BIR CIRCULARIZES POLICY ON ONLINE VIRTUAL MEETINGS + DESPITE PANDEMIC SSS CONTRIBUTION RATE HIKE A GO IN 2021 + PAGCOR ISSUES FIRST LOCAL ONLINE GAMING LICENSE

Other Relevant Tax Updates:

  • Securities and Exchange Commission (SEC) Legal Opinion Digest
  • BIR Circularizes Customized Information on Business Set-Up And Tax Compliance Of Various Classifications of Taxpayers
  • BIR Circularizes Policy on Online Virtual Meetings
  • BIR Suspends Audit Effective December 15, 2020
  • BIR Circularizes Availability of New Electronic Filing And Payment System (EFPs) Version of BIR Form 1601-C
  • BIR Clarifies Certain Issues and Concerns Raised by The Cooperative Sector
  • Supreme Court (SC) Cases Digest
  • Court of Tax Appeals (CTA) Cases Digest
  • Tax and Business-Related News [December 5-11]
 

I. SEC LEGAL OPINION DIGEST

[FINANCE CORPORATIONS MAY ENGAGE IN CREDIT CARD ACTIVITIES AS PART OF INVESTING ACTIVITY WITHOUT THE NEED OF STOCKHOLDERS’ RATIFICATION] [INVESTING OF CORPORATE FUNDS OF FINANCE COMPANY AS PART OF PRIMARY AND SECONDARY PURPOSE UNDER THE REVISED CORPORATION CODE (RCC)]

H Co. is seeking legal opinion on whether it may engage in credit card activities as part of investing of corporate funds in a similar purpose in relation to Section 41 of the RCC without the need of stockholders’ ratification. In rendering opinion, SEC opined that where the investment by the corporation is reasonably necessary to accomplish its primary purpose as stated in its Articles of Incorporation, the mere approval of the Board of Directors or Trustees is necessary. To shed light, Republic Act (R.A.) No. 10870, otherwise known as the Philippine Credit Card Industry Regulation Law, defines credit card as any card or other credit device intended for the purpose of obtaining money, property, or services on credit. Perusal of records showed that the grant or extension of loan/credit through the issuance or use of credit cards is reasonably necessary in furtherance of the primary purpose of H Co. Thus, ratification by the stockholders of the said act is no longer required. [SEC-OGC OPINION NO. 20-03, NOVEMBER 23, 2020]

II. BIR CIRCULARIZES CUSTOMIZED INFORMATION ON BUSINESS SET-UP AND TAX COMPLIANCE OF VARIOUS CLASSIFICATIONS OF TAXPAYERS

Revenue Memorandum Circular (RMC) 131-2020issued on November 16, 2020, circularizes the flyers for professional, corporations, and online sellers which aim to provide the internal and external stockholders with customized information based on TPs classification.

III. BIR CIRCULARIZES POLICY ON ONLINE VIRTUAL MEETINGS

Revenue Memorandum Circular No. 130-2020, issued on December 10, 2020, provides the policies and guidelines in the conduct of online meetings/conferences with taxpayers. Highlights of the circular include: 

  • All online meetings and conferences with taxpayer or representative shall be hosted by the BIR.
  • In sending invitation, revenue officials and employees shall only use the prescribed BIR e-mailaddress (@surname@bir.gov.ph). 
  • All meetings and conferences must be pre-approved in writingby the concerned Division Chief for National Office or Regional Director for Regional Offices or Revenue District Officer for Revenue District Offices.
  • To represent the taxpayer, all representatives shall have a duly notarized Special Power of Attorney.

IV. BIR SUSPENDS AUDIT EFFECTIVE DECEMBER 15, 2020

Revenue Memorandum Circular No. 127-2020, issued on December 4, 2020, circularizes the pronouncements of the BIR that all field audits of the BIR relative to examinations and verifications of taxpayers’ books of accounts and records and other transactions are suspended from December 15, 2020 to January 7, 2021. Thus, any form of business visitations in relation to service of Letter of Authority, Audit Notices and Mission Orders should not be conducted, except on a number of cases and situations enumerated in the circular. However, service of notices to avail the Tax Amnesty on Delinquencies, Estate Tax Amnesty, and Voluntary Assessment and Payment Program should still be effected. Hence, taxpayers may pay voluntarily their known deficiency taxes without the need to secure authority from concerned Revenue Officials.

