PERPETUAL TAX EXEMPTION OF ELECTRIC COOPERATIVES + MOST RECENT UPDATE ON CITIRA & GROSS TAXATION SCHEME
- COURT OF TAX APPEALS (CTA) DIGESTS
- TAX & BUSINESS-RELATED NEWS [SEPTEMBER 18-27]
I. CTA DIGESTS
- Non-Revalidation Of Letter Of Authority (LOA) Will Not Result To Cancellation Of Assessment; Cancellation Of Assessment Due To Defective Waiver Cannot Be Assailed If Both Parties Are In Pari Delicto; Retrospective Application Of Law That Prejudice The Interest Of Taxpayer Is Unconstitutional
- Perpetual Income Tax Exemption Of Electric Cooperatives Registered Under National Electrification Administration (NEA); Limit Of 30 Years Or Until The Cooperative Is Free From Indebtedness, Whichever Comes First, Pertains To Exemption Of Taxes Other Than Income Tax
- Assessment Cancelled Due To Non-Issuance Of New Loa In Case Of Re-Assignment To New Revenue Officer (RO)
[NON-REVALIDATION OF LOA WILL NOT RESULT TO CANCELLATION OF ASSESSMENT] [CANCELLATION OF ASSESSMENT DUE TO DEFECTIVE WAIVER CANNOT BE ASSAILED IF BOTH PARTIES ARE IN PARI DELICTO] [RETROSPECTIVE APPLICATION OF LAW THAT PREJUDICE THE INTEREST OF TAXPAYER IS UNCONSTITUTIONAL]
Petitioner Mercury Group of Companies, Inc. filed a Petition for Review seeking for the cancellation of 2009 assessment issued by the Respondent Commissioner of Internal Revenue on the ground of prescription and non-revalidation of LOA. The Petitioner contends that the Revenue Officer (RO) is allowed only 120 days from the date of receipt of the LOA to conduct the audit and submit the required report of investigation, otherwise, revalidation of LOA is necessary. Accordingly, failure of the Respondent to revalidate LOA ceased the authorities of the RO to conduct investigation, hence, nullify the assessment. The Petitioner also contends the validity of the waivers executed since it failed to specify the type of tax as well as absence of proof of acceptance of the Respondent. In ruling on issue on revalidation of LOA, the Court ruled that this will not render the assessment void but may result only to the imposition of disciplinary action to the RO assigned in the case. On the issue of defective waiver, the Court cited the Next Mobile case applying the principle of estoppel since the Petitioner already benefited from the executed waiver by having the period extended to submit the necessary documents to support its protest and delay the payment of taxes. On the substantive aspects of the assessment such as disallowed Optional Standard Deductions for being inconsistent on using the deductions method, the Court finds that the Petitioner has substantially complied with the prevailing regulations during the year of assessment and cannot be penalized by mere complying with the form prescribed. The Court emphasized that the Petitioner cannot be forced to comply with the new regulations since other regulations were existing during the time of tax filing. Simply, the retroactive application of law that prejudice the interest of the taxpayer, is unconstitutional. The Court PARTIALLY GRANTED the Petition resulting to a reduced amount of assessment. [MERCURY GROUP OF COMPANIES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9531, SEPTEMBER 6, 2019]
[PERPETUAL INCOME TAX EXEMPTION OF ELECTRIC COOPERATIVES REGISTERED UNDER NEA] [LIMIT OF 30 YEARS OR UNTIL THE COOPERATIVE IS FREE FROM INDEBTEDNESS, WHICHEVER COMES FIRST, PERTAINS TO EXEMPTION OF TAXES OTHER THAN INCOME TAX]
Petitioner Agusan Del Norte Electric Cooperative, Inc. filed a Petition for Review seeking for the cancellation of 2012 assessment issued by the Respondent Commissioner of Internal Revenue. Several issues were raised but the main issue stemmed from the tax exemption granted by NEA pursuant to Presidential Decree (PD) 269. The Respondent argued that the tax exemption granted was repealed with the issuance of Fiscal Incentives Regulatory Board (FIRB) No. 24-87 which states that income from electric service operations and other sources including interest income from bank deposits and yield or any other similar arrangement shall remain taxable. In resolving the case, the Court ruled in favor of the Petitioner stating that electric cooperatives registered under NEA shall be exempt from payment of income tax. The contention that the tax exemption is merely for a period of 30 years or until the cooperative becomes completely free from indebtedness incurred from borrowing, whichever comes first pertains to taxes other than income tax. The Petition for Review was GRANTED and the assessment was CANCELLED on the ground that the Petitioner is not liable for payment of income tax. [AGUSAN DEL NORTE ELECTRIC COOPERATIVE, INC. VS. COMMISSIONER OF INTERNAL REVENUE & REGIONAL DIRECTOR NASSER A. TANGCOR IN HIS CAPACITY AS OIC-REGIONAL DIRECTOR OF REGIONAL BUREAU OF INTERNAL REVENUE REGION NO 17, CTA CASE NO 9376, AUGUST 5, 2019]
ASSESSMENT CANCELLED DUE TO NON-ISSUANCE OF NEW LOA IN CASE OF RE-ASSIGNMENT TO NEW RO
