CONGRESS NEARS PASSAGE OF TAX REFORM PROPOSAL PACKAGE 2 THROUGH CITIRA + BIR TO CLOSE TAX LEAKAGE FROM ONLINE SELLERS + SSS TAPS PARTNERS TO EXPAND SELF-EMPLOYED WORKERS COVERAGE
Other Relevant Tax Updates:
- COURT OF TAX APPEALS (CTA) DIGESTS
- TAX & BUSINESS-RELATED NEWS [SEPTEMBER 28-OCTOBER 8]
I. CTA DIGESTS
- Letter Of Authority (LOA) Is Invalid For Having Been Served Beyond Thirty (30) Days From Date Of Its Issuance
- Cancellation Of Assessment Due To Failure To Establish The Fact Of Receipt By Authorized Personnel & Lack Of Authority To Examine; Letter Notice (LN) Should Be Converted Into Loa To Make The Assessment Valid
- Assessment Against Bgc Hotel Cancelled Due To Failure To Establish The Fact Of Receipt By Authorized Personnel
- Late Application Of Tax Treaty Relief (TTRA) Should Not Operate To Divest Entitlement Of Incentives Pursuant To Tax Treaty Agreement
- In Case Of Re-Assignment Or Transfer Of Cases To Another Revenue Officer (RO), It Is Mandatory That A New Loa Be Issued With The Corresponding Notation Thereof; Determination Of The Type Of Documents Needed To Support The Protest Rests Solely On The Taxpayer
- Taxes On Income Payment To Non Residents For Use Of Property Rights Shall Be Withheld At The Time Of Payment; Final Withholding VAT Is Payable Only During The Year Royalties Are Paid
- Notices Issued Must Be Actually Received By The Taxpayer Or Authorized Representative For Such Notices To Be Valid; Failure To State Factual & Legal Bases On Which The Assessment Is Based Renders The Assessment Void
LOA IS INVALID FOR HAVING BEEN SERVED BEYOND THIRTY (30) DAYS FROM DATE OF ITS ISSUANCE
Petitioner Kokoloko Network 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; however, the main issue is whether the LOA was served to the Petitioner beyond thirty (30) days from its issuance. In ruling, the Court finds that the LOA is invalid for having been served beyond thirty (30) days from date of its issuance. It appears that LOA issued on May 19, 2014 was served to the Petitioner only on August 6, 2014. Accordingly, LOA should have been served not later than the 30th day from date of its issuance, otherwise, it has to be revalidated. In addition, the Formal Letter of Demand (FLD) was served ten (10) days after the Preliminary Assessment Notice (PAN) making the assessment void because of violation of the Petitioner’s rights to due process rights. [KOKOLOKO NETWORK CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9574, SEPTEMBER 24, 2019]
[CANCELLATION OF ASSESSMENT DUE TO FAILURE TO ESTABLISH THE FACT OF RECEIPT BY AUTHORIZED PERSONNEL & LACK OF AUTHORITY TO EXAMINE] [LN SHOULD BE CONVERTED INTO LOA TO MAKE THE ASSESSMENT VALID]
Petitioner Indra Verhomal Menghrajani, represented by daughter Savitri V. Menghrajani, filed a Petition for Review seeking for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue for the reason that assessment notices were not received by the Petitioner and, in fact, were returned to sender as per the Postmaster’s Certifications. In ruling, the Court noted that the registry receipts show that the assessment notices were mailed by Respondent however the postman testified that the documents were returned to the BIR since Petitioner is no longer at the address indicated in the notices. Moreover, the authority of the Revenue Officer to conduct an examination of Petitioner’s tax liabilities is already lacking since the beginning. The LN should have been converted to an LOA before proceeding with the examination and assessment. Consequently, considering that the examination and assessments were issued pursuant only to an LN, the said assessments are void for lack of authority. The Petition for Review is GRANTED resulting to the CANCELLATION of the assessment. [INDRA VERHOMAL MENGHRAJANI, REPRESENTED BY DAUGHTER SAVITRI VS. MENGHRAJANI VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9269, SEPTEMBER 24, 2019]
ASSESSMENT CANCELLED DUE TO FAILURE TO ESTABLISH THE FACT OF RECEIPT BY AUTHORIZED PERSONNEL
