35-HOUR WORK WEEK BILL APPROVED IN HOUSE ON 2ND READING + DOF ON BAYANIHAN 3: EVALUATING DAMAGE CAUSED BY TYPHOONS IF CURRENT BUDGET SUFFICIENT + EXTENSION OF TAX PERKS FOR HOMEBUYERS PUSHED
Other Relevant Tax Updates:
- Bureau Of Internal Revenue (BIR) Law And Legislative Division Rulings
- BIR International Tax Affairs Division (ITAD) Rulings
- BIR Circularizes Online Application For Tax Clearance For Government Bidding
- BIR Clarifies Tax Exempt Provisions Of Retirement Under Bayanihan 2
- BIR Circularizes The Availability Of The 7.7. Version Of Offline E-Bir Forms
- Court Of Tax Appeals (CTA) Cases Digest
- Tax and Business-Related News [November 15-20]
I. BIR LAW AND LEGISLATIVE DIVISION RULINGS
- Remittance transactions of money transferbetween the sender/mediator and the beneficiaries is not liable for Documentary Stamp Tax (DST); money remittances from foreign countries and its payout partner banks and non-bank money transfer agents is subject to DST; remittances from Overseas Contract Workers (OCW’s) or Overseas Filipino Workers (OFW’s) are not subject to DST provided the payout partner banks and non-bank money transfer agents complied with requirements under Revenue Regulations (RR) no. 1-2011
- If the useful life originally estimated under previous conditions is no longer reasonable, taxpayer may lengthen or shorten useful lifein light of prevailing considerations; BIR confirms proposed change of useful life in claiming depreciation provided any prior adjustments shall be subject to income tax and penalties if warranted
- Importation, distribution and sale of fertilizers for use in vegetables is vat exempt
- 15% lower dividends taxis allowed for as long as the foreign country does not impose any tax on dividends received by corporations domiciled therein
- Sale of factory building, subject of supplemental agreement with Philippine Economic Zone Authority (PEZA), is covered by 5% special tax incentive,and exempt from vat, DST and Creditable Withholding Tax (CWT); income payments to persons enjoying income tax exemption will not be subject to CWT
- Only income directly attributable to revenues generated from PEZA-registered activitiesare exempt from income tax and CWT; payment received in connection with peza-registered activity is exempt from CWT during the period of its Income Tax Holiday (ITH) and Gross Income Tax (GIT) regime; entitlement to ITH is not automatic given the need to comply with PEZA registration agreement
- Extension of filing of estate tax returndue to old age and community quarantine
- Income received by savings loan and associationare exempt from tax, however, income derived from its properties or any activity conducted for profit shall be subject to corresponding taxes
- Interest income from retirement fundis exempt from income tax and final withholding tax (FWT)
- Adopt-a-school program tax benefits
- Extent oftax exemption of books
- Reconveyance of real property from real estate developer to condominium corporationsis exempt from CWT
- Reconveyance of a parcel of land pursuant to regional trial court (rtc) decisionis not subject to Capital Gains Tax (CGT)
- Extent of tax exemption and registration of Barangay Micro Business Enterprise (BMBE)
- Banks and non-bank financial intermediaries have direct liability to pay gross receipts tax (GRT)
- Exchange of land, being in the purview of other dispositionas stated under section 24(d)(1) of the 1997 tax code, is subject to cgt and dst
[REMITTANCE TRANSACTIONS OF MONEY TRANSFER BETWEEN THE SENDER/MEDIATOR AND THE BENEFICIARIES IS NOT LIABLE FOR DST] [MONEY REMITTANCES FROM FOREIGN COUNTRIES AND ITS PAYOUT PARTNER BANKS AND NON-BANK MONEY TRANSFER AGENTS IS SUBJECT TO DST] [REMITTANCES FROM OCW’S OR OFW’S ARE NOT SUBJECT TO DST PROVIDED THE PAYOUT PARTNER BANKS AND NON-BANK MONEY TRANSFER AGENTS COMPLIED WITH REQUIREMENTS UNDER RR NO. 1-2011]
