WEEKLY US JOBLESS CLAIMS RISE MORE THAN EXPECTED TO 1.1 MILLION + SEC NULLIFIES GONZALES FACTION’S MAJORITY ACQUISITION IN THE MEDICAL CITY + INSURANCE COMMISSION BACKS 60-DAY REPRIEVE ON LIFE INSURANCE PREMIUM PAYMENTS
Other Relevant Tax Updates:
- Court of Tax Appeals (CTA) Cases Digest
- Tax and Business-Related News [August 15-21]
I. CTA CASES DIGEST
- Definite amount of assessment must be indicated in the assessment notice, otherwise, the assessment is void
- Input VAT refund of a mining companypartially granted; cta is not bound by Commissioner Of Internal Revenue (CIR) computation on pro-rating of zero rated sales in relation to input vat refund; grounds for motion for new trial to be granted must be fraud, accident, mistake, excusable negligence or newly discovered evidence
- Petition for certiorariwas dismissed for lack of jurisdiction; proper remedy to obtain reversal of a final order is appeal
- Correctness of local tax assessmentis appealable to Local Board Of Assessment Appeals (LBAA) and Central Board Of Assessment Appeals (CBAA), not to court; direct recourse to court is warranted, if only issue is the legality or validity of the assessment
- Stock and property dividendsdeclared are not within the scope of donor’s tax
DEFINITE AMOUNT OF ASSESSMENT MUST BE INDICATED IN THE ASSESSMENT NOTICE, OTHEREWISE, THE ASSESSMENT IS VOID
Petitioner Meridien Leader, Inc. filed a Petition for Review seeking to cancel the assessment issued by the Respondent CIR citing prescription. Petitioner assailed that the Final Decision on Disputted Assessment (FDDA) lacks factual and legal bases. On the other hand, Respondent argued that the assessment is entitled to the presumption of correctness and good faith, and that the burden of proof is shifted to the taxpayer to show that the assessment lacks factual and legal bases. In ruling, the Court held the assessment is void due to the Respondent’s failure to provide a definite amount of tax liability for which the taxpayer is liable. Although there is a computation of the Petitioner’s tax liability, the Respondent stated that the interest and total amount due will be adjusted when the Petitioner decides to pay. Under the prevailing jurisprudence, an assessment shall contain a definite amount of tax liability which must be paid within a certain date. The Petitioner’s tax liability, being indefinite, lacks demand resulting in an invalid assessment. [MERIDIEN LEADER, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9316, JULY 29, 2020]
[INPUT VAT REFUND OF A MINING COMPANY PARTIALLY GRANTED] [CTA IS NOT BOUND BY CIR COMPUTATION ON PRO-RATING OF ZERO RATED SALES IN RELATION TO INPUT VAT REFUND] [GROUNDS FOR MOTION FOR NEW TRIAL TO BE GRANTED MUST BE FRAUD, ACCIDENT, MISTAKE, EXCUSABLE NEGLIGENCE OR NEWLY DISCOVERED EVIDENCE]
Both Taganito Mining Corporation and CIR filed a Petition for Review, TMC seeking additional refund while CIR praying for the total denial of refund which the Court in Division earlier granted. TMC argued that there is no basis for the Court in Division to consider its Dispatch Income as exempt sales and on the basis thereof, pro-rate the amount of input taxes allowed in computing the refund granted. It also claimed that it is incumbent upon the Court in Division to render clarity on the difference between the amount granted by the Court in Division and by the CIR. In ruling, the Court held that both Petitions deserve scant consideration. The Court in Division did not err and merely performed its mandate in ascertaining TMC’s refund claim based on the pieces of evidence submitted for its consideration. Likewise, the disallowance of the Dispatch Income and pro-rating of the valid input tax is proper. In order for the supply of services to be VAT zero-rated, the following requisites must be met: (1) services must be other than processing, manufacturing or repacking of goods; (2) payment for such services must be in acceptable foreign currency accounted for in accordance with the Bangko Sentral ng Pilipinas rules and regulations; and (3) recipient of such services is doing business outside the Philippines. TMC clearly complied with the first and second requisites, however, it failed to prove that all its non-foreign clients were doing business outside the Philippines. Considering that TMC failed to prove that all its sales are zero-rated sales, the Court in Division correctly pro-rated its valid input tax on the basis of its sales volume. Furthermore, contrary to the CIR’s position that TMC is not entitled to any refund owing to its purchases not being directly attributable to its zero-rated sales, the Court ruled that input taxes that bear a direct or indirect connection with a taxpayer’s zero-rated sales satisfy the requirement of the law. Lastly, denial of TMC’s motion to introduce additional evidence is not erroneous. A motion for new trial may only be granted upon specific well-defined grounds, namely, fraud, accident, mistake, excusable negligence or newly discovered evidence. Examination of Petitioner’s motion shows that it does not fall under any of the grounds enumerated. Considering all premises, both Petitions for Review were DENIED and the Decision and Resolution previously promulgated were AFFIRMED. [TAGANITO MINING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO.’S 2055 AND 2058, JULY 23, 2020]