V. BIR CIRCULARIZES AVAILABILITY OF NEW EFPS VERSION OF BIR FORM 1601-C

Revenue Memorandum Circular No. 125-2020, issued on November 27, 2020, announces the availability of BIR Form No. 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) January 2018 (ENCS) in the Electronic Filing and Payment System (eFPS). eFPS filers shall use the said form in filing and remitting the taxes withheld on compensation in accordance with business industry grouping set forth in Revenue Regulations No. 26-2002.

 VI. BIR CLARIFIES CERTAIN ISSUES AND CONCERNS RAISED BY THE COOPERATIVE SECTOR

Revenue Memorandum Circular (RMC) No. 124-2020, issued on November 26, 2020, clarifies certain provisions of Revenue Memorandum Order (RMO) No. 76-2010 in relation to the Joint Rules and Regulations implementing Articles 60, 61, and 144 of the Philippine Cooperative Code of 2008 and other revenue issuances affecting the cooperative sector. The circular clarifies, among others, the following:

  • Requirements for securing a Certificate of Tax Exemption (CTE);
  • Obligations of cooperatives with duly issued CTEs;
  • Taxation of interest earned from savings and time deposit accounts of member of the cooperative engaged in lending;
  • Documentary Stamp Tax (DST) on transactions between the cooperative and its members;
  • Criteria for a cooperative to be selected for audit; and
  • Courses of action in case a cooperative receives tax assessment notices from the BIR.

 VII. SC CASES DIGEST

[CTA HAS THE AUTHORITY TO TAKE COGNIZANCE OF OTHER MATTERS ARISING FROM THE 1997 TAX CODE] [WAIVERS MUST BE IN THE FORM PRESCRIBED BY APPLICABLE REGULATIONS TO BE VALID] [TAX MAY BE COLLECTED BY DISTRAINT OR LEVY  WITHIN THREE (3) YEARS FOLLOWING THE ASSESSMENT OF THE TAX]

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the earlier decisions of CTA cancelling the Warrant of Distraint and/or Levy issued against Respondent Bank of the Philippine Islands. Petitioner argued that the Courts have no jurisdiction as the assessment has become final, executory and unappealable upon Respondent’s failure to appeal within 30 days from receipt the of the final decision contained in a letter dated February 5, 1992. Likewise, its right to assess has not prescribed as there were valid Waivers executed. In ruling, the Court held that the law expressly vests the CTA authority to take cognizance of other matters arising from the 1977 Tax Code which necessarily includes measure on the collection of tax such as Warrants of Distraint and/or Levy. Further, what was questioned by Respondent in its Petition filed with the CTA is not the assessment but the issued warrant. On the issue of prescription where Petitioner argued that there were valid Waivers, the Court did not disturb the findings of the CTA invalidating the Waivers due to the absence of the Petitioner’s signature. Waivers, to be valid, must be in the form as prescribed by applicable tax regulations which necessarily includes the assent of both the taxpayer and the CIR. Lastly, by the time the warrant was issued in November 2011, the Petitioner was no longer authorized to collect as this right has already prescribed.  Under the 1997 Tax Code, tax may be collected by distraint or levy within three (3) years following the assessment of the tax. In the instant case, the assessment was issued in 1991 while the warrant was issued in 2011. Thus, the assailed decision was AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. BANK OF THE PHILIPPINE ISLANDS, G.R. NO. 227049, SEPTEMBER 16, 2020]

[COMPROMISE IS GENERALLY FAVORED AND THOSE ENTERED INTO IN GOOD FAITH CANNOT BE SET ASIDE] [OSG ENTITLED TO 5% SUCCESS FEE ON COMPROMISE]