L Philippines, a domestic company and mediator between its parent company, L International, and the payout partner banks and non-bank money transfer agents is seeking confirmation on the proper DST treatment under Section 181 of the 1997 Tax Code. Being a mediator, it is not a party to the remittance transaction. In reply, L Philippines is not privy in the actual remittance transactions of money transfer between the sender and the beneficiaries and does not in any manner, accept or pay any bill of exchange or order of payment of money purporting to be drawn in a foreign country payable in the Philippines. Hence, not being a party to the transaction, L Philippines is not liable for the payment of DST. However, transaction between L International and its payout partner banks and non-bank money transfer agents is considered a money remittance from foreign countries subject to DST. Moreover, transactions involving remittances from OCW’s or OFW’s will not be subject to DST provided the payout partner banks and non-bank money transfer agents complied with the requirements under RR 1-2011. [BIR RULING NO. 513-2020, SEPTEMBER 14, 2020]
[IF THE USEFUL LIFE ORIGINALLY ESTIMATED UNDER PREVIOUS CONDITIONS IS NO LONGER REASONABLE, TAXPAYER MAY LENGTHEN OR SHORTEN USEFUL LIFE IN LIGHT OF PREVAILING CONSIDERATIONS] [BIR CONFIRMS PROPOSED CHANGE OF USEFUL LIFE IN CLAIMING DEPRECIATION PROVIDED ANY PRIOR ADJUSTMENTS SHALL BE SUBJECT TO INCOME TAX AND PENALTIES IF WARRANTED]
S Co. is seeking confirmation and approval on the proposed change in useful life of certain assets, for tax and financial accounting purposes, beginning January 1, 2020 pursuant to Section 34(F)(3) of 1997 Tax Code. The proposed reduction in the useful life of fixed assets was predicated on several factors and was approved by the Company’s Board of Directors. In reply, the rate and estimated useful life agreed upon by the taxpayer and BIR shall be binding to both of them. However, if the useful life originally estimated under previous conditions is no longer reasonable, the taxpayer may lengthen or shorten the useful life in the light of prevailing considerations. The estimates of remaining life for each item of property had been based upon the observed condition of maintenance, and the consideration of normal rates of depreciation for the type of property. Thus, the proposed change in useful life of subject assets in claiming depreciation deduction was confirmed provided that any prior adjustments shall be subject to deficiency income tax, interest and penalties, if warranted. [BIR RULING NO. 507-2020, SEPTEMBER 8, 2020]
IMPORTATION, DISTRIBUTION AND SALE OF FERTILIZERS FOR USE IN VEGETABLES IS VAT EXEMPT
B Co. is seeking a VAT Exemption Certificate on its sale or importation of fertilizer. Along with the request is the Certificate of Product Registration License to Distribute issued by the Fertilizer and Pesticide Authority (FPA). In reply, importation, distribution and sale of fertilizers for use in vegetables (Pechay) is considered VAT exempt pursuant to Section 109 (1)(B) of 1997 Tax Code, as amended. Thus, since the FPA has issued a Certificate of Product Registration for Nano Amino Table Inorganic Fertilizer, the importation, distribution and sale thereof is exempt from 12% VAT. [BIR RULING NO. 491-2020, SEPTEMBER 8, 2020]
15% LOWER DIVIDENDS TAX IS ALLOWED FOR AS LONG AS THE FOREIGN COUNTRY DOES NOT IMPOSE ANY TAX ON DIVIDENDS RECEIVED BY CORPORATIONS DOMICILED THEREIN
A Co., a Singaporean company with Philippine shareholdings from which it receives dividends from its investments, is seeking confirmation whether dividends from Jollibee are subject to 15% lower dividends tax rate. As represented, A Co. has approved tax exemption scheme for Resident Funds pursuant to Sec. 13(R) of Singaporean Income Tax Act (“SITA”). In reply, dividends declared by Jollibee shall be subject to the preferential withholding tax rate of 15% on the part of A Co. pursuant to Sec. 28(B)(5)(b) of 1997 Tax Code considering that under the SITA, dividends derived by A Co. from sources outside Singapore, are exempt for Singapore income tax. [BIR RULING NO. 490-2020, SEPTEMBER 8, 2020]
[SALE OF FACTORY BUILDING, SUBJECT OF SUPPLEMENTAL AGREEMENT WITH PEZA, IS COVERED BY 5% SPECIAL TAX INCENTIVE, AND EXEMPT FROM VAT, DST AND CWT] [INCOME PAYMENTS TO PERSONS ENJOYING INCOME TAX EXEMPTION WILL NOT BE SUBJECT TO CWT]
