APRIL 15 TAX DEADLINE STAYS BUT BIR TO ALLOW TENTATIVE RETURNS IN WAKE OF COVID-19 + GOKONGWEI WAIVES MALL RENTAL + TOUR COMPANY APPEALS TO BIR

 

 
 

Other Relevant Tax Updates:

  • BIR media releases
  • BIR ruling digests
  • CTA case digests
  • Tax and business-related news [March 14-18]
 

I. BIR MEDIA RELEASES

  • BIR National Office, in an advisory dated March 18, 2020 (Monday), informs the public that all revenue offices will continuously be open even during the 30-day period Community Quarantine in the NCR from March 16, 2020 to April 14, 2020. Likewise, the BIR encourages everyone to file the tax returns online and use online payment platform such as GCash, PayMaya, LandBank, DBP, Visa and Mastercard in the payment. Further, BIR will establish eFiling Centers in the regional and district offices in time for the April 15, 2020 deadline. It may be recalled that the Department of Finance has earlier pronounced that April 15, 2020 deadline is non-extendible, as provided for under the law.
  • BIR Revenue Region (RR) No. 8B-South NCR filed six (6) separate criminal complaints to five (5) corporations and one (1) proprietor for willful failure to pay taxes for taxable years 2006, 2008, 2007, 2009, and 2012 despite repeated demands. BIR served the corresponding LOA, PAN, FAN/FLD and FDDA but failed to either pay or protest and submit relevant supporting documents to either substantiate their claims or to refute said assessments or to file an appeal with CTA, hence, making the said assessments final, executory, and demandable.
  • BIR RR No. 8B-South NCR has filed tax evasion, perjury raps against a construction company for four (4) counts of willful failure to supply correct and accurate information in its quarterly VAT returns and four (4) counts of perjury for the taxable year 2017 amounting to Php 2.8 Million.
  • BIR RR 7A conducted a simultaneous Tax Compliance Verification Drive (TCVD) to check the tax compliance of Offsite Cockpit Betting Machines in nineteen (19) different locations in Quezon City. The operation resulted in the constructive confiscation and seizure of automated ticket dispensing machines that are not registered with the BIR.
  • BIR Task Force closes 1st POGO Licensee/Operator for failure to pay 5% franchise tax on its gross gaming receipts for taxable year 2019 amounting to over ₱ 114 Million, inclusive of incremental penalties, as provided under Presidential Decree No. 1869 and circularized through Revenue Memorandum Circular No. 102-2017.

II. BIR RULING DIGESTS

  • Income payment made to Joint Venture (JV) is not subject to Creditable Withholding Tax (CWT); co-venturers income derived from JV is subject to CWT
  • VAT treatment of sales and purchases made by renewable energy developers
  • Denied ruling due to payment of salary; administrative expenses should not exceed 30% of the operating income
  • Tax incentives under Adopt-a-School Act of 1998
  • Denial of tax exemption due to compensation received by trustees
  • Change in accounting method requires BIR approval
  • Income payments to non-resident foreign corporation on software distribution taxable at 30% and 12% vat if there is a provision for service
  • VAT zero-rating on purchase by renewable energy developers relates only to development, construction and installation of power plant facilities
  • Tax exemption of school can only be acted upon after three (3) years of operations
  • Exemption of foreign government on income tax and withholding tax on loans, stocks, bonds and equity investments in the Philippines
  • Sale of agricultural and marine food products which are not served in a dine-in set-up are exempted from Value Added Tax (VAT); all sale of agricultural and marine foods products served in a dine-in setup will be taxed same as restaurant as it constitutes sale of service
  • Tax exemption of retirement pay upon meeting the age and length of service requirement
  • Transfer of property title to the trustor from the trustee is not subject to Capital Gains Tax (CGT), CWT, VAT, gift tax and Documentary Stamp Tax (DST); conveyance of property by trustee in favour of trustor by virtue of trust agreement is not a transfer separate and distinct from sale between the original owner and the trustee
  • Foundation must be organized and operated exclusively for charitable purpose to be entitled to claim tax exemptions for charitable institutions should be limited to institutions beneficial to the public and which improve social welfare
  • Non-stock non-profit has to prove, by actual operation for at least three (3) years, to obtain certificate of tax exemption
  • Transfer of land purchased by Homeowners Association (HOA) in behalf of its members are not subject to CGT, DST, and withholding taxes

[INCOME PAYMENT MADE TO JV IS NOT SUBJECT TO CWT] [CO-VENTURERS INCOME DERIVED FROM JV IS SUBJECT TO CWT]

JV is not subject to income tax if the conditions provided under Revenue Regulations (RR) No. 10-12 are met: (1) the JV is for the undertaking of construction project; (2) the JV involves joining or pooling of resources by licensed local contractors (licensed as general contractor by the Philippine Contractors Association Board (PCAB); (3) the local contractors are engaged in construction of business; and (4) the JV itself is duly licensed by PCAB. Accordingly, income payment to JV on the JV project is likewise not subject to 2% CWT. However, the BIR emphasized that the JV must subject the respective income of the co-venturers derived from the JV project to withholding tax before distribution. [BIR RULING NO. 783-2019, DECEMBER 11, 2019]

