject condominium corporation, refers to presence of members representing majority (more than 50%) interests in the corporation and whose units are not delinquent in their duties and assessment. On the other hand, the Master Deed mentions the computation of “Interest”, as floor area of unit owned over the total area of all units in the condominium project. Member suggests that attendance of only a simple majority of the members who are in good standing will constitute a quorum. The SEC refrains from rendering opinion as resolution necessitates the determination of factual issue. Nevertheless, it opined that any act or transaction made during a meeting without quorum is rendered of no force and effect. No action can be taken except to adjourn the meeting. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO. 19-25, JULY 22, 2019]
C. CTA DIGESTS
- Timeliness in the filing of appeal before CTA
- Reassignment/transfer of case to another Revenue Officer (RO) requires issuance of new Letter of Authority (LOA)
TIMELINESS IN THE FILING OF APPEAL BEFORE CTA
Petitioner Nueva Ecija I Electric Cooperative, Inc. filed a Petition for Review seeking the cancellation of the 2011 assessment issued by the Respondent Commissioner of Internal Revenue (CIR) on the ground of prescription. The Petitioner argued that the right of the Respondent to assess has already lapsed despite the execution of waiver, which is allegedly defective. The Petitioner also added that under Presidential Decree No. 269, an electric cooperative is not an income generating entity and is not capable of making income, hence, exempt from income tax. On the other hand, the Respondent countered that the court has no jurisdiction over the case since the Petitioner failed to file an appeal on time. Under Revenue Regulations No. 18-2013, it states that if the CIR fails to act on protest within the 180-day period, the same shall be considered a denial of the protest and the taxpayer may either (a) appeal to the CTA within 30 days from the lapse of the 180-day period; or (b) wait for the decision of the CIR even beyond the 180-day period and thereafter appeal such decision to the CTA within thirty (30) days after receipt of such decision. As noted, the Petition was only filed on April 3, 2007 which is beyond the 30 days from the lapsed of the 180-day period, pursuant to letter a. In ruling, the Court ruled that the assessment had already become final, executory and demandable and therefore it has no jurisdiction to entertain the Petition. Consequently, the Petition for Review is DISMISSED for lack of jurisdiction. [NUEVA ECIJA I ELECTRIC COOPERATIVE VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9563, JULY 23, 2019]
REASSIGNMENT/TRANSFER OF CASE TO ANOTHER RO REQUIRES ISSUANCE OF NEW LOA
Petitioner CIR filed a Petition for Review seeking reversal of the earlier resolution of the Court in Division affirming the cancellation of assessment issued against the Respondent Royal Class Trading and Transport Corporation. The Petitioner submitted that issuance of new LOA in case of reassignment is not necessary for the continuance of tax audit and that there is no requirement in the law that RO must be identified in the LOA to have authority. 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 RO assigned to perform assessment functions, in the absence of such, the assessment or examination is a nullity. Further, the Court settled that in case of re-assignment or transfer of cases to another RO, it is mandatory that a new LOA shall be issued with the corresponding notation therein to continue the investigation or audit. The authority of the new RO cannot emanate from the mere issuance of endorsement letter. The Petition for Review is DENIED. Consequently, the assessment was CANCELLED and SET ASIDE for failure of the BIR to establish authority in the conduct of tax examination. [COMMISSIONER OF INTERNAL REVENUE VS. ROYAL CLASS TRADING & TRANSPORT CORPORATION, CTA EN BANC CASE NO. 1832, JULY 20, 2019]
D. TAX & BUSINESS-RELATED NEWS [AUGUST 6-12]
- More sin taxes govt’s priority
- Imee sees rough sailing for second tax reform package seeking more taxes on tobacco
- Pagcor: Pogo hubs meant to protect Chinese
- 11 electric coops not remitting collections to gov’t – DOF
- DOF pushes higher tax on ‘alcopops’
- China: ‘Pogo hubs’ might violate rights of Sino workers
- Alcohol products soon to bear tax stamps
- BOC to examine rice traders’ books amid undervaluation allegations
- Call centers may not make it to DOF’s tax perks list
- PH to continue collecting taxes from Pogos
- Peza justifies tax perks, cites recipients’ contributions to economy
- ‘PEZA contributed P10T in 2015-2017’
- BOI, PEZA issue warning against cutting incentives granted to firms
- China says online casinos illegal but PH to continue collecting taxes from them
- Senate seen meeting DOF timetable for remaining tax reform packages
- Liquor tax hike to get House panel nod next week – solon
- Senate ‘ready’ to pass pending tax reform packages within 15-18 months
More sin taxes govt’s priority [Manila Times, August 12, 2019]
The Department of Finance (DoF) will prioritize the passage of additional “sin” taxes under the Package 2 Plus B of the Comprehensive Tax Reform Program (CTRP), Secretary Carlos Dominguez 3rd said late last week.