P Co., a PEZA-registered Ecozone Facilities Enterprise, is seeking confirmation that its sale of a factory building to N Co, another PEZA-registered Export Enterprise, is (i) subject to 5% special tax incentive; (ii) not subject to VAT and DST; and (iii) exempt for payment of CWT. In reply, BIR referred to Sec. 25 of Republic Act (R.A.) No. 7916 or the PEZA Law. Since the factory unit is one of the three (3) factory buildings subject of the P Co.’s Fourth Supplemental Agreement with PEZA and the subsequent Restatement of Supplemental Agreement, the sale thereof is covered by 5% special tax on gross income. Thus, the sale is no longer subject to VAT and DST. As to the CWT, since P Co. is enjoying exemption from payment of income tax pursuant to R.A. No. 7916, its revenues derived directly from its registered activity shall not be subject to CWT. [BIR RULING NO. 443-2020, AUGUST 17, 2020]
[ONLY INCOME DIRECTLY ATTRIBUTABLE TO REVENUES GENERATED FROM PEZA-REGISTERED ACTIVITIES ARE EXEMPT FROM INCOME TAX AND CWT] [PAYMENT RECEIVED IN CONNECTION WITH PEZA-REGISTERED ACTIVITY IS EXEMPT FROM CWT DURING THE PERIOD OF ITS ITH AND GIT REGIME] [ENTITLEMENT TO ITH IS NOT AUTOMATIC GIVEN THE NEED TO COMPLY WITH PEZA REGISTRATION AGREEMENT]
D Coconut Oil Mill, Inc., a PEZA-registered entity with registered activity limited to oil milling of crude oil and copra cake, is seeking exemption from income tax and CWT on payments received from the conduct of its PEZA-registered activity. In reply, withholding tax prescribed in Sec. 2.57.5(B)(2) of RR No.2-98, as amended by RR 6-2001 shall not apply to income payment to persons enjoying income tax exemption provided by Republic Act (R.A.) No. 7916 or PEZA Law. Since oil milling of crude oil and copra cake income activities is registered with PEZA, payment received in connection with these are exempt from CWT during the period of its ITH and GIT regime. Hence, only income directly attributable to revenues generated from PEZA-registered activities are exempt from income tax and CWT. Moreover, entitlement to ITH for its registered activities is not automatic as it has still to comply with the provisions of its Registration Agreement with PEZA. [BIR RULING NO. 438-2020, AUGUST 7, 2020]
EXTENSION OF FILING OF ESTATE TAX RETURN DUE TO OLD AGE AND COMMUNITY QUARANTINE
A senior citizen is seeking an extension of time to file the estate tax return of the estate of her husband who died on May 26, 2019. In reply, Section 90 (C) of the Tax Code, as amended, provides that the Commissioner shall have the authority to grant, in meritorious cases, a reasonable extension not exceeding thirty (30) days for filing the return. Given that the senior citizen has limited movement outside her house during the pandemic, there is established justifiable reason to grant the request for an extension. Thus, the filing of the estate tax return was extended for another thirty (30) days counted from the end of the thirty (30) days extension provided under RR No. 11-2020, that is, thirty (30) days counted from the date of the lifting of the Modified Community Quarantine on May 31, 2020. Thus, she was given until July 30, 2020 within which to file the estate tax return. [BIR RULING NO. 383-2020, JULY 10, 2020]
INCOME RECEIVED BY SAVINGS LOAN AND ASSOCIATION ARE EXEMPT FROM TAX, HOWEVER, INCOME DERIVED FROM ITS PROPERTIES OR ANY ACTIVITY CONDUCTED FOR PROFIT SHALL BE SUBJECT TO CORRESPONDING TAXES
R Association, a domestic corporation engaged in the operations of a non-stock savings and loan association, is seeking tax exemption from 20% FWT on the interest income derived from its bank deposits and deposits substitute pursuant to Section 5 of Republic Act (R.A.) No. 8367. In reply, Section 5 of R.A. No. 8367 provides that an association shall be exempt from payment of tax in respect to income it receives including interest on its deposit with any bank. Thus, R Association shall be exempt from income tax with respect to income it receives. Also, interest income derived from its deposit and deposit substitutes are exempt from 20% FWT. However, any income derived from any of its properties, real or personal, or any activity conducted for profit regardless of disposition, is subject to the applicable income tax and other internal revenue taxes. [BIR RULING NO. 377-2020, JULY 3, 2020]