VAT TREATMENT OF SALES AND PURCHASES MADE BY RENEWABLE ENERGY DEVELOPERS

A Co., a Renewable Energy (RE) Developer of Biomass Resources is seeking for confirmation on its 0% VAT treatment on its sale of energy generated from renewable sources and purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities. In reply, the BIR cited Sections 4.108-5 of RR No. 16-05 which provides that sale of power generated through renewable sources of energy are entitled to VAT zero-rating on its sales. Moreover, Section 15 of Republic Act (R.A) No. 9513 provides that all RE Developers are entitled to zero-rate VAT on its purchases provided that such are needed for the development, construction and installation of their power plant facilities. Thus, suppliers should not subject the purchases of RE Developers to 12% VAT. Nonetheless, the grant of VAT zero-rating shall be subject to post audit verification by the BIR. [BIR RULING NO. 780-19, DECEMBER 10, 2019]

[DENIED RULING DUE TO PAYMENT OF SALARY] [ADMINISTRATIVE EXPENSES SHOULD NOT EXCEED 30% OF THE OPERATING INCOME]

N Foundation, a non-stock, non-profit association, is seeking for issuance of BIR Certificate of Tax Exemption. In reply, the BIR referred to Section 30 of the Tax Code of 1997, which states that non-stock means no part of its income is distributable as dividends to its members, trustees, or officers. However, the submitted Financial Statements of the association shows that it pays allowances and honorarium. It also shows that more than 30% of the operating income is used as administrative expenses. Thus, the association cannot be qualified for the tax exemption sought for. Consequently, the BIR denied the request and therefore N Foundation shall be treated as a regular corporation subject to regular tax. [BIR RULING NO. 762-19, DECEMBER 9, 2019]

TAX INCENTIVES UNDER ADOPT-A-SCHOOL ACT OF 1998

A Co. entered into a Memorandum of Agreement (MOA) with two public schools under the Department of Education (DepEd), in which it will provide allowances to subsidize the wages of non-DepEd teaching plantilla. A Co. is now seeking a BIR ruling on its entitlement to donor’s tax exemption as well as deductibility of the donation in accordance with R.A. No. 8525, otherwise known as the “Adopt-A-School Act of 1998. In reply, BIR ruled that A Co. shall be entitled to  full deductibility of the amount of contribution/donation that were actually, directly and exclusively incurred for the Program, subject to limitations, conditions and rules in Section 34(H) of 1997 Tax Code. Likewise, it is entitled to additional amount of deductions equivalent to 50% of contribution/donation pursuant to compliance requirements under Section 3 of RR 10-2003.  Moreover, the donation made by A Co. to DepEd which is not conducted for profit, or to any political subdivision is also exempt from donor’s tax. [BIR RULING NO. 731-19, DECEMBER 9, 2019]

DENIAL OF TAX EXEMPTION DUE TO COMPENSATION RECEIVED BY TRUSTEES

D Academy, a non-stock, non-profit educational institution, is seeking for issuance of BIR Certificate of Tax Exemption. In reply, BIR referred to Revenue Memorandum Order (RMO) No. 44-2016 which states that there are two (2) requisites in order for a non-stock, non-profit educational institution to be exempt from tax: that it is a non-stock, non-profit educational institution, and its revenues are actually, directly and exclusively used for educational purposes. Non-stock means no part of its income is distributable as dividends to its members, trustees, or officers. However, perusal of the documents shows that the alphalist submitted showed that trustees received compensation income. Thus, the institution cannot be qualified as non-profit educational institution. Consequently, the BIR denied the request and therefore D Academy shall be treated as a regular corporation subject to regular tax. [BIR RULING NO. 727-19, DECEMBER 5, 2019]

CHANGE IN ACCOUNTING METHOD REQUIRES BIR APPROVAL

F Co., a power-generating company, is seeking approval on the change of depreciation method from Straight Line to Units of Production Method for both financial accounting and tax purposes. It used Straight Line Method of depreciation during the initial year of operation because the management estimated that the power plant will operate at full capacity and generate maximum output from the initial year of operation up to the end of the assets’ useful life. However, due to unforeseen changes in market condition, F Co. was not able to attain its full capacity. This leads to the recognition of depreciation that does not match the current and expected usage of the power plant assets in terms of unit volume of output.  In reply, the BIR cited Section 34 (F) of the Tax Code of 1997. Accordingly, depreciation is a cost allocation process that systematically and rationally allocates acquisition costs of operational assets to periods benefited by their use. Thus, F’s request to change the depreciation method is GRANTED, as justified by attendant circumstances cited. [BIR RULING NO. 723-19, DECEMBER 2, 2019]