Source: https://www.manilatimes.net/more-sin-taxes-govts-priority/598890/
Imee sees rough sailing for second tax reform package seeking more taxes on tobacco [Philippine Daily Inquirer, August 11, 2019]
The chair of the Senate economic affairs committee had expressed doubt the second package of the Duterte administration’s tax reform would be passed within the timetable set by government finance officials.
Source: https://business.inquirer.net/276589/imee-doesnt-see-smooth-sailing-for-second-tax-reform-package-seeking-more-taxes-on-tobacco#ixzz5wOiB9ylK
Pagcor: Pogo hubs meant to protect Chinese [Philippine Daily Inquirer, August 11, 2019]
Philippine authorities defended the plan to create “self-contained” communities where Chinese citizens employed in the booming online gaming industry could “live, work and play,” saying the scheme was intended to protect rather than persecute foreign workers.
Source: https://business.inquirer.net/276587/pagcor-pogo-hubs-meant-to-protect-chinese#ixzz5wOiyBuuC
11 electric coops not remitting collections to gov’t – DOF [Philippine Daily Inquirer, August 11, 2019]
A number of electric cooperatives are not remitting to Power Sector Assets and Liabilities Management Corp. (PSALM) the administrative charges they collected from consumers, the Department of Finance (DOF) revealed.
Source: https://business.mb.com.ph/2019/08/11/11-electric-coops-not-remitting-collections-to-govt-dof/
DOF pushes higher tax on ‘alcopops’ [Philippine Daily Inquirer, August 10, 2019]
The Department of Finance (DOF) is pushing for higher excise taxes on so-called “alcopops” or flavored alcoholic drinks to not only discourage young Filipinos from developing a drinking habit but also generate additional revenues for the Universal Health Care program.
Source: https://business.inquirer.net/276544/dof-pushes-higher-tax-on-alcopops#ixzz5wOjzl1nL
China: ‘Pogo hubs’ might violate rights of Sino workers [Philippine Daily Inquirer, August 9, 2019]
The Chinese Embassy in Manila on Thursday expressed “grave concern” that a plan by the Philippine casino regulator to move thousands of Chinese citizens working at online gambling companies in the country to “self-contained hubs” might be a violation of their rights
Source: https://business.inquirer.net/276388/china-pogo-hubs-might-violate-rights-of-sino-workers#ixzz5w44cJIzp
Alcohol products soon to bear tax stamps [Philippine Daily Inquirer, August 9, 2019]
After years of delay, the government will finally start affixing internal revenue stamps on alcohol products to discourage tax cheats once higher excise taxes kick in by next year, according to Finance Undersecretary Karl Kendrick T. Chua.
Source: https://business.inquirer.net/276415/alcohol-products-soon-to-bear-tax-stamps
BOC to examine rice traders’ books amid undervaluation allegations [Philippine Daily Inquirer, August 9, 2019]
The Bureau of Customs (BOC) is set to begin a full audit of all entities engaged in rice trading on the back of reports there might have been traders who undervalued their rice shipments to avoid paying higher taxes.
