DUTERTE REVEALS NAMES OF BIR PERSONNEL DISMISSED OVER CORRUPTION + BIR IMPLEMENTS ANOTHER RESHUFFLE TO HIT 2021 TAX GOAL + FINANCE CHIEF ORDERS BIR CUSTOMS TO INVESTIGATE COOPERATIVES USED FOR RICE IMPORTS
Other Relevant Tax Updates:
- Securities and Exchange Commission (SEC) Legal Opinion Digest on Perpetual Corporate Term Under the Revised Corporation Code (RCC)
- SEC Provides Regulatory Relief on Non-Imposition of Fines and other Monetary Penalties For Non-Filing, Late Filing, and Non-Compliance With Compulsory Notification And Other Reportorial Requirements
- SEC Issues Guidelines on the Revision of the General Information Sheet (GIS) of Foreign Corporations to Include Beneficial Ownership Information
- SEC Requires Official Contacts
- SEC Issues Guidelines on the Conversion of Corporations either to One Person Corporation (OPC) or to Ordinary Stock Corporation
- Bureau Of Internal Revenue (BIR) Rulings Digest
- BIR and Land Registration Authority (LRA) Share Records to Improve Tax Assessments and Collections
- BIR Clarifies the List of VAT-Exempt Drugs Pursuant to the Clarification Raised by Food and Drug Administration (FDA)
- Court of Tax Appeals (CTA) Cases Digest
- Tax and Business-Related News [November 21-29]
I. SEC LEGAL OPINION DIGEST ON PERPETUAL CORPORATE TERM UNDER RCC
S Co. is seeking an opinion on whether the corporate term in its Articles of incorporation is deemed amended to the effect that it now has perpetual existence pursuant to RCC, without performing any positive act. In reply, Section 11 of the RCC provides that corporation with Certificates of Incorporation issued prior to the effectivity of RCC, and which continue to exist, shall have perpetual existence, unless the corporation, upon a vote of its stockholders representing a majority of its outstanding capital stock, notifies the Commission that it elects to retain its specific corporate term pursuant to its Articles of Incorporation. Furthermore, Section 2(a) of SEC Memorandum Circular No. 22 Series of 2020 provides that the corporate term of a corporation with Certificate of Incorporation issued prior to the effectivity of the RCC and which continue to exist, shall be deemed perpetual upon the effectivity of the RCC, without any action on the part of the corporation. Thus, the Articles of Incorporation of all corporations which satisfies the requirements under Section 11 of the RCC and MC 22 Series of 2020 are deemed amended to the effect that their corporate term is now perpetual. A positive act on the part of corporations is only required if they intend to limit their corporate term to a certain period. [SEC-OGC OPINION NO. 20-02, NOVEMBER 3, 2020]
II. SEC PROVIDES REGULATORY RELIEF ON NON-IMPOSITION OF FINES AND OTHER MONETARY PENALTIES FOR NON-FILING, LATE FILING, AND NON-COMPLIANCE WITH COMPULSORY NOTIFICATION AND OTHER REPORTORIAL REQUIREMENTS
SEC MC No. 31, Series of 2020, dated November 5, 2020 and published last November 15, 2020, provides for regulatory relief to business entities in the form of non-imposition of monetary penalties as result of non-filing, late filing, and non-compliance with compulsory notification and other reportorial requirements during the Community Quarantine (CQ). This regulatory relief is implemented in compliance as well with the provisions of Bayanihan 2.
Highlights of the circular include the following:
- Circular covers non-filing and late filing of General Information Sheet (GIS) and Audited Financial Statements (AFS)including other reportorial requirements that the Commission may require, and non-compliance with compulsory notification.
- No imposition of fines and other monetary penalties will be imposed for violations incurred from September 14, 2020 until December 19, 2020.
- Corporations may still apply for monitoringfrom September 2020 until December 2020 to secure monitoring clearance.
- All other violations incurred outside the covered period will result in computation of fines and penalties.