INCOME PAYMENTS TO NON-RESIDENT FOREIGN CORPORATION ON SOFTWARE DISTRIBUTION TAXABLE AT 30% AND 12% VAT IF THERE IS A PROVISION FOR SERVICE

E Co., a Singapore Company, is seeking confirmation of its position that income payments related to the services performed outside the Philippines shall not be subject to income tax and consequently to withholding tax and VAT in the Philippines, in connection to the Software Distribution Agreement executed with V Co., a Philippine an domestic entity engaged in the business of trading and importation of goods such as computer hardware, software, office equipment, on wholesale and retail basis, and allied services. As represented, E Co. is organized under the laws of the Republic of Singapore and not registered as a corporation or as partnership in the Philippines as evidenced by Certification of Non-Registration of Company issued by the Securities and Exchange Commission (SEC). In reply, the BIR forward that a non-resident foreign corporation is subject to Philippine income tax of 30% only in respect of the gross income received from all sources within the Philippines. The tax situs rule provides that the source of income is the property, activity or service that produced the income; the test of taxability is the “source” and the source of income is that activity which produced the income. Perusal of the documents shows that the source of income (i.e., distribution of software) takes place in the Philippines. The distributor, V Co., is a domestic company, located in the Philippines, and under the Agreement, the software shall be distributed in the Philippines; hence the service, being performed in the Philippines, is taxable in the Philippines. On business tax, Section 108 (A) of the Tax Code of 1997 provides that VAT shall be imposed on gross receipts derived from the sale or exchange of services, and the use or lease of properties. The same provision of the Tax Code provides that the phrase “exchange of services” means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration. In this case, the services to be rendered by E Co. to V Co. will be done in the Philippines. Consequently, payments of service fees by V Co. shall likewise be subject to VAT. Thus, payments to be made by V Co. to E Co. for services rendered in the Philippines are subject to Philippine income tax, withholding tax, and VAT. [BIR RULING NO. 672-19, OCTOBER 30, 2019]

VAT ZERO-RATING ON PURCHASE BY RENEWABLE ENERGY DEVELOPERS RELATES ONLY TO DEVELOPMENT, CONSTRUCTION AND INSTALLATION OF POWER PLANT FACILITIES

P Co., a Renewable Energy (RE) Developer is seeking for confirmation on its entitlement to VAT zero-rating on purchases made including its lease payments. In reply, the BIR cited Section 15 of R.A. No. 9513 which provides that purchase of goods and services by RE Developers are subject to 0% VAT provided that they are needed for the development, construction and installation of their power plant facilities. However, it is to be emphasized that such incentive is limited to previously mentioned activities for its power plant. This is one of the fiscal incentives given by the government to encourage RE Developers including contractors and subcontractors to develop and utilize the renewable energy sources in the country. [BIR RULING NO. 668-19, OCTOBER 21, 2019]

TAX EXEMPTION OF SCHOOL CAN ONLY BE ACTED UPON AFTER THREE (3) YEARS OF OPERATIONS

A Methodist Christian School based in Cagayan, a non-stock, non-profit association, is requesting for the issuance of Certificate of Tax Exemption pursuant to Section 30 of the 1997 Tax Code, as amended. In reply, the BIR ruled that it cannot issue yet the requested Certificate of Tax Exemption for the school has to prove at least three (3) years of actual operation, that it is really an association exempt from income tax citing the previous precedents and rulings. In the meantime, the School is subjected to the corresponding internal revenue taxes imposed under the Tax Code. It is likewise subjected to final taxes, business taxes, and must act as withholding agent of the government for the compensation received by its employees.  [BIR RULING NO. 655-19, OCTOBER 17, 2019]

EXEMPTION OF FOREIGN GOVERNMENT ON INCOME TAX AND WITHHOLDING TAX ON LOANS, STOCKS, BONDS AND EQUITY INVESTMENTS IN THE PHILIPPINES

G Co., a wholly-owned corporation by the Government of Singapore and incorporated in 1981 under the Companies Act, Cap. 185 of the Republic of Singapore, is seeking for confirmation that the income derived from its current and future investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on its deposits in banks in the Philippines, is exempt from Philippine income tax, and consequently from withholding tax. G Co. represented that it made several investments in the Philippines such as government treasury bills and bonds, bank deposits, as well as equity investments in various Philippine corporations. In ruling, the BIR cited Section 32 of 1997 Tax Code, as amended, which provides that income derived from investment in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in banks in the Philippines by foreign governments and financing institutions wholly-owned, controlled or enjoying refinancing from foreign governments shall be exempt from income tax and, consequently, to withholding tax. Thus, its investments should be exempted from income tax. [BIR RULING NO. 621-19, OCTOBER 16, 2019]