Petitioner Kepco Philippines Corporation filed a Petition for Review with Manifestation and Motion to Render Judgment on the Case based on the parties’ compromise settlement praying to declare the assessment case closed and terminated. As proof, Petitioner attached a Certificate of Availment issued by Respondent CIR certifying that the National Evaluation Board (NEB) has already approved the Petitioner’s application for compromise settlement. On the other hand, the Office of the Solicitor General (OSG) avered that the compromise agreement is not valid because it failed to allege and prove any of the grounds for a valid compromise and Petitioner did not pay in full the compromise amount upon filing of the application. OSG also manifested that it is entitled to collect 5% success fee in case of government approved compromise agreements. Meanwhile, Respondent asserted that Petitioner paid the full 40% of the basic tax assessed when it applied for compromise. In ruling, the Supreme Court discussed first that the power of the CIR to enter into compromise for deficiency taxes is explicit. The general rule is that the authority of the CIR to compromise is purely discretionary and the Courts cannot interfere with his exercise of discretionary functions, absent grave abuse of discretion. Here, no grave abuse of discretion exists. Petitioner complied with the procedures prescribed under the BIR rules on the application and approval of compromise settlement on the ground of doubtful validity. Thus, the compromise settlement between Petitioner and Respondent is valid. Consequently, the Petition was DISMISSED and the Manifestation was GRANTED. The case was considered CLOSED and TERMINATED. Finally, the OSG, as counsel for the Respondent, should be entitled to 5% of the total deficiency tax liabilities paid by Petitioner. [KEPCO PHILIPPINES CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 225750-51, JULY 28, 2020]

VIII. CTA CASES DIGEST

  • Formal assessment notice (FAN) reiterating preliminary assessment notice (PAN) despite protest without giving explanation is a nullity; mere reiteration of assessment in fan without explanation is violation of due process; failure to consider taxpayer protest without explanation violates to taxpayers’ right to due process
  • Transfer of property pursuant to a tax-free mergeris not subject to withholding tax and documentary stamp tax (DST); BIR ruling is not a condition for the availment of the non-recognition of gain in a merger transaction
  • Denial of input vat due to failure to present that Philippine associated smelting and refining corporation (PASAR) is Philippine Economic Zone Authority (PEZA); Board of Investments (BOI) certification on zero ratinglocal purchases is not for export sales attestation
  • 25% surcharge and 20% delinquency interestare imposable upon failure to pay deficiency taxes within the time prescribed in the notice of assessment or demand; failure to show that service charge is distributed to its employees renders it vatable; absence of the statement of facts and the law upon which disallowance is based makes subject assessment void; imposition of compromise penalty is void without the confirmity of the taxpayer
  • World Trade Organization (WTO) agreementgenerally prohibits discretionary import licensing
  • In refundcases, taxpayer can offer evidence he failed to supply the Commissioner of Internal Revenue (CIR) during pendency of administrative claim because the CIR failed to specify what documents were withheld from BIR
  • Absent authority of Revenue Officer (RO)who conducted examination of  books of accounts and other accounting records will invalidate assessment; chief of Regular Large Taxpayers Audit Division (RLTAD) ii is not included in the list of officials authorized to issue and sign Letter of Authority (LOA); only CIR or his duly authorized representatives can authorize audit examination of taxpayers for purposes of assessment
  • Failure to establish qualification for zero-rated salesis fatal in the claim for refund of input tax
  • Court has no jurisdiction over taxpayer’s appealwhich was belatedly filed from receipt of Final Decision On Disputed Assessment (FDDA); evidence must be duly identified by testimony duly recorded and incorporated in the records of the case so that evidence, not previously offered, can be admitted

 [FAN REITERATING PAN DESPITE PROTEST WITHOUT GIVING EXPLANATION IS A NULLITY] [MERE REITERATION OF ASSESSMENT IN FAN WITHOUT EXPLANATION IS VIOLATION OF DUE PROCESS] [ FAILURE TO CONSIDER TAXPAYER PROTEST WITHOUT EXPLANATION VIOLATES TO TAXPAYERS’ RIGHT TO DUE PROCESS]

