SEC BLACKLISTS AUDITOR OF SCAMMED BROKERAGE + BIR CHIEF CONTRADICTS CALIDA INSISTS POGO NEED TO PAY 5% FRANCHISE TAX + HOUSE COMMITTEE OKS 12% VAT ON DIGITAL TRANSACTIONS
Other Relevant Tax Updates:
- Bureau of Internal Revenue (BIR) removes submission of photocopies of documentary requirements evidencing qualified loans not subject to Documentary Stamp Tax(DST) under Enhanced Community Quarantine (ECQ)
- Court of TaxAppeals (CTA) Cases Digest
- Taxand Business-Related News [July 25-31]
I. BIR REMOVES SUBMISSION OF PHOTOCOPIES OF DOCUMENTARY REQUIREMENTS EVIDENCING QUALIFIED LOANS NOT SUBJECT TO DST UNDER ECQ
Revenue Memorandum Circular (RMC) No. 72-2020, dated July 17, 2020, amends RMC No. 36-2020 which provides that there shall be no additional Documentary Stamp Tax (DST) to be imposed on credit extension and credit restructuring on qualified loans starting the first day of Enhanced Community Quarantine (March 17, 2020), subject to evaluation of the BIR. RMC No. 72-2020 now removes the submission of photocopies of documentary requirements evidencing qualified loans under RMC 26-2020. Covered institutions must submit within sixty (60) days from lifting of ECQ, a copy of summary listing of all pre-existing loans, pledges and other instruments as of March l7, 2020 which were granted extension of payment and/or maturity periods, with prescribed BIR format.
II. CTA CASES DIGEST
- Taximplication of Revenue Memorandum Circular (RMC) issued by BIR over international agreements entered into by the Philippines; tax cannot be imposed without clear and express words, thus, the necessity for guidelines from BIR
- Evidence is hearsaywhen its probative force depends on the competency and credibility of some persons other than the witness; conflicting theories by witnesses lead to denial of the petition
- Two core documents to prove the fact of being non-resident foreign entity not doing business in the Philippines;court is free to adapt or disregard, completely or partially, the findings of the Independent Certified Public Accountant (ICPA)
- Assessment was cancelled due to non-issuance of new Letter of Authority (LOA) in case of transfer to another revenue officer (RO)
- Assessment was cancelled due to BIR’s failure to prove that Preliminary Assessment Notice (PAN) was received in a regular mailing process; it is a requirement of due process that the taxpayer must actually receive the assessment
- Memorandum of Assignment (MOA) may be construed as a new LOAprovided it contains all elements to establish contract of agency between the Commissioner of Internal Revenue (CIR) or his duly authorized representative and the new RO; CTA is not bound by the issues specifically raised by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case
- BIR is required to verify the amounts it obtained from its computerized/third-party matchingby securing confirmation or certification from third-party information source or from externally sourced data; without accomplishing the certifications or confirmations, the data gathered from the computerized/third party matching are left unverified, resulting in void assessment
[TAX IMPLICATION OF RMC ISSUED BY BIR OVER INTERNATIONAL AGREEMENTS ENTERED INTO BY THE PHILIPPINES] [TAX CANNOT BE IMPOSED WITHOUT CLEAR AND EXPRESS WORDS, THUS, THE NECESSITY FOR GUIDELINES FROM BIR]
Petitioners Majella R. Canzon and Helen B. Cruda, Filipino employees of Asian Development Bank (ADB) filed a Petition for Review seeking the reversal of the Court’s earlier decision denying their claim for refund on income tax payments for taxable year 2013. The issue stemmed from the Respondent CIR’s issuance of RMC No. 31-2013 which clarifies the taxability of earnings of ADB’s employees. Prior to this issuance, employees of ADB enjoy tax privileges provided under the international agreement entered into by the government. In ruling, the Court held that notwithstanding that the Philippines adopts generally accepted principles of international law as part of the laws of the land, the power to interpret tax laws is vested upon the CIR as provided under Section 4 of the 1997 Tax Code, as amended. Tax cannot be imposed without clear and express words for that purpose, thus, the necessity for clear guidelines from the BIR. The issuance of RMC No. 31-2013 with express repealing clause that any issuance which is inconsistent is deemed revoked, repealed or modified accordingly, the earnings of the Petitioners and the rest of ADB employees are finally declared as taxable. Considering that tax payments being sought for refund pertain to taxable year 2013 which were paid in the following year, income earned from 2013 were already subject to income tax since RMC No. 31-2013 became effective on May 2, 2013. Thus, the Petition was DENIED for lack of merit and the assailed decision was AFFIRMED. [MAJELLA R. CANZON AND HELEN B. CRUDA VS. HONORABLE CAESAR B. DULAY IN HIS CAPACITY AS COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2040, JULY 16, 2020]