[SALE OF AGRICULTURAL AND MARINE FOOD PRODUCTS WHICH ARE NOT SERVED IN A DINE-IN SET-UP ARE EXEMPTED FROM VAT] [ALL SALE OF AGRICULTURAL AND MARINE FOODS PRODUCTS SERVED IN A DINE-IN SETUP WILL BE TAXED SAME AS RESTAURANT AS IT CONSTITUTES SALES OF SERVICE]

B Co., operating under ready-to-eat roasted chicken with nationwide presence, is primarily engaged in manufacturing, marketing and distribution of poultry and meat products. It is seeking confirmation with the BIR if sale of roasted chicken is exempted from VAT. As represented, its process flow starts from specification of dressed chicken, up to the roasting of its meats. It does not add any other preservatives, additives or coloring. Likewise, all store outlets sell roasted chickens, in either whole or chopped to customers. In reply, the BIR cited Section 109 of the Tax Code of 1997, as amended which provides that sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption are exempted from VAT. However, if sales outlet maintain a facility by which the chicken, which has undergone the simple process of roasting, will be offered as a menu to customers who would dine-in, then it will be subject to VAT on sale of service which is similarly imposed on restaurants and other eateries. [BIR RULING 557-2019, OCTOBER 3, 2019]

TAX EXEMPTION OF RETIREMENT PAY UPON MEETING THE AGE AND LENGTH OF SERVICE REQUIREMENT

Mr. M, an employee of National Grid Corporation of the Philippines (NGCP) since June 30, 2009, is requesting for exemption from payment of tax on his retirement benefits. As represented, June 25, 2019 will be his compulsorily retirement age upon reaching the age of sixty-five (65). However, NGCP has no retirement plan or policy for its employees. In reply, BIR cited Republic Act (R.A.) No. 7641 which provides that in the absence of a retirement plan or agreement for the retirement benefits of employees, an employee upon reaching the age of 60 or more, but not beyond 65, who has served at least five (5) years in the said establishment is entitled to retirement pay equivalent to at least 1/2 month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. Accordingly, the retirement pay is exempt from income tax and consequently, to the withholding tax pursuant to Section 32 (B) (6) (a) of the 1997 Tax Code, as amended. [BIR RULING NO. 545-19, OCTOBER 1, 2019]

[TRANSFER OF PROPERTY TITLE TO THE TRUSTOR FROM THE TRUSTEE IS NOT SUBJECT TO CGT, CWT, VAT, GIFT TAX AND DST] [CONVEYANCE OF PROPERTY BY TRUSTEE IN FAVOR OF TRUSTOR BY VIRTUE OF TRUST AGREEMENT IS NOT A TRANSFER SEPARATE AND DISTINCT FROM  SALE BETWEEN THE ORIGINAL OWNER AND THE TRUSTEE]

J Corporation, the actual owner of the condominium unit, also known as “trustee” entered into a Deed of Trust with Spouses B & C or “trustors”. The Deed expressly undertakes not to sell, encumber, transfer, or convey the unit without a Board Resolution from J Corporation authorizing as such. On June 23, 2017, J Corporation issued a Board Resolution that the condominium unit be transferred and conveyed to it. J Corporation is now seeking a ruling that the transfer and reconveyance of the title of the properties to the trustor from the trustee is not subject to CGT, CWT, VAT, Gift Tax, and DST. In reply, BIR ruled that the transfer is not subject to CGT, CWT and DST considering that the transfer is not motivated by a valuable consideration and merely acknowledges, confirms and consolidates the legal title and actual ownership over the properties in the name of J Corporation. Likewise, it is not subject to 12% VAT because the said property is not held primarily for sale to customer or for lease in the ordinary course of trade or business. Moreover, it is not subject to Gift Tax since there is no donative intent on the part of the trustee. However, the notarial acknowledgment to such deed is subject to DST of Php 15. [BIR RULING NO. 546-19, OCTOBER 1, 2019]

[FOUNDATION MUST BE ORGANIZED AND OPERATED EXCLUSIVELY FOR CHARITABLE PURPOSE TO BE ENTITLED TO CLAIM TAX EXEMPTION] [TAX EXEMPTIONS FOR CHARITABLE INSTITUTIONS SHOULD BE LIMITED TO INSTITUTIONS BENEFICIAL TO THE PUBLIC AND WHICH IMPROVE SOCIAL WELFARE]

L Foundation, a non-stock non-profit foundation organized for charitable purpose is seeking for issuance of Certificate of Tax Exemption pursuant to Section 30 of Tax Code of 1997, as amended. In reply, the BIR denied its application for it is not qualified because L Foundation is not organized and operated exclusively for charitable purpose. Perusal of the documents shows that the secondary purpose includes a provision that part of its net income or asset shall belong to or inure to the benefit of any member, organizer, officer or any specific person. Likewise, financial statements prove that foundation’s transactions calls for payment of regular tax. Tax exemptions for charitable institutions should therefore be limited to institutions beneficial to the public and those which improve social welfare. A profit-making entity should not be allowed to exploit this subsidy to the detriment of the government and other taxpayers. [BIR RULING NO. 508-19, SEPTEMBER 11, 2019]