Petitioner, Chun Lang Han operating under the business name Tokai Rubber Products, filed a Petition for Review seeking cancellation of the assessment issued by the Respondent CIR. Several issues were raised but the Court instead resolved the issue of violation of taxpayer’s right to due process. In ruling, the Court held the Respondent responsible in performing its functions in accordance with, and strict adherence to, law, with their rules of procedure, and always with regard to the basic tenets of the due process. As noted, the assessment presented in PAN and FAN is substantially the same despite the Petitioner’s submission of protest. Such action clearly shows that Respondent reiterates only its position without giving any reason for rejecting the refutations and explanations made by the Petitioner. Thus, this leaves an impression that Respondent did not provide particular facts upon which the assessment is based and a clear violation of the Petitioner’s right to administrative process, thereby, rendering the subject assessment NULL AND VOID.  [CHUN LANG CHAN, THEN OPERATING UNDER BUSINESS NAME TOKAI RUBBER PRODUCTS REPRESENTED BY LI CHUAN CHANG VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9758, DECEMBER 3, 2020]

[TRANSFER OF PROPERTY PURSUANT TO A TAX-FREE MERGER IS NOT SUBJECT TO WITHHOLDING TAX AND DST] [BIR RULING IS NOT A CONDITION FOR THE AVAILMENT OF THE NON-RECOGNITION OF GAIN IN A MERGER TRANSACTION]

Petitioner Luzviminda Land Holdings, Inc. filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) of alleged erroneously paid withholding tax and DST as a result of sale of parcel of land which is the subject of merger. Petitioner, as the surviving corporation in a merger, sold a parcel of land subsequent to an SEC-approved merger. While Petitioner was in the process of securing a Certificate Authorizing Registration for the transfer of the said parcel of land to Petitioner and later to the purchaser, pending the ruling that the transfer pursuant to merger is tax exempt, it was informed that it should first pay the corresponding withholding tax and DST. Hence, the Petitioner paid the amount under protest. Later, Petitioner went to Court arguing that, contrary to Respondent CIR’s claim, a prior BIR ruling is not a precondition in availing the tax benefits of a tax-free merger. In ruling, the Court held that the merger qualifies under Section 40(C)(2) of the 1997 Tax Code. Consequently, the transfer of the said land should not be imposed with withholding tax under Revenue Regulations No. 2-98, as amended, and DST based on Section 196 of the 1997 Tax Code. Nowhere in Section 40(C)(2)(a) in relation to Section 40(C)(6)(b) of the 1997 Tax Code requires a prior BIR ruling validating an exchange transaction pursuant to a merger as tax-free before a taxpayer may reap the benefits of the said provisions. Thus, the Petition was GRANTED ordering the Respondent to REFUND the Petitioner of the erroneously paid withholding tax and DST. [LUZVIMINDA LAND HOLDINGS, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10035, DECEMBER 3, 2020]

[DENIAL OF INPUT VAT DUE TO FAILURE TO PRESENT THAT PASAR IS PEZA]  [BOI CERTIFICATION ON ZERO RATING LOCAL PURCHASES IS NOT FOR EXPORT SALES ATTESTATION]

Petitioner Carmen Copper Corporation filed a Petition for Review seeking reversal of the earlier decision of the Court in Division denying its claim for refund or issuance of Tax Credit Certificate (TCC) relative to excess and unutilized input VAT directly attributable to its zero-rated sales. Petitioner argued that it was able to prove the existence of zero-rated sales with sufficient documentary evidence and could readily show that the input tax it claimed on its purchases of capital goods substantially complies with the requirements under Section 110 of the Tax Code. In ruling, the Court disallowed the entire zero-rated sales reported due to the following grounds: (1) failure to substantiate the advances and customer charges deducted from the final sales invoice; (2) failure to prove that sales to PASAR are subject to VAT zero-rating; (3) unreadable supporting sales invoices; and (4) declared zero-rated sales has no proof of inward remittance. Thus, in light of the foregoing considerations, the Petition for Review was DENIED for lack of merit. [CARMEN COPPER CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2161, NOVEMBER 25, 2020]