Petitioner FPIP Property Developers and Management Corporation filed a Petition for Review seeking for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue. Several issues were raised in the assessment but the bulk was centered on the imposition of 30% Regular Corporate Income Tax (RCIT) on the sale of real properties by the Petitioner to HOGP Land Holdings, Inc. (HOGP) and Hoya Glass Disk Philippines, Inc. (HDGP), PEZA-registered entities. The Respondent premised its assessment on the Petitioner’s registered activity as per its PEZA Certificate of Registration which is “to engage in the construction and management of seven (7) factory buildings for lease to PEZA-registered Ecozone Export Enterprise at the First Philippine Industrial Park-Special Zone (FPIP-SEZ). Accordingly, buying and selling of real properties are not among its registered activities. In defense, the Petitioner countered that the preferential rate of 5% and not the RCIT of 30% should be imposed as the sale pertains to activities within the ecozone and necessary to its registered activity. On the procedural aspect, the Petitioner contended that a different RO conducted the actual examination due to reassignment of new RO, and whose name was not contained in the LOA, thereby resulting to a void assessment. In ruling, the Court did not touch upon the substantive aspect of the case but instead it stressed that LOA is the proof that the person named therein is authorized to conduct the necessary audit, and it is an express grant of authority. Thus, absent the necessary issuance of a new LOA specifically naming the person to whom to conduct the audit and to whom the case which will be newly assigned, with the corresponding annotation per RMO No. 43-90, there is no authority to conduct the audit. The Petition for Review is GRANTED and the assessment is CANCELLED. [FPIP PROPERTY DEVELOPERS & MANAGEMENT CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 890, AUGUST 28, 2019]
II. TAX & BUSINESS-RELATED NEWS [SEPTEMBER 18-27]
- Net revenues from TRAIN up 65% to P55.6B in H1
- BIR shuts tax-dodging Pogo service provider
- ‘Citira to cut 700,000 PH jobs’
- Senate thumbs down proposal to scrap VAT, TRAIN taxes on fuel
- Bill raising tobacco, alcohol taxes reaches Senate floor
- Dominguez: SC ruling on LGUs’ higher share from tax collections will “create a fiscal problem”
- BCDA, PCC agree to boost PPP projects
- Gov’t to create startup ecozones
- Chinese e-cig maker launches product in PH amid bid to raise taxes
- ‘Higher alcohol tax to reduce demand, revenues’
- Former finance chiefs back tax reforms
- Solon thumbs down Duterte proposal to adopt gross taxation scheme
Net revenues from TRAIN up 65% to P55.6B in H1 [Philippine Daily Inquirer, September 27, 2019]
Net revenues generated through the Tax Reform for Acceleration and Inclusion (TRAIN) Act rose by almost two-thirds in the first half, Finance Secretary Carlos G. Dominguez III said.
BIR shuts tax-dodging Pogo service provider [Philippine Daily Inquirer, September 26, 2019]
More than 8,000 workers, mostly Chinese, lost their jobs on Wednesday after the taxman shuttered one of the biggest service providers of the Philippine offshore gaming operators (Pogo) sector for operating without Bureau of Internal Revenue (BIR) registration.
‘Citira to cut 700,000 PH jobs’ [Manila Times, September 25, 2019]
THE proposed rationalization of tax incentives under House 4157, or the Corporate Income Tax and Incentives Rationalization Act (Citira), would result in the loss of 700,000 jobs in its first year of implementation, the Joint Foreign Chambers (JFC) of the Philippines warned on Tuesday.
Senate thumbs down proposal to scrap VAT, TRAIN taxes on fuel [Manila Bulletin, September 25, 2019]
The Senate committee on energy has thumbed down the proposal of consumer-groups to scrap the value-added tax (VAT) as well as the excise taxes being levied on various fuel products as prescribed under the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
Bill raising tobacco, alcohol taxes reaches Senate floor [Philippine Daily Inquirer, September 25, 2019]
A bill raising the taxes on alcohol and tobacco products has reached the Senate floor.
Dominguez: SC ruling on LGUs’ higher share from tax collections will “create a fiscal problem” [Philippine Daily Inquirer, September 25, 2019]
The head of the Duterte administration’s economic team on Wednesday warned that the High Court’s ruling granting local governments a share of all tax-collection agencies’ revenues beginning 2022 will “create a fiscal problem.”
BCDA, PCC agree to boost PPP projects [Manila Bulletin, September 23, 2019]
The Bases Conversion and Development Authority (BCDA) and the Philippine Competition Commission (PCC) sealed a partnership agreement that will boost the attractiveness of investment opportunities in the Philippines, such as those at New Clark City.
Gov’t to create startup ecozones [Manila Bulletin, September 23, 2019]
The government will establish the startup economic zones with P1 billion fund to grant innovative technology firms with a separate set of fiscal and non-fiscal incentives to encourage more startups in the country.
Chinese e-cig maker launches product in PH amid bid to raise taxes [Philippine Daily Inquirer, September 20, 2019]
A Chinese e-cigarette maker launched one of its brands in the Philippines on Friday, Sept. 20, hoping to draw in at least 1.5 million users in five years.
‘Higher alcohol tax to reduce demand, revenues’ [Philippine Daily Inquirer, September 19, 2019]
ALTHOUGH it welcomes the new tax structure for distilled spirits proposed under House Bill (HB) 1026, the Distilled Spirits Association of the Philippines (DSAP) warned the government that too many tax increases might lead to reduced state revenues.
Former finance chiefs back tax reforms [Manila Bulletin, September 19, 2019]
Former finance ministers and eminent economists expressed strong support for the urgent passage of the remaining packages of the Duterte administration’s comprehensive tax reform program (CTRP) to help meet the government’s poverty reduction goal.
Solon thumbs down Duterte proposal to adopt gross taxation scheme [Philippine Daily Inquirer, September 18, 2019]
President Rodrigo Duterte’s proposal to compute corporate taxes based on gross revenue rather than taxable net income is likely to meet fierce opposition in Congress.
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