NON-STOCK NON-PROFIT HAS TO PROVE, BY ACTUAL OPERATION FOR AT LEAST THREE (3) YEARS, TO OBTAIN CERTIFICATE OF TAX EXEMPTION

A company, under inception of operations, cannot be issued yet with a Certificate of Tax Exemption for it has to prove its entitlement to income tax exemption after three (3) years of operations. [BIR RULING NO. 507-19, SEPTEMBER 10, 2019]

TRANSFER OF LAND PURCHASED BY HOA IN BEHALF OF ITS MEMBERS ARE NOT SUBJECT TO CGT, DST, AND WITHHOLDING TAXES

S, a Homeowners Association Inc. (SHOA), is seeking for confirmation on its exemption from CGT relative to the transfer of title of land in favour of its qualified member beneficiary. As represented, SHOA is the registered owner of the land which was acquired through payment made involving 178 beneficiaries. One of the beneficiaries is now in the process of transferring the purchased property to her name. In reply, the BIR cited Section 27(D) of the 1997 Tax Code which provides that the purchased lot is not subject to CGT or to CWT imposed under RR 2-98 considering that the said transfer of property is without any consideration and is effected only as a formality to finally effect the transfer of said property who actually bought the same from the former owner through the association. Moreover, the said transfer is not subject to Donor’s Tax since there is no donative intent on the part of the association; it could not donate property of which the ownership belongs to the member-beneficiary. Lastly, the transaction is not subject to DST considering that the purchaser is actually the owner thereof. However, notarial acknowledgement to the Deed of Conveyance is subject to DST. [BIR RULING NO. 88-19, JANUARY 10, 2019]

III. CTA CASE DIGESTS

  • Grant of authority must be made assigning revenue officer to perform tax assessment functions
  • Assessment void due to set-in of prescription; waivers extending the prescriptive period of tax assessments must indicate the nature and amount of the tax due
  • Defective waiver cannot be raised as a defense if both parties are at fault; waiver executed beyond the prescriptive period will not extend the prescriptive period to assess
  • Extent of exemption on real property tax of renewable energy; 1.5% special tax rate covers all realty taxes

GRANT OF AUTHORITY MUST BE MADE ASSIGNING REVENUE OFFICER TO PERFORM TAX ASSESSMENT FUNCTIONS

Petitioner Tann Philippines, Inc. filed a Petition for Review seeking for the invalidation and cancellation of Warrant of Garnishment issued by the Respondent Commissioner of Internal Revenue (CIR) and praying that the amount garnished by the Respondent be refunded or used as tax credit. The issue stemmed from the imposition of penalties due to late filing, in which the Petitioner filed an abatement or cancellation of penalties. Petitioner argued that the tax regulations do not impose any penalty on taxpayers who filed earlier than due dates but paid at a later date and that payment was made on the 1st amended return, not on the original return, thus, it cannot be said that there was late payment. Petitioner also averred that the issuance of Warrant of Garnishment is premature since the Petitioner has appealed the Notice of Denial and that assessment notice is invalid due to the absence of Letter of Authority (LOA). In ruling, the Court ruled that the Warrant of Garnishment is without effect as it stems from a void assessment. Consequently, the Petition for Review is GRANTED and the Respondent is ordered to refund the Petitioner. [TANN PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9433, MARCH 3, 2020]

[ASSESSMENT VOID DUE TO SET-IN OF PRESCRIPTION] [WAIVERS EXTENDING THE PRESCRIPTIVE PERIOD OF TAX ASSESSMENTS MUST INDICATE THE NATURE AND AMOUNT OF THE TAX DUE]

Petitioner Rural Bank of Bacnotan (La Union), Inc. filed a Petition for Review seeking for the cancellation of the assessment issued by the Respondent CIR for taxable year 2010. Petitioner argued that the Respondent’s right to assess has already lapsed since the Formal Assessment Notice/Formal Letter of Demand (FAN/FLD) which was issued on December 15, 2014, was way beyond the three (3) year period.  Respondent countered that the Petitioner executed two (2) Waivers of the Defense of Prescription under the Statute of Limitations, thus, extending the period to assess. However, the Petitioner pointed out that the waivers are defective for the reasons that they were executed beyond the 3-year period to assess, and that the Respondent failed to notify Petitioner of the acceptance of the waivers and the waivers was not signed by the duly authorized representative of the taxpayer. In ruling, the Court ruled that the 3-year prescriptive period may be extended, if before the expiration of the time allotted, both Commissioner and the taxpayer have agreed in writing. Citing the case of CIR vs. System Technology Institute, waivers extending the prescriptive period of tax assessments must be compliant with Revenue Memorandum Order (RMO) No. 20-90 and must indicate the nature and amount of the tax due. These requirements are mandatory and must strictly be followed. Perusal of the waivers executed show that the specific tax involved and the exact amount of the tax to be assessed or collected was not supplied, hence, the waivers are defective and did not effectively extend the 3-year period. Thus, the Petition for Review is GRANTED resulting in the CANCELLATION of the assessment. [RURAL BANK OF BACNOTAN (LA UNION), INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9118, MARCH 2, 2020]