INTEREST INCOME FROM RETIREMENT FUND IS EXEMPT FROM INCOME TAX AND FWT
M Co. is seeking tax exemption on its Retirement Fund’s interest income derived from the Multi-Purpose Loan Assistance Program (MLAP) for the benefit of its employee-members. It was represented that the Company’s Retirement Fund was previously approved as a “Reasonable Retirement Benefit Plan” and consequently revalidated. In appreciation of support, it was noted that the conditions are present in the Retirement Fund to warrant the income tax exemption of employees’ trust. Thus, interest income derived by the Company’s Retirement Fund from the MLAP for the benefit of its employee-members is exempt from income tax, and consequently, from FWT. Provided, however, that in its investment activities, no part of the corpus or income of the Fund shall be used for or diverted to purposes other than for the exclusive benefit of the member-employees or their beneficiaries. [BIR RULING NO. 376-2020, JULY 3, 2020]
ADOPT-A-SCHOOL PROGRAM TAX BENEFITS
H Co. is seeking availment of donor’s tax exemption and deductibility of donation made to public schools under Department of Education (DepEd) pursuant to Republic Act (R.A.) No. 8525 or the “Adopt-A-School Act of 1998.” In reply, donations to the Government, its agencies or political subdivisions are deductible in full and R.A. No. 8525 provides an additional 50% deduction from the gross income of the adopting entity. However, donations not in accordance with the National Priority Plan are subject to limited deductibility or deductions to an amount not exceeding 10% in the case of an individual and 5% in the case of a corporation of the taxpayer’s taxable net income as computed without the benefit of this deduction. Moreover, donations to the Government, or any entity created by any of its agencies which is not conducted for profit is exempt from tax. Perusal of the documents showed that H Co. is compliant with the requirements set forth under Section 3 of RR No. 10-2003 and the Adopt-A-School Program is considered a Priority Project in the National Priority Plan of the Government on that year. Thus, H Co. qualifies for donor’s tax exemption and availment of 150% deduction of the donation from its gross income. [BIR RULING NO. 375-2020, JULY 3, 2020]
EXTENT OF TAX EXEMPTION OF BOOKS
K Publishing Co. is seeking confirmation whether it is exempt from VAT and 3% Percentage Tax pursuant to Section 109(1)(R) of the 1997 Tax Code. In reply, the said provision provides that sale, importation, printing and publication of books, newspapers, magazines, reviews and bulletins are VAT exempt. As clarified in Revenue Memorandum Circular (RMC) No. 75-2012, these materials, to be VAT exempt, must be: (1) printed or published at regular intervals; (2) available for subscription and sale at fixed prices; and (3) are not principally devoted to the publication of paid advertisements. It further clarified that the exemption only refers to materials in hard copies, and not those in digital/electronic format or computerized versions. If K Publishing Co. will likewise have other transactions that do not qualify to be VAT-exempt, it is, therefore, required to register as a VAT business entity and is required to issue a separate VAT invoice/receipt to record such transactions. Further, VAT, being an indirect tax, can be shifted to buyers. Thus, notwithstanding that it is VAT exempt on its sales, its purchases of goods, properties or services from its suppliers shall nevertheless be subject to the 12% VAT. [BIR RULING NO. 373-2020, JULY 3, 2020]
RECONVEYANCE OF REAL PROPERTY FROM REAL ESTATE DEVELOPER TO CONDOMINIUM CORPORATIONS IS EXEMPT FROM CWT
R Co., a real estate developer, is requesting a ruling exempting the conveyance of land and common areas in favor of condominium corporations from the payment of CWT and DST. In reply, the request has been sufficiently addressed with the issuance of Revenue Memorandum Order (RMO) No. 18-2009 dated April 26, 2009. Inasmuch as the query falls within the ambit of RMO 18-2009, R Co. was advised to just comply with the requirements prescribed under the said RMO. [BIR RULING NO. 372-2020, JULY 3, 2020]