[25% SURCHARGE AND 20% DELINQUENCY INTEREST ARE IMPOSABLE UPON FAILURE TO PAY DEFICIENCY TAXES WITHIN THE TIME PRESCRIBED IN THE NOTICE OF ASSESSMENT OR DEMAND] [FAILURE TO SHOW THAT SERVICE CHARGE IS DISTRIBUTED TO ITS EMPLOYEES RENDERS IT VATABLE] [ABSENCE OF THE STATEMENT OF FACTS AND THE LAW UPON WHICH DISALLOWANCE IS BASED MAKES SUBJECT ASSESSMENT VOID] [IMPOSITION OF COMPROMISE PENALTY IS VOID WITHOUT THE CONFIRMITY OF THE TAXPAYER]

Hotel Specialist (Tagaytay), Inc. (HSTI) and the CIR both filed a Petition for Review assailing the earlier decision of the Special Second Division. HSTI argued that the Special Second Division erred in imposing 25% surcharge and 20% delinquency on the undisputed portions of the assessment because such undisputed portions were already paid prior to the filing of Petition for Review with CTA. Also, the imposition of the 25% surcharge and 20% delinquency interest would be tantamount to amending the CIR’s assessment and imposing something which was not stated therein. In ruling, the Court cited Sections 248(A)(3) and 249(A) and (C)(3) of the 1997 Tax Code which provide that surcharge and delinquency interest are imposable when there is failure to pay deficiency tax within the time prescribed for its payment as provided in the notice of assessment or demand. In the instant case, since the payment was made beyond the prescribed time in the Final Decision on Disputed Assessment (FDDA), the imposition of the delinquency interest and surcharge was proper even if it is not contained in the assessment as the collection of which is mandatory as held by the Supreme Court in the case of Philippine Refining vs. Court of Appeals, et. al. On the VAT assessment, HSTI argued that it is based only on the CIR’s legal position that service charges collected must be subject to VAT, and, therefore, a question of law. In ruling, the Court held that the VAT assessment must be upheld because HSTI failed to adduce evidence to support its contention that a portion of the service charge collected was distributed to its employees as mandated by the Labor Code. On the issue of disallowance of tax credits, CIR argued that the cancelled portion of the FDDA insofar as the disallowance of tax credits was erroneous as it maintains that it fully informed HSTI on the factual and legal bases of the disallowance. However, in the FDDA, the claimed tax credits were simply disallowed without providing the reason for such disallowance. As provided in Section 228 of the 1997 Tax Code, the taxpayer shall be informed in writing of the law and the facts on which the assessment is made, else, the assessment shall be void. Lastly, on the cancellation of compromise penalty, the CIR argued that the Special Second Division erred in cancelling the compromise penalty because HSTI did not question the validity of the penalty in its protests and Petition. As held by the Supreme Court in various cases, the imposition of compromise penalty without the conformity of the taxpayer is illegal and unauthorized as compromise penalty by its nature is mutual in essence. Given the glaring evidence that HSTI never consented to the imposition of the compromise penalty, the cancellation, therefore is proper. Thus, the assailed decision was AFFIRMED. [HOTEL SPECIALIST (TAGAYTAY), INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NOS. 2084 AND 2092, NOVEMBER 25, 2020]