DEFECTIVE WAIVER CANNOT BE RAISED AS A DEFENSE IF BOTH PARTIES ARE AT FAULT; WAIVER EXECUTED BEYOND THE PRESCRIPTIVE PERIOD WILL NOT EXTEND THE PRESCRIPTIVE PERIOD TO ASSESS

Both the CIR and Next Mobile Inc. or formerly known as Nextel Communications Philippines, Inc. filed their separate Petitions for Review seeking for the reversal of the earlier decision of Special 1st Court Division cancelling the income tax assessment and retaining the assessment on Expanded Withholding Tax, Final Withholding Tax, and Withholding Tax on Compensation. The remaining issue revolved around the defective waivers in which the Court in Division cited the Supreme Court pronouncement that neither party should be benefit from the defects of the waiver if both of them had a hand in causing said defects eliciting the doctrine of equal fault doctrine. However, Next Mobile insists that portions of the assessment have already prescribed during the execution of the waiver rendering some of the assessed items have prescribed, thus, the principles of estoppel and pari delicto validating the questioned waivers cannot be used as defenses to uphold the portion of the assessment that have been already prescribed when the first waiver became effective. In ruling, perusal of the waiver executed show that it was executed and acknowledged on August 2004 rendering the assessment issued for the months prior to the execution of the waiver prescribed. Likewise, the Court En Banc agrees with the Petitioner but with reservations on the portion of assessment where Petitioner cannot establish a solid documentary evidence to prove that the assessed amount pertains to the prescribed months. Nevertheless, the Petition for Review filed by CIR is DENIED, while the Petition filed by Next Mobile, Inc. is PARTIALLY GRANTED resulting in a modified assessment. [COMMISSIONER OF INTERNAL REVENUE VS. NEXT MOBILE, INC., NEXT MOBILE, INC, VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 1864, FEBRUARY 28, 2020]

[EXTENT OF EXEMPTION ON REAL PROPERTY TAX OF RENEWABLE ENERGY] [1.5% SPECIAL TAX RATE COVERS ALL REALTY TAXES]

Petitioner Provincial Treasurer of Ilocos Norte filed a Petition for Review against Respondent North Luzon Renewable Energy Corporation seeking for the reversal of the assailed decision and resolution of the Central Board of Assessment Appeals (CBAA) ordering the Petitioner to refund the Respondent for the excess payments made. Petitioner argued that the 1.5% maximum realty tax rate provided under Republic Act (R.A.) No. 9513 also known as the Renewable Energy Act (RE Law) applies to realty and other taxes with the exception of the tax imposed for Special Education Fund (SEF). On the other hand, Respondent argued that the 1.5% tax rate covers all realty taxes including SEF.  In resolving the case, the Court clarified the purview of “other taxes” and likewise determined the legislative intent of the fiscal incentives provided under RE Law. To interpret the RE Law in a manner that allows the imposition of an additional 1% tax for SEF on top of the 1.5% special rate effectively nullifies the incentive provided since RE Developers will end up incurring the same property tax as prescribed under the Local Government Code. The Court finds no error in the conclusion arrived by the CBAA which considered SEF as part of the 1.5% maximum realty tax. The Petition for Review is DENIED for lack of merit. [PROVINCIAL TREASURER OF THE PROVINCE OF ILOCOS NORTE VS. NORTH LUZON RENEWABLE ENERGY CORPORATION, CTA EN BANC CASE NO. 1812, FEBRUARY 26, 2020]

IV. TAX & BUSINESS-RELATED NEWS [MARCH 14-18]

  1. Gokongwei sets P100M COVID-19 relief fund, waives mall rental
  2. As April 15 tax deadline nears, BIR OKs options for quarantine-locked taxpayers
  3. SEC oks guidelines on remote participation in corporate meetings
  4. Business tycoons assure support to gov’t, public amid enhanced community quarantine
  5. Cebu Pacific suspends all flights until April 14 due to COVID-19 lockdown
  6. Tour company appeals to BIR to move tax filing deadline amid COVID-19 Luzon lockdown
  7. Davao Region to suspend travel starting March 19 over coronavirus fears
  8. April 15 tax deadline stays but BIR to allow ‘tentative’ returns in wake of COVID-19
  9. Cebu Pacific announces layoffs as local flights grounded due to COVID-19
  10. GSIS closes headquarters, three branches
  11. DTI issues strict guidelines on business establishments
  12. PEZA ensures uninterrupted service to locators
  13. Duterte appeals for 13th-month pay, continued income for workers during quarantine period
  14. San Miguel says food facilities to continue operations amid quarantine
  15. MacroAsia management takes pay cuts to save jobs due to COVID-19
  16. Victory Liner halts operations as gov’t puts Luzon under ‘enhanced’ quarantine
  17. LIST: Philippine banks extending payment due dates to help Filipinos in time of COVID-19
  18. Jollibee, McDonald’s take steps to stay open during COVID-19 quarantine
  19. COVID-19 quarantine life: Banks, groceries, utilities assure public of services
  20. Pagcor suspends gaming activities in Metro Manila