[EVIDENCE IS HEARSAY WHEN ITS PROBATIVE FORCE DEPENDS ON THE COMPETENCY AND CREDIBILITY OF SOME PERSONS OTHER THAN THE WITNESS] [CONFLICTING THEORIES BY WITNESSES LEAD TO DENIAL OF THE PETITION]
Petitioners Commissioner of Bureau of Customs and District Collector of Bataan filed a Petition for Review seeking to reverse the Court’s earlier decision holding that the seizure and detention of fuel oil of Respondent MT Alpine Magnolia was invalid. Petitioners argued that the Warrant of Seizure and Detention for the alleged smuggling of fuel oil was valid in the absence of an alert order since the latter document is not a prerequisite for the issuance of the Warrant as provided under Section 1117 of the Customs Modernization and Tariff Act. In ruling, the Court held that Petitioners failed to establish the existence of smuggling. Scrutiny of evidences presented revealed that: (1) Statement of Facts provided by one of the witnesses was considered hearsay since its probative force depends on the competency and credibility of some other persons other than the witness; (2) witnesses had conflicting theories; and (3) Respondent’s fuel oil were seized based on unverified reports. Since persons who provided the alleged intelligence report or any document hinting on the existence of smuggling were not presented during trial, the Court cannot find basis to conclude that there was probable cause to justify seizure. Thus, the Petition was DENIED and the assailed decision was AFFIRMED. [COMMISSIONER OF BUREAU OF CUSTOMS AND DISTRICT COLLECTOR OF BATAAN VS. MT ALPINE MAGNOLIA, CTA EN BANC CASE NO. 2003, JULY 15, 2020]
[TWO CORE DOCUMENTS TO PROVE THE FACT OF BEING NON-RESIDENT FOREIGN ENTITY NOT DOING BUSINESS IN THE PHILIPPINES] [COURT IS FREE TO ADAPT OR DISREGARD, COMPLETELY OR PARTIALLY, THE FINDINGS OF THE ICPA]
Manulife Data Services Inc. (Manulife) and Commissioner of Internal Revenue (CIR) filed a separate consolidated Petitions for Review seeking to reverse the Court in Division’s earlier decision which partially granted Manulife’s claim for refund or issuance of Tax Credit Certificate (TCC) in the reduced amount of Php 8,460,225.24 representing excess input VAT attributable to zero-rated sales for the year 2012. CIR argued that Manulife did not submit complete documents in support of its administrative claim for refund/TCC pursuant to Sec. 112 of 1997 Tax Code, hence, the refund should be denied. On the other hand, Manulife countered that the refund should be higher based on the Independent Certified Public Accountant (ICPA) report. In ruling, the Court held that it is not limited by the evidence presented in the administrative claim in the BIR. The claimant may present new and additional evidence to support its case for tax refund. Both SEC Certificate of Non-registration of Corporation/Partnership and Proof of Incorporation/Business Registration must be presented to prove the fact of being a non-resident foreign entity not doing business in the Philippines. Verifications of documents showed that Manulife was not able to present foreign certificates of incorporation of its clients. As to the weight of ICPA’s findings, the Court is not bound by it and the report submitted is but a tool or guide to aid the Court in the resolution. Probative value of such report is still within the province of the Court wherein it is free to adapt or disregard the findings of the ICPA. Consequently, consolidated Petitions were DENIED for lack of merit. [MANULIFE DATA SERVICES INC. VS. COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF INTERNAL REVENUE VS. MANULIFE DATA SERVICES INC., CTA EN BAN CASE NO. 2066 AND 2068, JULY 15, 2020]
ASSESSMENT WAS CANCELLED DUE TO NON-ISSUANCE OF NEW LOA IN CASE OF TRANSFER TO ANOTHER RO