WTO AGREEMENT GENERALLY PROHIBITS DISCRETIONARY IMPORT LICENSING

Petitioner Commissioner of Customs filed a Petition for Review seeking to reverse and set aside the earlier decision of the Court in Division ordering the release of the proceeds of the auction sale to Respondent RMJR Grains Center Corporation. The subject of the said auction sale pertains to excess rice imported by Respondent not covered by import permits. Petitioner argued that the Philippine Government is authorized to require import permits at the time of importation of the said white rice. In defense, Respondent countered that the Philippine Government cannot impose any quantitative import restrictions on rice imports at the time of importation as it failed to request for an extension of its special treatment. In ruling, Paragraph 2 of Article 4 of the World Trade Organization Trade Agreement on Agriculture prohibits member countries from using discretionary import licensing, or the discretionary grant or refusal of a country’s authorities to issue documents necessary for the importation of goods, as part of its policies on imported goods. However, the same agreement provides for the exemption of developing countries on such prohibition on the first ten (10) years of the developing country’s membership, which may be renegotiated for extensions. Upon the expiration of the first ten (10) years of the Philippines’ exemption in 2005, it was able to request for extension until June 2012. After the said period, the Philippines again negotiated for an extension but was only able to successfully obtain permission on July 24, 2014. Given that the importation of the subject excess white rice occurred on November 3, 2013 or after the extension, the Respondent need not obtain any import permit or other license from the government as the government did not enjoy exemption from the general prohibition at the time of importation. As such, Respondent lawfully imported the subject excess white rice and that the forfeiture and eventual auction sale was uncalled for. Thus, the Petition was DENIED. [COMMISSIONER OF CUSTOMS VS. RMJR GRAINS CENTER CORPORATION, CTA EN BANC CASE NO. 2113, NOVEMBER 23, 2020]

IN REFUND CASES, TAXPAYER CAN OFFER EVIDENCE HE FAILED TO SUPPLY THE CIR DURING PENDENCY OF ADMINISTRATIVE CLAIM BECAUSE THE CIR FAILED TO SPECIFY WHAT DOCUMENTS WERE WITHHELD FROM BIR

Petitioner Philippine Geothermal Production Company, Inc. filed consolidated Petitions for Review seeking refund or issuance of Tax Credit Certificate (TCC) amounting to Php 31,679,205.60 representing unutilized input taxes for the calendar year 2014. Petitioner argued that as a Renewable Energy Developer, it is subject to zero-rated VAT on its local purchases under Republic Act (R.A.) No. 9513 and Section 8(B)(7)38 of the 1997 Tax Code, hence, it is entitled to a refund or TCC. In ruling, Section 2(A) and (C) of the 1997 Tax Code provides for the requisites to be complied in order for the refund of input tax attributable to zero-rated to prosper. Perusal of the pieces of evidence presented showed that the Petitioner has complied with the requisites except the following exceptions noted by Independent Certified Public Accountant, to wit: (1) unsupported foreign currency differential; (2) variance between the accrual and reversal of sales; (3) unreadable details of official receipts on some zero-rated sales; (4) non-compliance with invoicing practices. Moreover, Petitioner can offer evidence it failed to supply the BIR during the pendency of its administrative claim, because the Respondent CIR failed to specify what documents were withheld from BIR. Consequently, the consolidated Petitions for Review were PARTIALLY GRANTED[PHILIPPINE GEOTHERMAL PRODUCTION COMPANY, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NOS. 9440, 9501, 9534 AND 9588, NOVEMBER 18, 2020]

[ABSENT AUTHORITY OF RO WHO CONDUCTED EXAMINATION OF  BOOKS OF ACCOUNTS AND OTHER ACCOUNTING RECORDS WILL INVALIDATE ASSESSMENT] [CHIEF OF REGULAR LARGE TAXPAYERS AUDIT DIVISION (RLTAD) II IS NOT INCLUDED IN THE LIST OF OFFICIALS AUTHORIZED TO ISSUE AND SIGN LOA] [ONLY CIR OR HIS DULY AUTHORIZED REPRESENTATIVES CAN AUTHORIZE AUDIT EXAMINATION OF TAXPAYERS FOR PURPOSES OF ASSESSMENT]

Petitioner Marketing Convergence, Inc. filed a Petition for Review seeking to cancel the assessment issued by the Respondent CIR. Several issues were raised but the Court instead focused on the validity of subject LOA. In ruling, the assessment is intrinsically void due to absence of authority on the part of RO who conducted the examination of Petitioner’s books of accounts and other accounting records. Revenue Memorandum Order (RMO) No. 43-90 identifies those officials who are authorized to issue and sign LOA. It may be noted that a Chief of the Regular Large Taxpayers Audit Division (RLTAD) II is not included therein. To reiterate, it is only the CIR or his duly authorized representatives who can authorize the audit examination of taxpayers for purposes of assessment of any deficiency taxes. Thus, the Memorandum of Assignment issued cannot validly grant RO Tasarra and GS Caling the authority to conduct the audit examination. Consequently, Petition for Review was GRANTED and the assessment was CANCELLED. [MARKETING CONVERGENCE, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9379, NOVEMBER 16, 2020]