RECONVEYANCE OF A PARCEL OF LAND PURSUANT TO RTC DECISION IS NOT SUBJECT TO CGT
Ms. L is seeking a ruling that the reconveyance of a parcel of land pursuant to the decision of the Regional Trial Court (RTC) is exempt from the payment of tax. It is represented that Ms. L obtained the land by way of purchase from Spouses Mr. and Mrs. B. However, the same land was erroneously the subject of an Application for Free Patent filed by Mrs. A. Noticing that the land was different from the land intended to the subject of the Application for Free Patent, Ms. A requested for the withdrawal of her application. However, such request came in late as the application was already approved resulting in the issuance of land title in the name of Mr. and Mrs. A. Ms L then filed for a case of reconveyance in which she won. In reply, reconveyance of the parcel of land to Ms. L is without consideration and that the transfer is in order to return the parcel of land to the legal owner, therefore, it is not subject to CGT imposed under Section 24(D)(1) of the 1997 Tax Code. Such transfer is, however, subject to Documentary Stamp Tax imposed under Section 188 of the 1997 Tax Code. [BIR RULING NO. 371-2020, JULY 3, 2020]
EXTENT OF TAX EXEMPTION AND REGISTRATION OF BMBE
E Trading Co., a BMBE-registered entity, is seeking a Certificate of Exemption from payment of income tax pursuant to the provisions of Republic Act (R.A.) No. 9178 or BMBE Law. In reply, inasmuch as the Company was awarded a DTI BMBE Certificate of Authority, it is, therefore, exempt from income tax arising purely from the BMBE operations for a period of two (2) years. However, the availment of the foregoing tax exemptions shall not apply to income subject to final tax such as but not limited to interest from bank deposits, royalties, prizes and winnings, dividends, capital gains, etc. For purposes of exemption from CWT, it shall furnish its customers with a certified true copy of its amended BIR registration certificate. [BIR RULING NO. 370-20, JULY 3, 2020]
BANKS AND NON-BANK FINANCIAL INTERMEDIARIES HAVE DIRECT LIABILITY TO PAY GRT
The Bangko Sentral ng Pilipinas (BSP) is seeking confirmation if it is obliged to withhold percentage taxes on interest income payments to banks and non-bank financial intermediaries. In reply, RR No. 9-2004 provides for the imposition of GRT on banks and non-bank financial intermediaries and the time and venue of filing and payment of GRT. Based on the foregoing, BSP is not required to withhold percentage taxes since the bank and non-bank financial intermediaries are directly obliged to pay the monthly GRT imposed under Section 121 of the 1997 Tax Code. [BIR RULING NO. 363-2020, JUNE 29, 2020]
EXCHANGE OF LAND, BEING IN THE PURVIEW OF OTHER DISPOSITION AS STATED UNDER SECTION 24(D)(1) OF THE 1997 TAX CODE, IS SUBJECT TO CGT AND DST
Mr. L and Ms. G is requesting for tax exemption from the payment of CGT and DST relative to an executed Deed of Exchange. As represented, both Mr. L and Ms. G purchased land from YCF Neighborhood Corporation. However, due to clerical error, there was an exchange made. The land purchased by Mr. L was occupied and developed by Ms. G. On the other hand, the land purchased by Ms. G was occupied and developed by Mr. L. Upon discovery of such error, both Mr. L and Ms. G executed a Deed of Exchange which conveys the lots to the appropriate owner. In reply, citing the case of Salud vs. Commissioner of Internal Revenue, the transaction is within the purview of other disposition stated in Section 24(D)(1) of the 1997 Tax Code. As such, the exchange made between Mr. L and Ms. G is subject to CGT as imposed under Section 24(D)(1) and DST imposed under Sections 188 and 196 of the 1997 Tax Code. [BIR RULING NO. 362-2020, JUNE 25, 2020]
II. BIR ITAD RULINGS
- Gross Philippine billings under RP-United Arab Emirates (UAE) Tax Treaty
- Supply Of Firearms to Armed Forces Of The Philippines (AFP)Is Exempt From FWT Under RP-Us Treaty but subject to VAT
GROSS PHILIPPINE BILLINGS UNDER RP-UAE TAX TREATY