Both United Coconut Planters Bank (UCPB) and Commissioner of Internal Revenue (CIR) filed a consolidated Petitions for Review seeking to reverse the earlier decision holding UCPB liable to deficiency tax assessment in the amounting of Php 61.9M pertaining to foreign exchange gains and miscellaneous income not considered offshore income, thus, subject to 35% income tax, and foreign exchange gain under trade activity subject to 7% Gross Receipts Tax (GRT). CIR argued that UCPB’s foreign exchange gains and miscellaneous income must instead be subject to 7% GRT under Section 32 of the Tax Code and not 5%, as previously decided by the Court. On the other hand, UCPB countered that the assessment was issued without factual and legal bases. In ruling, the Court did not touch upon the substantive aspect of the case but instead focused on the absence of the authority on the part of RO conducting audit. Records revealed that the CIR failed to issue a new LOA as a result of transfer of audit to new RO. LOA is the proof that the person named therein is authorized to conduct the necessary audit. Thus, absent the necessary issuance of a new LOA specifically naming the person to whom to conduct the audit and to whom the case will be newly assigned, with the corresponding annotation per Revenue Memorandum Order (RMO) No. 43-90, there is no authority to conduct the audit. Thus, the Petition was GRANTED and the assessment was CANCELLED. [UNITED COCONUT PLANTERS BANK VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 1790 AND 1792, JULY 14, 2020]
[ASSESSMENT WAS CANCELLED DUE TO BIR’S FAILURE TO PROVE THAT PAN WAS RECEIVED IN A REGULAR MAILING PROCESS] [IT IS A REQUIREMENT OF DUE PROCESS THAT THE TAXPAYER MUST ACTUALLY RECEIVE THE ASSESSMENT]
Petitioner CIR filed a Petition for Review seeking to reverse the CTA 1st Division’s earlier decision cancelling the assessment issued to Respondent Far East Seafood, Inc. Petitioner argued that it was able to prove that the PAN was served by registered mail and Respondent is estopped from denying receipt of the PAN since all notices issued were served directly to its registered address. In ruling, the Court held that since there is a direct denial of the receipt of the PAN, the said denial shifts the burden upon Petitioner to prove that the mailed PAN was indeed received by Respondent. A scrutiny of the pieces of evidence presented by Petitioner reveals that the same are insufficient to prove that the PAN was indeed received by Respondent. Considering that Petitioner failed to discharge the burden of proving that the PAN was actually received by Respondent or it’s duly authorized agent, the PAN is deemed to have not been issued by Petitioner. Thus, for failure of the Petitioner to inform the taxpayer of the facts and the law on which the assessment was made through the valid service of PAN, the subject assessment is void and has no legal effect. Hence, the Petition was DENIED for lack of merit and earlier decision was AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. FAR EAST SEAFOOD, INC., CTA EN BANC CASE NO. 2033, JULY 14, 2020]
[MOA MAY BE CONSTRUED AS A NEW LOA PROVIDED IT CONTAINS ALL ELEMENTS TO ESTABLISH CONTRACT OF AGENCY BETWEEN THE CIR OR HIS DULY AUTHORIZED REPRESENTATIVE AND THE NEW RO] [CTA IS NOT BOUND BY THE ISSUES SPECIFICALLY RAISED BY THE PARTIES BUT MAY ALSO RULE UPON RELATED ISSUES NECESSARY TO ACHIEVE AN ORDERLY DISPOSITION OF THE CASE]
Petitioner CIR filed a Petition for Review seeking to reverse the Court in Division’s earlier decision cancelling the assessment issued against Respondent Trinity Franchising and Management Corporation. Likewise, Petitioner is seeking to deny the Respondent’s claim of refund or issuance of Tax Credit Certificate (TCC). Petitioner argued that the Court in Division erred in addressing an issue not raised by Respondent in its original Petition for Review and further claimed that MOAs are sufficient to grant RO Pedosa authority to audit the books of Respondent. In ruling, the Court held that the Court in Division has the authority to resolve the issue pertaining to the RO authority to conduct the audit of Respondent even though the parties did not raise it in their pleadings. Moreover, a MOA may be construed as a new LOA where the authority of a newly designated RO may emanate from, provided that it contains all the elements necessary to establish a Contract of Agency between the CIR or his duly authorized representative and the new RO. Included in these elements is the authority of the person issuing the MOA. However, records revealed that OIC-Chief of LTS-RLTAD II has no authority to issue the MOA, consequently resulting in RO Pedosa’s non acquisition of authority to conduct Respondent’s audit. Thus, Petition was DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS. TRINITY FRANCHISING AND MANAGEMENT CORPORATION, CTA EN BANC CASE NO. 2010, JULY 14, 2020]
[BIR IS REQUIRED TO VERIFY THE AMOUNTS IT OBTAINED FROM ITS COMPUTERIZED/THIRD-PARTY MATCHING BY SECURING CONFIRMATION OR CERTIFICATION FROM THIRD-PARTY INFORMATION SOURCE OR FROM EXTERNALLY SOURCED DATA] [WITHOUT ACCOMPLISHING THE CERTIFICATIONS OR CONFIRMATIONS, THE DATA GATHERED FROM THE COMPUTERIZED/THIRD PARTY MATCHING ARE LEFT UNVERIFIED, RESULTING IN VOID ASSESSMENT]