FAILURE TO ESTABLISH QUALIFICATION FOR ZERO-RATED SALES IS FATAL IN THE CLAIM FOR REFUND OF INPUT TAX

Petitioner Ibex Philippines, Inc. filed a Petition for Review seeking to refund its alleged unutilized input VAT attributable to its zero-rated sales. Petitioner argued that its sale of business process and contact center services to its sole client, a non-resident foreign corporation, is VAT zero-rated pursuant to Section 108(B)(2) of the 1997 Tax Code and that the input VAT attributable to such sales were not utilized. In ruling, sale of services to be subject to 0% VAT under Section 108(B)(2) must meet the following essential elements: (1) the recipient of the services is a foreign corporation doing business outside the Philippines or  a non-resident person not engaged in business who is outside the Philippines when the services are rendered; (2) the services rendered should be other than processing, manufacturing or repacking of goods; (3) the services must be performed in the Philippines by a VAT-registered person; and (4) the payment for the services should be in acceptable foreign currency accounted for in accordance with BSP rules. Despite its compliance with the first essential element, Petitioner, however, failed to present documentary evidence that its sales of services are other than processing, manufacturing and repacking of goods in compliance with the second essential element. Further, Petitioner likewise failed to show proof that the services rendered were performed in the Philippines in relation to the third essential element. Thus, the Petition was DENIED. [IBEX PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9802, NOVEMBER 18, 2020]

 [COURT HAS NO JURISDICTION OVER TAXPAYER’S APPEAL WHICH WAS BELATEDLY FILED FROM RECEIPT OF FDDA] [EVIDENCE MUST BE DULY IDENTIFIED BY TESTIMONY DULY RECORDED AND INCORPORATED IN THE RECORDS OF THE CASE SO THAT EVIDENCE, NOT PREVIOUSLY OFFERED, CAN BE ADMITTED]

Petitioner Loadstar International Shipping, Inc. filed a Petition for Review seeking to reverse the Court First Division’s earlier decision upholding the assessment issued by the Respondent CIR. In ruling, considering the lapse of time from receipt of the FDDA to the filing of the Petition for Review, Respondent’s decision has already attained finality. Moreover, although the undated protest was not attached in the Judicial Affidavit of Revenue Officer Alano, the same was still presented in Court during the re-cross examination, hence, the instant case clearly falls within the exception to the general rule that the Court shall not consider any evidence not formally offered. Furthermore, the Court is not convinced that C.M. Bagan & Associates is not Petitioner’s authorized representative before the BIR. It is quite unusual for an entity (separate from Petitioner) to have been able to obtain a Petitioner’s received copy of the FDDA (with its address on it) if it were not indeed its representative. Thus, the Petition for Review was DENIED and the earlier decision was AFFIRMED[LOADSTAR INTERNATIONAL SHIPPING, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2011, NOVEMBER 11, 2020]

IX. TAX AND BUSINESS-RELATED NEWS [DECEMBER 5-11]

  • BSP wants banks to lend more to firms but loan incentives still underutilized
  • CREATE exempts COVID vaccine from VAT
  • New credit scoring system enables SMEs to better access loans: BSP
  • Pagcor issues first local online gaming license
  • DOLE tells employers: Settle regular holiday pay before year-end
  • Manufacturing recovery underway, to get boost from tax reform, free trade deal: DTI
  • PCCI wants accelerated CREATE enactment
  • Despite pandemic, SSS contribution rate hike a go in 2021
  • BSP mulls new license rule for digital banks
  • Surprise November inflation spike temporary, says BSP

BSP wants banks to lend more to firms but loan incentives still underutilized [Philippine Daily Inquirer, December 11, 2020]

The central bank is encouraging financial institutions to lend more to both small and large companies to help restore growth to the country’s economy, and it is doing so by setting a generous ceiling on the amount of loans that can be used to comply with bank reserve rules.