Gokongwei sets P100M COVID-19 relief fund, waives mall rental [Philippine Daily Inquirer, March 18, 2020]

The Gokongwei group has created a P100-million fund to help the country battle the coronavirus (COVID-19) pandemic while mobilizing various companies under the conglomerate to support stakeholders.

Source: https://business.inquirer.net/292825/gokongwei-group-sets-up-p100m-covid-19-relief-fund-waives-mall-rental-amid-lockdown#ixzz6H0mbZYQh

As April 15 tax deadline nears, BIR OKs options for quarantine-locked taxpayers [Philippine Daily Inquirer, March 17, 2020]

As the April 15 deadline to file annual income tax returns (ITRs) fast approaches, the Bureau of Internal Revenue (BIR) has urged taxpayers to pay online or submit tentative returns if unable to get out of their homes to transact in a BIR office amid COVID-19 quarantine measures that now covers the entire island of Luzon.

Source: https://business.inquirer.net/292756/as-april-15-tax-deadline-nears-bir-oks-options-for-quarantine-locked-taxpayers#ixzz6H0mrTJ2g

SEC oks guidelines on remote participation in corporate meetings [Philippine Daily Inquirer, March 17, 2020]

The Securities and Exchange Commission (SEC) has approved the guidelines for remote participation in corporate meetings in support of an expanded community quarantine to contain the coronavirus (COVID-19) pandemic.

Source: https://business.inquirer.net/292743/sec-oks-guidelines-on-remote-participation-in-corporate-meetings#ixzz6H0vF7UZu

Business tycoons assure support to gov’t, public amid enhanced community quarantine [ABS-CBN News, March 17, 2020]

Philippine business tycoons on Monday expressed their support to the government and assured uninterrupted service to the public as the country faces the threat of the coronavirus disease 2019 (COVID-19).

Source: https://news.abs-cbn.com/business/03/17/20/business-tycoons-assure-support-to-govt-public-amid-enhanced-community-quarantine

Cebu Pacific suspends all flights until April 14 due to COVID-19 lockdown [ABS-CBN News, March 17, 2020]

Cebu Pacific said Tuesday all flights would be cancelled from March 19 to April 14 in compliance with the Luzon-wide lockdown and similar quarantines elsewhere in the country to contain the COVID-19 pandemic.

Source: https://news.abs-cbn.com/business/03/17/20/cebu-pacific-suspends-all-flights-until-april-14-due-to-covid-19-lockdown

Tour Company appeals to BIR to move tax filing deadline amid COVID-19 Luzon lockdown [ABS-CBN News, March 17, 2020]

The Bureau of Internal Revenue should defer the deadline for the filing of income tax returns to give businesses more time to prepare all necessary documents amid the COVID-19 lockdown imposed over the whole of Luzon, a tourism firm said on Tuesday.

Source: https://news.abs-cbn.com/business/03/17/20/tour-company-appeals-to-bir-to-move-tax-filing-deadline-amid-covid-19-luzon-lockdown

Davao Region to suspend travel starting March 19 over coronavirus fears [ABS-CBN News, March 17, 2020]

Davao Region will be closed to all land, sea and domestic air travel starting Thursday, March 19, a task force overseeing the government’s response to the coronavirus disease 2019 (COVID-19) pandemic said Tuesday.

Source: https://news.abs-cbn.com/news/03/17/20/davao-region-to-suspend-travel-starting-march-19-over-coronavirus-fears

April 15 tax deadline stays but BIR to allow ‘tentative’ returns in wake of COVID-19 [Philippine Daily Inquirer, March 16, 2020]

While sticking with the April 15 deadline to file annual income tax returns (ITR) as mandated by law, the Bureau of Internal Revenue (BIR) will allow the filing of tentative returns.

Source: https://business.inquirer.net/292712/april-15-tax-deadline-stays-but-bir-to-allow-tentative-returns-in-wake-of-covid-19#ixzz6H0oKDuEg

Cebu Pacific announces layoffs as local flights grounded due to COVID-19 [Philippine Daily Inquirer, March 16, 2020]

Cebu Pacific, the country’s largest budget airline, is letting go of over 150 cabin crew members on Thursday as the COVID-19 pandemic forces it to ground all domestic flights by March 20 this year.