E Co., an international air carrier from United Arab Emirates (UAE), is seeking confirmation that its Gross Philippine Billings (GPB) is exempt from tax on the basis of reciprocity. In reply, Section 28 (A) of the Tax Code provides that an international carrier doing business in the Philippines shall pay 2 ½% on its GPB. However, with the enactment of Republic Act (R.A.) No. 10378 or the Act Recognizing the Principle of Reciprocity as Basis for the Grant of Income Tax Exemptions to International Carriers, an international carrier doing business in the Philippines may avail of a preferential rate or exemption from tax imposed on their gross revenue derived from the carriage of persons and their baggage on the basis of applicable tax treaty or international agreement or on the basis of reciprocity. Considering that Philippine Airlines (PAL) does not pay any corporate income taxes to UAE, E Co. shall likewise be exempt from income tax on its gross revenue derived from the carriage of persons and excess baggage on the basis of reciprocity. Likewise, E Co. is entitled to the preferential rate of 1 ½% on the gross revenues derived from carriage of cargo and mail pursuant to RP-UAE tax treaty. Further, E Co. is liable to pay the 3% Common Carriers tax on its carriage of cargo. In relation to the exemption granted to E Co., its authorized representative is obliged to submit to the ITAD a sworn certification stating that there is no change in the domestic laws of its home country granting income tax exemption to Philippine carriers before January 31 of each year. Failure to submit the sworn certification shall be a ground for the revocation of the ruling. [BIR ITAD RULING NO. 007-20, JANUARY 9, 2020]
SUPPLY OF FIREARMS TO AFP IS EXEMPT FROM FWT UNDER RP-US TREATY BUT SUBJECT TO VAT
R Co., a non-resident foreign corporation, is seeking confirmation whether the income it derived from the supply and delivery of firearms to the AFP is exempt from income tax pursuant to RP-US treaty. In reply, in general, gross income derived by an NRFC from all sources within the Philippines is subject to 30% income tax. However, such income may be exempt when required by any treaty obligation binding upon the Philippine government. Article 8 of the RP-US treaty states that branch profits are taxable only to the US, unless the Company has a permanent establishment in the Philippines. Upon perusal of documents, it was shown that the R Co. has no permanent establishment though it conducted maintenance training on the use of the procured firearms for two (2) days in the Philippines. Thus, income derived by R Co. is exempt from FWT but subject to Final Withholding VAT for the services rendered. [BIR ITAD RULING NO. 005-20, JANUARY 6, 2020]
III. BIR CIRCULARIZES ONLINE APPLICATION FOR TAX CLEARANCE FOR GOVERNMENT BIDDING
Revenue Memorandum Circular (RMC) No. 121-2020, issued on November 17, 2020, circularizes the availability of the online application for Tax Clearance for Bidding Purposes and Tax Compliance Verification Certificate (eTCBP/TCVC). This circular details the policies, documentary requirements, and procedures in the application. Upon denial of the application, the taxpayer-applicant shall be required to re-apply for TCBP/ICVC and re-submit the application together with the complete the documentary requirements and comply with the prescribed criteria. TCBP has one (1) year from the date of issuance while TCVC has 90 days from the date of issuance, unless sooner revoked for valid reasons.
IV. BIR CLARIFIES TAX EXEMPT PROVISIONS OF RETIREMENT UNDER BAYANIHAN 2
Revenue Memorandum Circular (RMC) No. 120-2020, issued on November 9, 2020, clarifies the exemption from income tax of the retirement benefits received by employees from June 5, 2020 to December 31, 2020 pursuant to Bayanihan to Recover as One Act (Bayanihan 2), as implemented under Revenue Regulations (RR) No. 29-2020.
Only the amount received and covered by the registered retirement plan will be exempt from income tax, provided that the retirement and receipt of the retirement benefits are within the covered period (i.e. June 5, 2020 to December 31, 2020). The amount in excess of what is within the retirement plan shall be taxable.
RR No. 29-2020 requires the submission of the list of recipients of retirement benefits and other income payments exempt from income tax paid by employers from June 5 to December 31, 2020.