Source: https://business.inquirer.net/313702/bsp-wants-banks-to-lend-more-to-firms-but-loan-incentives-still-underutilized

CREATE exempts COVID vaccine from VAT [Manila Bulletin, December 11, 2020]

Importation of critical medical medicines, including vaccines, are exempted from value added tax under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act starting January 1, 2021, according to Trade and Industry Secretary Ramon M. Lopez.

Source: https://mb.com.ph/2020/12/11/create-exempts-covid-vaccine-from-vat/

New credit scoring system enables SMEs to better access loans: BSP [ABS-CBN News, December 10, 2020]

The Bangko Sentral ng Pilipinas (BSP) and the Japan International Cooperation Agency (JICA) launched the Credit Risk Database (CRD) project that seeks to generate and analyze credit scoring data of SMEs for easier borrowing.

Source: https://news.abs-cbn.com/business/12/10/20/new-credit-scoring-system-enables-smes-to-better-access-loans-bsp

Pagcor issues first local online gaming license [Philippine Daily Inquirer, December 10, 2020]

A unit of technology firm DFNN Inc. has obtained a first-of-its-kind license from the state-owned Philippine Gaming and Amusement Corp. (Pagcor) to operate an online gaming platform for the local high-roller or VIP market.

Source: https://business.inquirer.net/313610/pagcor-issues-first-local-online-gaming-license#ixzz6gWZwcsGI

DOLE tells employers: Settle regular holiday pay before year-end [ABS-CBN News, December 9, 2020]

Employers should pay their workers for this year’s 12 regular holidays before Dec. 31, the Department of Labor and Employment (DOLE) said Wednesday. 

Source: https://news.abs-cbn.com/video/business/12/09/20/dole-tells-employers-settle-regular-holiday-pay-before-year-end

Manufacturing recovery underway, to get boost from tax reform, free trade deal: DTI [ABS-CBN News, December 9, 2020]

The Department of Trade and Industry said the manufacturing sector is recovering after suffering a steeper decline than the rest of the economy because of the COVID-19 pandemic. 

Source: https://news.abs-cbn.com/business/12/09/20/manufacturing-recovery-underway-to-get-boost-from-tax-reform-free-trade-deal-dti

PCCI wants accelerated CREATE enactment [Manila Bulletin, December 8, 2020]

The Philippine Chamber of Commerce and Industry (PCCI) has strongly pushed to fast track the enactment of the Corporate Recovery and Tax Incentives Reform or CREATE bill before yearend.

Source: https://mb.com.ph/2020/12/08/pcci-wants-accelerated-create-enactment/

Despite pandemic, SSS contribution rate hike a go in 2021 [Philippine Daily Inquirer, December 7, 2020]

Despite the COVID-19 pandemic that shed millions of jobs and shuttered thousands of businesses, the state-run pension fund Social Security System (SSS) on Monday (Dec. 7) said the scheduled increase in contribution rate to 13 percent from 12 percent at present will push through in January 2021.

Source: https://business.inquirer.net/313487/despite-pandemic-sss-contribution-rate-hike-a-go-in-2021#ixzz6gWaFmzu8

BSP mulls new license rule for digital banks [Manila Bulletin, December 5, 2020]

The Bangko Sentral ng Pilipinas (BSP) said it may require all banks with digital banking services to apply for the appropriate digital bank license based on a new circular’s transitory provision.

Source: https://mb.com.ph/2020/12/03/bsp-mulls-new-license-rule-for-digital-banks/

Surprise November inflation spike temporary, says BSP [Philippine Daily Inquirer, December 5, 2020]

Prices of basic goods and services accelerated beyond the central bank’s forecast range for November, due mainly to a spike in food prices caused by the recent spate of typhoons.
Source: https://business.inquirer.net/313124/surprise-november-inflation-spike-temporary-says-bsp#ixzz6gWl6rp91 

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