Source: https://business.inquirer.net/276411/boc-to-examine-rice-traders-books-amid-undervaluation-allegations#ixzz5w459t82j
Call centers may not make it to DOF’s tax perks list [Philippine Daily Inquirer, August 9, 2019]
The Department of Finance (DOF) thinks the voice sector of the business process outsourcing (BPO) industry should not be prioritized for tax incentives, since the sector is already competitive enough.
Source: https://business.inquirer.net/276409/call-centers-may-not-make-it-to-dofs-tax-perks-list#ixzz5w45DGbgB
PH to continue collecting taxes from Pogos [Philippine Daily Inquirer, August 9, 2019]
The government will continue to collect the taxes from foreign—mostly Chinese—workers in Philippine offshore gaming operators (Pogos) and issue tax identification numbers (TINs) to those still unregistered even as the Chinese Embassy in Manila on Wednesday said online gambling was illegal in the mainland.
Source: https://business.inquirer.net/276404/ph-to-continue-collecting-taxes-from-pogos
Peza justifies tax perks, cites recipients’ contributions to economy [Philippine Daily Inquirer, August 9, 2019]
The Philippine Economic Zone Authority (Peza), getting fed up of being “demonized” for giving out tax incentives, stressed that its registered companies had poured into the economy more than P10 trillion in recent years.
Source: https://business.inquirer.net/276394/peza-justifies-tax-perks-cites-recipients-contributions-to-economy#ixzz5w46iHKSd
‘PEZA contributed P10T in 2015-2017’ [Manila Times, August 9, 2019]
THE Philippine Economic Zone Authority (PEZA) said on Thursday it and its registered firms contributed a total of P10.05 trillion to the Philippine economy from 2015 to 2017, in an effort to banish whatever misconceptions people have about the state-run agency.
Source: https://www.manilatimes.net/peza-contributed-p10t-in-2015-2017/597197/
BOI, PEZA issue warning against cutting incentives granted to firms [Manila Bulletin, August 8, 2019]
For the very first time, the government’s premier investment-generating agency – the Board of Investment (BOI) – has spoken against “rushing” the implementation of proposed cuts in tax incentives, which had been committed to export and labor-intensive investors in the country.
China says online casinos illegal but PH to continue collecting taxes from them [Philippine Daily Inquirer, August 8, 2019]
The government will continue to collect taxes due from foreign—mostly Chinese—workers in Philippine offshore gaming operators (Pogos) and issue tax identification numbers (TINs) to those still unregistered even as the Chinese Embassy in Manila on Wednesday (Aug 7) said online gambling was illegal in the mainland.
Source: https://business.inquirer.net/276373/china-says-online-casinos-illegal-but-ph-to-continue-collecting-taxes-from-them#ixzz5w472zCGR
Senate seen meeting DOF timetable for remaining tax reform packages [Philippine Daily Inquirer, August 8, 2019]
The Senate is “ready” to heed the call of Finance Secretary Carlos G. Dominguez III to pass the remaining packages of the comprehensive tax reform program within 15-18 months.
Source: https://business.inquirer.net/276344/senate-seen-meeting-dof-timetable-for-remaining-tax-reform-packages#ixzz5w477SF8E
Liquor tax hike to get House panel nod next week – solon [Philippine Daily Inquirer, August 8, 2019]
The House ways and means committee is expected to approve the imposition of higher taxes on alcoholic drinks early next week, Albay 2nd District Rep. Joey Salceda said.
Source: https://business.inquirer.net/276354/liquor-tax-hike-to-get-house-panel-nod-next-week-solon#ixzz5w47LPcGS
Senate ‘ready’ to pass pending tax reform packages within 15-18 months [Philippine Daily Inquirer, August 7, 2019]
The Senate is “ready” to heed the call of Finance Secretary Carlos G. Dominguez III to pass the remaining packages of the comprehensive tax reform program within 15-18 months.
Source: https://business.inquirer.net/276308/senate-ready-to-pass-pending-tax-reform-packages-within-15-18-months#ixzz5w47YAjC3
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