Petitioner Fort 1 Global City Center, Inc. filed a Petition for Review seeking for the cancellation of the assessments issued by the Respondent Commissioner of Internal Revenue on the ground that it never received a copy of LOA and assessment notices. Petitioner likewise avers that upon perusal of the employment records, it had never employed any of those who allegedly received it, as countered by the Respondent. Petitioner alleges that if the LOA and the assessment notices were received by any person in another address not specifically stated in the Petitioner’s General Information Sheet (GIS) or any of Petitioner’s actual address, such person is an uninterested third party who is not authorized to receive important documents for and in behalf of the Petitioner. Respondent argued that the Petitioner was afforded due process because it was able to reply and/or file its protest to the notices that were issued or sent to it. In defense, the Petitioner countered that service by personal delivery should be made upon the taxpayer himself or his authorized representative who shall acknowledge receipt by signing his name, stating his designation and his authority to receive the same. Respondent’s witnesses themselves clearly admitted that they have not confirmed or even inquired into the authority of the persons who allegedly received the notices. The substantial irregularities noted by the Court in the alleged personal service of the BIR notices show that Respondent failed to strictly comply with the requirements of the law, regulations and jurisprudence. Thus, the Petitioner’s right to due process has been violated. Consequently, the Petition for Review is GRANTED and the assessment is CANCELLED. [FORT 1 GLOBAL CITY CENTER, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9490, SEPTEMBER 24, 2019
LATE APPLICATION OF TTRA SHOULD NOT OPERATE TO DIVEST ENTITLEMENT OF INCENTIVES PURSUANT TO TAX TREATY AGREEMENT
Petitioner Commissioner of Internal Revenue filed a Motion for Reconsideration (MR) seeking for reversal of the earlier decision of CTA 1st Division granting tax refund in favour of the Respondent DGA Ilijan B.V., a resident of the Netherlands, pertaining to erroneously paid final withholding tax on dividends. The Petitioner argued that the application for TTRA should be denied on the ground that it was not filed before the date of dividend payment, pursuant to Revenue Memorandum Order (RMO) No. 09-2010. In Ruling, the Court cited the Supreme Court’s ruling in Deutsche Bank AG Manila Branch vs. Commissioner of Internal Revenue, wherein it was clarified that that failure to file a TTRA on time does not operate to divest entitlement to treaty relief. The Court also stated that the Philippine Constitution provides adherence to the general principles of international law as part of the law of the land pursuant to pacta sunt servanda. Likewise, it emphasized that tax treaties are entered into “to reconcile the national fiscal legislations of the contracting parties and, in turn, help the taxpayer avoid simultaneous taxation in two different jurisdictions. Further, compliance with tax treaty obligations must take precedence over the objective of a mere administrative issuance. The MR was DENIED for lack of merit. [DGA ILIJAN B.V. VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2008 SEPTEMBER 02, 2019]
[IN CASE OF RE-ASSIGNMENT OR TRANSFER OF CASES TO ANOTHER RO, IT IS MANDATORY THAT A NEW LOA BE ISSUED WITH THE CORRESPONDING NOTATION THEREOF] [DETERMINATION OF THE TYPE OF DOCUMENTS NEEDED TO SUPPORT THE PROTEST RESTS SOLELY ON THE TAXPAYER]
Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking for the reversal of the earlier decision of the Court in Division cancelling the assessment issued against the Respondent Bisazza Philippines, Inc. The issues are centered on whether the assessment is considered final for failure of the Respondent to submit documents in support of its protest as well as the validity of LOA. Petitioner contends that the issuance of a new LOA is not necessary and that the letter and Memorandum of Assignment (MOA) issued to the ROs already gave them the authority to continue the audit investigation. Respondent counters that the ROs were not named in the new LOA, and thus, they were not duly authorized to conduct the audit. Respondent further claims that supporting documents were attached on the request for reconsideration. In ruling, the Court ruled that Memorandum Letter and MOA are not sufficient to grant ROs the authority to conduct the audit investigation. An LOA must be issued assigning an RO to perform tax assessment functions, in order that such officer may examine taxpayers and collect the correct amount of tax, or to recommend the assessment of any deficiency tax due. In addition, the determination of the type of documents needed to support the protest rests solely on the taxpayer; and the BIR cannot demand what type of supporting documents should be submitted. The Court likewise stressed that “attaching” supporting documents to the protest constitutes, in effect, the “submission” of the same as of the filing of the said protest. The Petition for Review was DENIED and assailed decisions rendered by Court in Division are AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. BISAZZA PHILIPPINES, INC., CTA CASE NO. 9372, SEPTEMBER 2, 2019]