[PETITION FOR CERTIORARI WAS DISMISSED FOR LACK OF JURISDICTION] [PROPER REMEDY TO OBTAIN REVERSAL OF A FINAL ORDER IS APPEAL
Petitioner CIR filed a Petition for Certiorari seeking to reverse the CTA Second Division’s earlier resolution denying its Petition for Relief from Judgment, and resultantly, precluded him from filing a motion for reconsideration on the Second Division’s earlier decision cancelling the assessment issued against the Respondent Surigao Micro Credit Corporation. In ruling, the Court discussed first that the Supreme Court has emphasized that there is a whale of difference between a Petition for Review on Certiorari Rule 45 and Petition for Certiorari under Rule 65. Rule 65 is an original action that dwells on jurisdictional errors of whether a lower court acted without or in excess of its jurisdiction or with grave abuse of discretion. On the other hand, Rule 45 is a mode of appeal which centers on the review on the merits of a judgment, final order or award rendered by a lower court involving purely questions of law. A Petition for Certiorari under Rule 65 of the Rules of Court is a special civil action that may be resorted to only in the absence of appeal or any plain, speedy and adequate remedy in the ordinary course of law. The proper remedy to obtain a reversal of a final order or resolution is appeal. Petitioner’s resort to Certiorari proceedings under Rule 65 is, therefore, erroneous. Thus, the Petition was DISMISSED for lack of jurisdiction. [COMMISSIONER OF INTERNAL REVENUE VS. COURT OF TAX APPEALS AND SURIGAO MICRO CREDIT CORPORATION, CTA EN BANC CASE NO. 1967, JULY 22, 2020]
[CORRECTNESS OF LOCAL TAX ASSESSMENT IS APPEALABLE TO LBAA AND CBAA, NOT TO COURT] [DIRECT RECOURSE TO COURT IS WARRANTED, IF ONLY ISSUE IS THE LEGALITY OR VALIDITY OF THE ASSESSMENT]
Petitioner National Food Authority filed a Petition for Review seeking the reversal of the assailed Orders of the lower court and the invalidation of the Notice of Delinquency issued by Respondents. The issue involved is the correctness of the assessment. In ruling, the Court held that Petitioner failed to appeal before LBAA and consequently, before the CBAA, citing provisions under Sections 226 and 230 of Local Government Code of 1991. The proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts without necessarily adhering to technical rules applicable in judicial proceedings. If the only issue is the legality or validity of the assessment, which is a question of law, direct recourse to the RTC is warranted. However, Petitioner’s claim for exemption from payment of RPT is in the nature of questioning the reasonableness or correctness of the assessment. Thus, it should have first complied with the requirement of payment under protest under the rule on exhaustion of administrative remedies. Thus, the Petition was DENIED for lack of merit. [NATIONAL FOOD AUTHORITY VS. MUNICIPALITY OF SHARIFF AGUAK, MUNICIPAL TREASURER, AND MUNICIPAL ASSESSESOR OF SHARIFF AGUAK, MAGUINDANAO, CTA AC NO. 202, JULY 22, 2020]
STOCK AND PROPERTY DIVIDENDS DECLARED ARE NOT WITHIN THE SCOPE OF DONOR’S TAX
Petitioner CIR filed a Petition for Review seeking to reverse the Court Third Division’s earlier decision cancelling the assessment issued against the Respondent Trans-Asia Oil and Energy Development Corporation. Petitioner argued that the shares of stocks declared as stock and property dividends issued to the Respondent’s shareholders are subject to donor’s tax. The assessment arose from the difference between the fair market value per share of stock based on adjusted net asset value prescribed in Revenue Regulations (RR) No. 06-2008 vis-à-vis- book value per share recorded in the Respondent’s Audited Financial Statement. On the other hand, Respondent countered that the provisions of RR No. 6-2008 does not apply to all types of dispositions of share, but only to those which can give rise to net capital gains. In ruling, the Court held that a stock dividend distribution is not a donation. Dividends are return of income from the invested capital of its stockholders. The distribution of dividend is a realization of income on the part of the Respondent’s stockholders, by virtue of their capital investment in the corporation. Since dividends are distributions from unrestricted earnings arising from the capital invested in the corporation, they cannot be considered donations made out of the liberality of the corporation. Thus, the Petition was DENIED. [COMMISSIONER OF INTERNAL REVENUE VS. TRANS-ASIA OIL AND ENERGY DEVELOPMENT CORPORATION, CTA EN BANC CASE NO. 2009, JULY 21, 2020]