Petitioner CIR filed a Petition for Review seeking reversal of the Court in Division’s earlier decision cancelling the assessment issued against the Respondent MCC Transport Singapore PTE. LTD. covering taxable year 2009. Petitioner argued that although he did not secure the certifications or confirmations from the third-party information sources to support the information it gathered, the absence of such do not affect the validity of the assessment. Likewise, nowhere in Revenue Memorandum Order (RMO) No. 04-2003 or RMO No. 46-2004 which provides that the absence of said certifications or confirmations renders the assessment void. Likewise, the 10-year prescriptive period should apply given the alleged substantial under-declaration of income committed by the Respondent. On the other hand, Respondent countered that the Petitioner failed to observe the necessary due process in the issuance of the assessment, in violation of Section 228 of the Tax Code which requires the assessment to be based on facts. Petitioner’s assessment is based on unverified and inaccurate third-party information. In ruling, the Court held that the data gathered by the BIR from the third-party information source should be verified in order to render the assessment valid. The contention of the Petitioner that absence of the certifications or confirmation from the third-party sources to validate the amounts will not affect the validity of the assessment is wrong and without merit. Although the said RMOs do not explicitly state that the absence of the confirmation or certification renders the assessment void, the abovementioned provisions confirm that the BIR is required to verify the amounts it obtained from its computerized/third-party matching by securing confirmation or certification from the third-party information source, or from externally-sourced data. Without accomplishing the aforementioned, the data gathered from the computerized/third party matching are left unverified, and the resulting assessment is void for lack of factual and legal basis. Moreover, as ruled by the Supreme Court in CIR vs. Hantex Trading Co., Inc., an assessment, in order to stand judicial scrutiny, must be based on facts supported by credible evidence. In this case, upon examination, the Petitioner was only able to verify two sales transactions. Thus, the Court can only consider these transactions as valid undeclared sales/receipts assessment. However, even if the said amount was verified, the Court still cancelled the assessment, since the Formal Assessment Notice (FAN) was received by the respondent beyond the 3-year prescriptive period. Thus, the Petition was DENIED for lack of merit. (COMMISSIONER OF INTERNAL REVENUE VS. MCC TRANSPORT SINGAPORE PTE. LTD., CTA EN BANC CASE NO. 1961, JULY 14, 2020)
III. TAX AND BUSINESS-RELATED NEWS [JULY 25-31]
- Taxdigital services? That’s part of business, says DTI chief
- POGOs seek ‘compromise’ with gov’t, office demand seen to rise: Leechiu
- House panel OKs VAT for online goods, services
- Ecozone job vacancies top 40,000
- DOF confident Create to be approved soon
- BIR extends online trade registration to Aug. 31
- House panel OKs bill imposing VAT on digital transactions in PH
- Netflix, Facebook, Google tax? House committee OKs 12 percent VAT on digital transactions
- Seniors aged 60 to 64 can now file retirement claims online: SSS
- Dominguez: No new ‘sin’ taxeseyed despite recession
- BIR to Pagcor: Offshore Pogos must pay 5 percent franchise tax
- SEC blacklists auditor of scammed brokerage
- SONA 2020: Duterte backs bill allowing banks to dispose of bad loans
- Duterte threatens to shut down, expropriate PLDT, Globe
- BIR chief contradicts Calida, insists POGOs need to pay 5 percent franchise tax
- Duterte calls on lawmakers to fast-track passage of corporate taxreform bill
- DTI stops accepting MSME applicants for loan program
Tax digital services? That’s part of business, says DTI chief [ABS-CBN News, July 31, 2020]
Paying taxes is part of doing business–even if it’s online, Trade Secretary Ramon Lopez said Friday after a legislative panel approved a bill that seeks to impose tariffs on digital transactions.
POGOs seek ‘compromise’ with gov’t, office demand seen to rise: Leechiu [ABS-CBN News, July 31, 2020]
Office demand by offshore gaming operators will likely return in September, after shrinking in the first half of 2020 due to COVID-19 lockdowns, a property consultant said Friday.