V. BIR CIRCULARIZES THE AVAILABILITY OF THE 7.7. VERSION OF OFFLINE E-BIR FORMS
Revenue Memorandum Circular (RMC) No. 118-2020, issued on November 6, 2020, circularizes the availability of the new offline electronic BIR form package. The new version includes the January 2018 version of BIR Forms No. 1604-C, 1604-F and 1604-
VI. CTA CASES DIGEST
- Formal Assessment Notice (FAN) which is a mere reiteration of Preliminary Assessment Notice (PAN)without giving explanations on the denial is a violation of taxpayer’s right; failure to provide facts upon which an assessment is based is a violation of taxpayer’s right to administrative due process; Revenue District Officer (RDO) is not authorized to issue Letter of Authority (LOA) or Memorandum of Assignment (MOA)
- Non-compliance with the 120+30 day periods is fatal to the taxpayer’s judicial claim for refund
- Stock transaction tax is a percentage tax and not an income tax; tax exemptions cannot be extended to a controlled companyas it is a separate and distinct entity
[FAN WHICH IS A MERE REITERATION OF PAN WITHOUT GIVING EXPLANATIONS ON THE DENIAL IS A VIOLATION OF TAXPAYER’S RIGHT] [FAILURE TO PROVIDE FACTS UPON WHICH AN ASSESSMENT IS BASED IS A VIOLATION OF TAXPAYER’S RIGHT TO ADMINISTRATIVE DUE PROCESS] [RDO IS NOT AUTHORIZED TO ISSUE LOA OR MOA]
Petitioner Titanium Corporation filed a Petition for Review seeking to cancel the assessment issued by the Respondent Commissioner of Internal Revenue (CIR) claiming that the assessment notice was issued in violation of the Petitioner’s right to valid preliminary assessment proceeding. Further, examiners are not authorized as they are not named under the issued LOA. In ruling, the Court cited the Supreme Court case in CIR vs. Avon Products Manufacturing Inc. which provides that tax assessments issued in violation of the due process rights of a taxpayer are null and void. One of the fundamental requirements of due process that must be respected in administrative proceedings is that the decision is rendered in a manner that the parties may know the various issues involved and the reasons for the decision. In the case at bar, the FAN, which is a mere reiteration of the PAN, was issued without giving explanations on the denial of Petitioner’s protest to the PAN. Further, the audit was reassigned to different set of examiners as evidenced by a MOA which was signed by the RDO. Pursuant to the provisions of the 1997 Tax Code, RDO has no authority to issue LOA or MOA. Thus, the Petition was GRANTED resulting in the CANCELLATION of the assessment. [TITANIUM CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9644, NOVEMBER 11, 2020]
NON-COMPLIANCE WITH THE 120+30 DAY PERIODS IS FATAL TO THE TAXPAYER’S JUDICIAL CLAIM
Petitioner Luzon Hydro Corporation filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) of unutilized input VAT for the 1st, 2nd and 4th quarters of year 2006. Petitioner argued that its judicial claim was timely filed and it has legal and factual bases to claim for input VAT refund. In ruling, the CIR has 120 days from the date of submission of the complete documents within which to grant or deny the claim. Thereafter, upon receipt of the adverse decision, or from the lapse of the 120-day period, the taxpayer has 30 days within which to file its judicial claim. In this case, from the filing of Petitioner’s administrative claim on April 30, 2007, the CIR had 120 days, or until August 28, 2007, within which to render a decision on the said claim. Considering that the CIR did not act on the claim on or before August 28, 2007, Petitioner had 30 days, or until September 27, 2007, within which to file its judicial claim. However, the Petition was filed on November 9, 2015, or beyond the 30-day period to appeal. Thus, Petitioner’s judicial claim was filed out of time. Hence, the Court acquired no jurisdiction and it is no longer necessary to determine whether Petitioner had factual and legal bases for input VAT refund. Consequently, the Petition was DISMISSED. [LUZON HYDRO CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9187, NOVEMBER 6, 2020]
[STOCK TRANSACTION TAX IS A PERCENTAGE TAX AND NOT AN INCOME TAX] [TAX EXEMPTIONS CANNOT BE EXTENDED TO A CONTROLLED COMPANY AS IT IS A SEPARATE AND DISTINCT ENTITY]
Petitioner CIR filed a Petition for Review seeking to reverse the CTA 1st Division’s earlier decision granting the refund of Stock Transaction Tax withheld from the sales of shares of stock in BDO Unibank, Inc. by Respondent IFC Capitalization (Equity) Fund, LP which is controlled and enjoys refinancing foreign governments and international financial institutions. Petitioner argued that the exemption of income provided in Section 32(B)(7)(a) of the 1997 Tax Code only covers exemption from Income Tax and not from Stock Transaction Tax. Further, Petitioner argued that the exemption granted to International Financial Corporation (IFC), the Respondent’s controlling corporation, cannot be extended to the Respondent because they are separate and distinct entities. In defense, Respondent countered that the BIR has consistently ruled that Stock Transaction Tax is treated as Income