[TAXES ON INCOME PAYMENT TO NON RESIDENTS FOR USE OF PROPERTY RIGHTS SHALL BE WITHHELD AT THE TIME OF PAYMENT] [FINAL WITHHOLDING VAT IS PAYABLE ONLY DURING THE YEAR ROYALTIES ARE PAID]
Petitioner Jobstreet.com Philippines, Inc. filed a Petition for Review seeking for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue holding it liable to the deficiency final withholding VAT on payment of royalties to non-resident corporation. The Petitioner submitted that final taxes were withheld and remitted at the time of actual payment rather than at the time the expense was incurred. In the resolution, the Court rendered that income payment for lease or use of properties or property rights to non-resident owners shall be subject to final withholding tax of 12% at the time of payment. Further, the Court ruled that the Respondent failed to formally offer evidence to substantiate its allegations of deficiency tax assessment, leading to baseless assessment. The Petition for Review is GRANTED. Consequently, the assessment is CANCELLED. [JOBSTREET.COM PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 9483, SEPTEMBER 2, 2019]
[NOTICES ISSUED MUST BE ACTUALLY RECEIVED BY THE TAXPAYER OR AUTHORIZED REPRESENTATIVE FOR SUCH NOTICES TO BE VALID] [FAILURE TO STATE FACTUAL & LEGAL BASES ON WHICH THE ASSESSMENT IS BASED RENDERS THE ASSESSMENT VOID]
Petitioner IBM Plaza Condominium Association, Inc. filed a Petition for Review seeking for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue. The Petitioner argued that the LOA and assessment notices were received by unauthorized persons in violation of procedural process pursuant to Revenue Regulations (RR) 12-99 which prescribes the due process requirements to be observed in all stages of the assessment and collection. Accordingly, the BIR is required to issue the Notice for Informal Conference, the PAN, and the FAN in writing to the taxpayer and that the taxpayer must actually receive the same for such notices to be valid. In the present case, the Respondent failed to present any evidence to show that they served the notices to authorized representatives. It is clear that the respondent failed to properly serve the assessment to the Petitioner. Moreover, even if the Petitioner receives the same, it would not have been able to file an intelligent appeal as the Respondent also failed to apprise the Petitioner the basis for the denial of its protest. Consequently, the Petition for Review is GRANTED resulting to the CANCELLATION of the assessment. [IBM PLAZA CONDOMINIUM ASSOCIATION, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 8740, SEPTEMBER 2, 2019]
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II. TAX & BUSINESS-RELATED NEWS [SEPTEMBER 28-OCTOBER 8]
- Tax revenue from sugary drinks hits P24.9 billion in H1, exceeds goal
- BIR warns POGOs not paying taxes
- SSS taps partners to expand self-employed workers’ coverage
- BIR to close tax leakage from online sellers
- Duterte economic team seen pushing to privatize Pagcor, PCSO
- Tax debts lead to closure of 7 businesses with Pogo workers as clients
- DOF, BIR raid warehouses operated by ‘tax-dodging’ firms in Bulacan
- SEC issues CDO VS Scentkoworld, parent
- Tax on green vehicles pushed
- BIR taps PayMaya for online tax payment
- Japan raises sales tax to 10% amid signs economy weakening
- SBMA execs get tough on tax evaders, shut down cigarette maker
- DOF wants to take tax reform further by amending law on incentives data
- TIEZA issues guidelines for own joint ventures
DTI bats for longer CITIRA transition period
Tax revenue from sugary drinks hits P24.9 billion in H1, exceeds goal [Philippine Star, October 8, 2019]
The Bureau of Internal Revenue (BIR) generated P24.9 billion in additional revenue from excise tax collections on sugar sweetened beverages (SSB) in the first half of the year, the Department of Finance (DOF) said over the weekend.