House panel OKs VAT for online goods, services [Philippine Daily Inquirer, July 30, 2020]
Netflix and Spotify subscribers as well as Amazon, Lazada and Shopee customers may soon have to pay more for these digital platforms’ products and services should the 12-percent value-added tax (VAT) approved by the House committee on ways and means becomes law after third reading in the House and Senate approval.
Ecozone job vacancies top 40,000 [Philippine Daily Inquirer, July 30, 2020]
The Philippine Economic Zone Authority (PEZA) has launched an online job expo offering more than 40,000 openings across the country and included work-from-home call center positions.
DOF confident Create to be approved soon [Philippine Daily Inquirer, July 30, 2020]
With President Duterte’s backing, the Department of Finance (DOF) on Tuesday expressed confidence that Congress would soon pass the second tax reform package aimed at providing relief to businesses struggling amid the COVID-19 pandemic through lower income taxes.
BIR extends online trade registration to Aug. 31 [Philippine Daily Inquirer, July 29, 2020]
The Bureau of Internal Revenue (BIR) has given online businesses one more month, or until Aug. 31, to register without penalty as movement restrictions remained in place despite a less-stringent COVID-19 community quarantine.
House panel OKs bill imposing VAT on digital transactions in PH [Philippine Daily Inquirer, July 29, 2020]
The substitute bill seeking to impose value-added tax (VAT) on digital transactions in the Philippines was approved Wednesday by the House committee on ways and means.
Netflix, Facebook, Google tax? House committee OKs 12 percent VAT on digital transactions [ABS-CBN News, July 29, 2020]
The House Committee on Ways and Means on Wednesday approved a bill seeking to impose a 12 percent value added tax (VAT) on digital transactions, including non-resident or foreign service providers.
Seniors aged 60 to 64 can now file retirement claims online: SSS [ABS-CBN News, July 28, 2020]
The Social Security System said Tuesday senior members aged 60 to 64 separated from work may now file their retirement claim applications online.
Dominguez: No new ‘sin’ taxes eyed despite recession [Philippine Daily Inquirer, July 27, 2020]
Despite rising budgetary needs for COVID-19 response and universal health care and a weak tax collection because of recession, the government is not resorting to higher excise on so-called sin products beyond rates already mandated by recent laws, according to the head of the Duterte administration’s economic team.
BIR to Pagcor: Offshore Pogos must pay 5 percent franchise tax [Philippine Daily Inquirer, July 27, 2020]
The Bureau of Internal Revenue (BIR) is bent on collecting 5 percent franchise taxes owed by Philippine offshore gaming operators (Pogos) based overseas despite opposition from the Philippine Amusement and Gaming Corp. (Pagcor).
SEC blacklists auditor of scammed brokerage [Philippine Daily Inquirer, July 27, 2020]
The Securities and Exchange Commission (SEC) has blacklisted and fined R&L Investments’ external auditor, under whose watch a rouge settlement clerk pulled off a long-running stock theft that led to the collapse of this stock brokerage house.
SONA 2020: Duterte backs bill allowing banks to dispose of bad loans [ABS-CBN News, July 27, 2020]
President Rodrigo Duterte on Monday called on lawmakers to pass a bill allowing banks to dispose of bad loans by transferring them to asset management companies.
Duterte threatens to shut down, expropriate PLDT, Globe [ABS-CBN News, July 27, 2020]
President Rodrigo Duterte opened his penultimate State of the Nation Address by attacking the Lopez family, branding the owners of ABS-CBN as “oligarchs”, just weeks after his Congressional allies denied the network’s franchise renewal bid.
BIR chief contradicts Calida, insists POGOs need to pay 5 percent franchise tax [ABS-CBN News, July 27, 2020]
Philippine offshore gaming operators (POGOs) need to pay the 5-percent franchise tax before being allowed to resume operations, the country’s main tax collection agency said contradicting the position of the state gaming regulator and the Office of the Solicitor General (OSG).
Duterte calls on lawmakers to fast-track passage of corporate tax reform bill [ABS-CBN News, July 27, 2020]
President Rodrigo Duterte called on lawmakers to “fast-track the passage” of a bill seeking to lower corporate income taxes and rationalize fiscal incentives during his fifth State of the Nation Address on Monday.
DTI stops accepting MSME applicants for loan program [Philippine Daily Inquirer, July 25, 2020]
The Department of Trade and Industry (DTI) had temporarily stopped since last month accepting loan applications from businesses that needed help to survive the health crisis after its P1-billion fund fell short of meeting demand.
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