Source: https://business.inquirer.net/292704/cebu-pacific-announces-layoffs-as-local-flights-grounded-due-to-covid-19#ixzz6H0ofOCcr

GSIS closes headquarters, three branches [Manila Bulletin, March 16, 2020]

The Government Service Insurance System (GSIS) headquarters in Pasay City along with its offices in Quezon City, Cagayan de Oro and Iligan City will remain closed to the public after an employee was tested positive for coronavirus disease (COVID-19).

Source: https://business.mb.com.ph/2020/03/16/gsis-closes-headquarters-three-branches/

DTI issues strict guidelines on business establishments [Manila Bulletin, March 16, 2020]

Trade and Industry Secretary Ramon M. Lopez has assured consumers there will be enough food and necessities as the government expanded the National Capital Region community quarantine to Luzon-wide.

Source: https://business.mb.com.ph/2020/03/16/dti-issues-strict-guidelines-on-business-establishments/

PEZA ensures uninterrupted service to locators [Manila Bulletin, March 16, 2020]

The Philippine Economic Zone Authority (PEZA) has ordered all ecozones and offices nationwide to assign a skeletal force in their operation and implement alternative work arrangements to maintain uninterrupted service to clients and locators.

Source: https://business.mb.com.ph/2020/03/15/peza-ensures-uninterrupted-service-to-locators/

Duterte appeals for 13th-month pay, continued income for workers during quarantine period [ABS-CBN News, March 16, 2020]

Duterte, in a public address, called on business firms to give their employees their 13th-month pay even if it’s pro-rated, or even half of their monthly salaries for them to survive the possible loss of income during the “enhanced community quarantine” period in Luzon.

Source: https://news.abs-cbn.com/news/03/16/20/duterte-appeals-for-13th-month-pay-continued-income-for-workers-during-quarantine-period

San Miguel says food facilities to continue operations amid quarantine [ABS-CBN News, March 16, 2020]

San Miguel Corp. on Monday said it has enough inventory of food products “to feed Filipinos for the next several months” amid concerns over the availability of food products in markets because of the quarantine measures for COVID-19.

Source: https://news.abs-cbn.com/business/03/16/20/san-miguel-says-food-facilities-to-continue-operations-amid-quarantine

MacroAsia management takes pay cuts to save jobs due to COVID-19 [ABS-CBN News, March 16, 2020]

MacroAsia Corp said Monday members of its management team and other subsidiaries agreed take 10-percent pay cuts to save jobs as the aviation industry reeled from travel restrictions due to the COVID-19 pandemic.

Source: https://news.abs-cbn.com/business/03/16/20/macroasia-management-takes-pay-cuts-to-save-jobs-due-to-covid-19

Victory Liner halts operations as gov’t puts Luzon under ‘enhanced’ quarantine [ABS-CBN News, March 16, 2020]

Victory Liner announced Monday it is suspending operations until further notice following the government pronouncement that the entire Luzon is placed under “enhanced community quarantine.”

Source: https://news.abs-cbn.com/business/03/16/20/victory-liner-halts-operations-as-govt-puts-luzon-under-enhanced-quarantine

LIST: Philippine banks extending payment due dates to help Filipinos in time of COVID-19 [ABS-CBN News, March 16, 2020]

Major Banks in the Philippines have announced a 30-day extension for credit card, mortgage, and loans for eligible customers to help Filipinos during the Luzon-wide COVID-19 lockdown.

Source: https://news.abs-cbn.com/business/03/17/20/list-philippine-banks-extending-payment-due-dates-to-help-filipinos-in-time-of-covid-19

Jollibee, McDonald’s take steps to stay open during COVID-19 quarantine [ABS-CBN News, March 16, 2020]

Jollibee and McDonald’s assured customers on Monday that measures were in place to ensure safety as stores remain open while Metro Manila is on a 1-month long community quarantine.

Source: https://news.abs-cbn.com/business/03/16/20/jollibee-mcdonalds-take-steps-to-stay-open-during-covid-19-quarantine

COVID-19 quarantine life: Banks, groceries, utilities assure public of services [ABS-CBN News, March 16, 2020]

Metro Manila entered its second full day of quarantine to arrest the spread of COVID-19. Until April 14, passenger travel will be restricted, malls are shut and social distancing will be the norm in public places and transport.

Source: https://news.abs-cbn.com/business/03/16/20/covid-19-quarantine-life-banks-groceries-utilities-assure-public-of-services

Pagcor suspends gaming activities in Metro Manila [Manila Bulletin, March 15, 2020]

The Philippine Amusement and Gaming Corp. (Pagcor) suspended all gaming operations in Metro Manila following the community quarantine order by the President to contain the spread of the coronavirus disease 2019 (COVID-19).

Source: https://business.mb.com.ph/2020/03/15/pagcor-suspends-gaming-activities-in-metro-manila/

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