Tax, therefore, the exemption provided in Section 32(B)(7)(a) of the 1997 Tax Code should likewise cover Stock Transaction Tax. In ruling, the Court held that it is clear that the exemption provided in Section 32(B) of the 1997 Tax Code only covers Income Tax. On the Petitioner’s claim that Stock Transaction Tax is treated as Income Tax based on the rulings issued by the BIR, the Court cited the Supreme Court case CIR vs. Court of Appeals which provides that administrative issuances must not override the law they seek to implement. Further, the BIR’s most recent rulings also affirm that Stock Transaction Tax as a Percentage Tax is not an Income Tax. Further, tax exemption of IFC cannot be extended to the Respondent as they are separate and distinct entities. Thus, the Petition was GRANTED leading to the REVERSAL of the CTA 1st Division’s decision. [COMMISSIONER OF INTERNAL REVENUE VS. IFC CAPITALIZATION (EQUITY) FUND, LP, CTA EN BANC CASE NO. 2083, NOVEMBER 5, 2020]
VII. TAX AND BUSINESS-RELATED NEWS [NOVEMBER 15-20]
- BPO industry seen performing better vs PH economy this year
- BSP adopts new gold-colored PH eagle logo, says ‘brand refresh’ signifies ‘renewed vitality’
- 35-hour work week bill approved in House on second reading
- Pag-IBIG allows deferral, lower payments on housing loans under a new program
- SEC allows modified financial reporting by BSFIs during pandemic
- ASEAN ministers sign MOU to address non-tariff measures
- Recto wants to account for MSME lending
- Dominguez bats for FIST bill this year as tight lending seen hitting businesses
- P9 billion funds still unreleased for loan applications from pandemic-hit MSMEs
- DOF on Bayanihan 3: Evaluating damage caused by typhoons if current budget ‘sufficient’
- Extension of tax perk for homebuyers pushed
BPO industry seen performing better vs PH economy this year [ABS-CBN News, November 20, 2020]
The Philippine business process outsourcing sector will perform better than the Philippine economy this 2020. But it won’t see growth in revenues either.
BSP adopts new gold-colored PH eagle logo, says ‘brand refresh’ signifies ‘renewed vitality’ [ABS-CBN News, November 20, 2020]
The Bangko Sentral ng Pilipinas (BSP) on Friday announced a “brand refresh” with the launch of its new gold-colored Philippine eagle logo.
35-hour work week bill approved in House on second reading [Manila Bulletin, November 19, 2020]
The House of Representatives has approved on second reading a bill instituting a 35-hour work week scheme as an alternative arrangement for employees in the private sector.
Pag-IBIG allows deferral, lower payments on housing loans under a new program [Manila Bulletin, November 19, 2020]
Top executives of the Pag-IBIG Fund announced the offering of a loan restructuring program that would allow housing loan borrowers to lower their monthly payments and to defer their payments until March next year.
SEC allows modified financial reporting by BSFIs during pandemic [Manila Bulletin, November 19, 2020]
The Securities and Exchange Commission (SEC) has approved an industry-specific framework for the preparation of the audited financial statements (AFS) of financial institutions to account for the regulatory relief measures extended to them during the pandemic.
ASEAN ministers sign MOU to address non-tariff measures [Manila Bulletin, November 19, 2020]
ASEAN economic ministers have agreed to refrain from introducing trade-restrictive measures on essential goods associated with combating the global pandemic to ensure smooth flow of these items across borders.
Recto wants to account for MSME lending [Manila Bulletin, November 19, 2020]
Senator Ralph Recto yesterday sought for an accounting of the funds being allocated to government financial institutions for lending to the micro, small and medium enterprises (MSMEs).
Dominguez bats for FIST bill this year as tight lending seen hitting businesses [ABS-CBN News, November 18, 2020]
Finance Secretary Carlos Dominguez called on lawmakers to pass a bill this year that will let banks offload bad loans as a study released Wednesday showed tight lending has been affecting businesses amid the COVID-19 crisis.
P9 billion funds still unreleased for loan applications from pandemic-hit MSMEs [Philippine Daily Inquirer, November 18, 2020]
Nearly 25,000 loan applications from pandemic-hit micro, small and medium enterprises (MSMEs) remain pending with the non-release of P9 billion under the Bayanihan to Recover as One Act.
DOF on Bayanihan 3: Evaluating damage caused by typhoons if current budget ‘sufficient’ [ABS-CBN News, November 17, 2020]
The Department of Finance said it is assessing the need for a third COVID-19 aid package or Bayanihan 3 as typhoons inundated large swaths of Luzon and the Visayas.
Extension of tax perk for homebuyers pushed [Philippine Daily Inquirer, November 16, 2020]
The country’s housing chief is appealing for an extension of the tax perk for purchases of residential units worth P2 million and above next year in order to keep prices affordable amid a pandemic-induced recession hurting both supply and demand.
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