BIR warns POGOs not paying taxes [Manila Times, October 7, 2019]
DELINQUENT online gaming operators and service providers were warned anew by the Bureau of Internal Revenue (BIR) to pay the right taxes to avoid sanctions.
SSS taps partners to expand self-employed workers’ coverage [Manila Bulletin, October 5, 2019]
More than 50 cooperatives and associations nationwide joined the Social Security System (SSS) on its fourth multi-sectoral forum aiming to promote the pension fund’s programs for self-employed workers in the informal sector.
BIR to close tax leakage from online sellers [Manila Times, October 4, 2019]
THE Department of Finance (DoF) has directed the Bureau of Internal Revenue (BIR) to study on how to effectively close the tax leakage from online sellers.
Duterte economic team seen pushing to privatize Pagcor, PCSO [Philippine Daily Inquirer, October 3, 2019]
The government is studying the turnover to the private sector of commercial functions of two of the biggest income earners among government-owned and controlled corporations (GOCCs)—the Philippine Amusement and Gaming Corp. and Philippine Charity Sweepstakes Office.
Tax debts lead to closure of 7 businesses with Pogo workers as clients [Philippine Daily Inquirer, October 3, 2019]
The Bureau of Internal Revenue (BIR) has closed seven establishments in Las Pinas City, including two Chinese restaurants with a clientele that officials said was from online casinos, or Philippine offshore gaming operators (Pogo) facilities.
DOF, BIR raid warehouses operated by ‘tax-dodging’ firms in Bulacan [Philippine Daily Inquirer, October 3, 2019]
GUIGUINTO, Bulacan –– Authorities on Thursday raided a compound here where several stalls and warehouses were reportedly being operated illegally by at least five companies that have not been paying taxes.
SEC issues CDO VS Scentkoworld, parent [Philippine Daily Inquirer, October 3, 2019]
The Securities and Exchange Commission (SEC) has ordered Scentko World Corp. and its parent firm, Brendahl Cruz Holdings Inc., to stop illegal solicitation of investments in the guise of marketing perfume and cosmetics products.
Tax on green vehicles pushed [Manila Times, October 1, 2019]
The road user’s tax must also be imposed on green vehicles, the Department of Finance (DoF) said.
BIR taps PayMaya for online tax payment [Manila Bulletin, October 1, 2019]
BIR TAPS PAYMAYA FOR EASIER AND MORE CONVENIENT TAX PAYMENTS- Through the partnership, tax payers can now remit payments through the PayMaya app and soon through its website and district offices nationwide with the use of any e-wallet and any debit, prepaid, and credit card.
Japan raises sales tax to 10% amid signs economy weakening [Philippine Daily Inquirer, October 1, 2019]
Japan’s national sales tax was raised to 10% from 8% on Tuesday, amid concerns that the long-delayed move could derail the fragile growth path of the world’s third-largest economy.
SBMA execs get tough on tax evaders, shut down cigarette maker [Philippine Daily Inquirer, October 1, 2019]
SUBIC BAY FREEPORT–Authorities here shut down a cigarette manufacturing firm for alleged tax evasion and non-compliance with other government regulations.
DOF wants to take tax reform further by amending law on incentives data [Philippine Daily Inquirer, September 30, 2019]
As Congress nears passage of a measure that would lower corporate income tax and put sense into tax incentives, the Department of Finance (DOF) wants to take it a step further by also pushing for amendments to a law that required a listing of tax perks and revenue that the government waived through these incentives.
TIEZA issues guidelines for own joint ventures [Manila Bulletin, September 29, 2019]
The Tourism Infrastructure and Enterprise Zone Authority (TIEZA) board recently approved the agency’s own joint venture (JV) guidelines that will be used to allow private sector participation in the development, operation, management and/or disposition of TIEZA properties and facilities, whether owned, administered or controlled.
DTI bats for longer CITIRA transition period [Manila Bulletin, September 29, 2019]
Trade and Industry Secretary Ramon M. Lopez was batting for a longer 5-8-year transition period to mitigate the impact on jobs as well as the setting of an investment threshold that the planned Fiscal Incentives Review Board (FIRB) can intervene in the grant of tax incentives to investors under the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) Bill.
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