II. TAX AND BUSINESS-RELATED NEWS [AUGUST 15-21]
- Disburse Bayanihan 2 funds based on ‘objective criteria’, ensure easy credit access: MAP
- Eurozone business growth slows as virus rise crimps demand
- Weekly US jobless claims rise more than expected to 1.1million
- BSP pauses, keeps key rates unchanged after 4 cuts in a row
- SEC nullifies Gonzales faction’s majority acquisition in The Medical City
- Lawmakers, bankers agree on 60-day loan reprieve under Bayanihan 2: Angara
- DTI courts British firms to link up with Philippine tech startups, MSMEs
- Bangko Sentral raises banks’ real estate loan limit
- Airbnb files for initial public offering
- PH bans Australian poultry imports due to bird flu
- Insurance Commission backs 60-day reprieve on life insurance, premium payments
Disburse Bayanihan 2 funds based on ‘objective criteria’, ensure easy credit access: MAP [ABS-CBN News, August 21, 2020]
The Management Association of the Philippines (MAP) on Friday urged government to disburse funds under the second coronavirus response package based on certain “objective criteria,” as it hailed Congress in enacting the measure.
Eurozone business growth slows as virus rise crimps demand [ABS-CBN News, August 21, 2020]
Eurozone economic activity slowed in August as a new rise in cases of the coronavirus in parts of Europe blunted a recovery, IHS Markit said Friday.
Weekly US jobless claims rise more than expected to 1.1 million [ABS-CBN News, August 20, 2020]
Just over 1.1 million people filed new claims for jobless benefits in the week ended August 15, the US Labor Department said Thursday, defying expectations for a more moderate rise.
BSP pauses, keeps key rates unchanged after 4 cuts in a row [ABS-CBN News, August 20, 2020]
The Bangko Sentral ng Pilipinas on Thursday kept the benchmark overnight borrowing rate steady at 2.25 percent after 4 interest rate cuts this year as the newly downgraded COVID-19 restrictions stepped up the gas for economic recovery.
Source: https://news.abs-cbn.com/business/08/20/20/bsp-keeps-key-rate-steady
SEC nullifies Gonzales faction’s majority acquisition in The Medical City [ABS-CBN News, August 20, 2020]
The Securities and Exchange Commission said Thursday it nullified the majority acquisition of shares in The Medical City (TMC) by a group led by Jose “Eckie” Gonzales after finding it to have “employed fraud” and violated regulations.
Lawmakers, bankers agree on 60-day loan reprieve under Bayanihan 2: Angara [ABS-CBN News, August 20, 2020]
A 60-day moratorium on loans is part of the Senate and House of Representatives bicameral committee-approved version of the Bayanihan to Recover As One bill, which is a step closer to becoming a law.
DTI courts British firms to link up with Philippine tech startups, MSMEs [ABS-CBN News, August 20, 2020]
The Department of Trade and Industry again called on British firms to invest in the Philippines and link up with startups in the country especially in key sectors such as aerospace, automotive, electronics, and pharmaceuticals.
Bangko Sentral raises banks’ real estate loan limit [ABS-CBN News, August 20, 2020]
The Bangko Sentral ng Pilipinas said Thursday it raised the real estate loan limit of universal and commercial banks to infuse more liquidity in real estate lending.
Source: https://news.abs-cbn.com/business/08/20/20/bangko-sentral-raises-banks-real-estate-loan-limit
Airbnb files for initial public offering [ABS-CBN News, August 20, 2020]
Home-sharing startup Airbnb on Wednesday said it has confidentially filed with US regulators for an initial public offering.
Source: https://news.abs-cbn.com/business/08/20/20/airbnb-files-for-initial-public-offering
PH bans Australian poultry imports due to bird flu [ABS-CBN News, August 19, 2020]
The Philippines issued a temporary ban on poultry imports from Australia due to concerns over possible bird flu contamination.
Source: https://news.abs-cbn.com/business/08/19/20/ph-bans-australian-poultry-imports-due-to-bird-flu
Insurance Commission backs 60-day reprieve on life insurance, premium payments [ABS-CBN News, August 17, 2020]
The Insurance Commission on Monday backed a 60-day moratorium on loan payments under the proposed Bayanihan to Recover as One (Bayanihan 2) Act.
If you wish to get a copy of the complete texts of the above issuances, send us an email thru taxseminars@dmdcpa.com.ph.
Recent Comments