- Circular also applies to Foreign Corporationsexcept on matters pertaining to Securities Deposits and Change of Resident Agent.
III. SEC ISSUES GUIDELINES ON THE REVISION OF THE GIS OF FOREIGN CORPORATIONS TO INCLUDE BENEFICIAL OWNERSHIP INFORMATION
SEC MC No. 30, Series of 2020, dated October 13, 2020 and published last November 5, 2020, provides for the guidelines on the revision of GIS of Foreign Corporations to include Beneficial Ownership Information, to wit:
- All SEC-registered foreign corporations, both stock and non-stock, are required to disclose their beneficial owners.
- Any changes in beneficial ownership information shall be included in the Notification Update Form, to be submitted within 30 days after such occurrence.
- Failure to disclose and exercise due diligence required in ensuring compliance with the requirements, without any lawful cause, will be penalized in accordance with Section 11 of SEC MC No. 15, Series of 2019.
IV. SEC REQUIRES OFFICIAL CONTACTS
SEC MC No. 28, Series of 2020, dated August 27, 2020 and published last October 31, 2020, provides the requirements and guidelines for the creation and/or designation of an official e-mail account and cellphone number for transactions with the Commission in order to facilitate and expedite the transmission and receipt of official communications.
Highlights of the circular include the following:
- Every person under the jurisdiction and supervision of the Commission shall submit a valid official and alternate e-mail address and cellphone numberwithin 60 days from the effectivity of these rules. The e-mail addresses and cellphone numbers shall be under the control of duly authorized representative such as the corporate secretary, person charged with the administration and management of the corporation sole, resident agent of the foreign corporation, managing partner, among others. Updates shall be filed within five (5) days from the change along with the authorization or certification of authorization.
- Beginning February 23, 2021, the e-mail address and cellphone numbers shall be included in the GIS or Notification Update Form (NUF). Submission will be thru online and accompanied by a duly signed Authorization or Certificate of Authorization. A Multi-Factor Authentication (MFA) utilizing mechanisms such as OTP schemeor Two-Step Verification by a Software Based Authenticator will be in place for every transmittal for security purposes.
- Beginning February 23, 2021, failure to submit in accordance with the foregoing, shall be administratively penalized with a penalty amounting to Php 10,000.
V. SEC ISSUES GUIDELINES ON THE CONVERSION OF CORPORATIONS EITHER TO OPC OR TO ORDINARY STOCK CORPORATION
SEC Memorandum Circular No. 27, Series of 2020, dated August 25, 2020 and published last October 16, provides the guidelines for the conversion of corporations either to OPC or to Ordinary Stock Corporation.
The circular covers the specific guidelines, documentary requirements, effects and related consequences as well as governing law after the conversion.
VI. BIR RULINGS DIGEST
- City or municipality certification that homeowners associationlacks resources is essential in claim of tax exemption
- Extent of tax exemption of sale of books
- Vat exempt and zero-rating privileges are only limited to necessary purchases to implement internationalagreement from which privileges arose
CITY OR MUNICIPALITY CERTIFICATION THAT HOMEOWNERS ASSOCIATION LACKS RESOURCES IS ESSENTIAL IN CLAIM OF TAX EXEMPTION
P Homeowners’ Association, Inc., a non-stock and non-profit residential homeowners’ association duly registered with the Housing and Land Use Regulatory Board (HLURB), and situated in Las Piñas City, is requesting for tax exemption pursuant to Republic Act (R.A.) No. 9904 or “Magna Carta for Homeowners and Homeowners’ Associations” and in reference to Revenue Memorandum Circular (RMC) No. 9-2013 which clarifies the taxability of association dues, membership fees, and other charges collected by Homeowners’ Association. In reply, P Homeowners’ Association does not fall within the purview of those homeowners’ associations which may be exempted under R.A. 9904 because of the absence of the required certification from the city that the subject lacks resources to provide for basic services of its members. Consequently, it is liable to applicable internal revenue taxes on its income from association dues, rentals of its facilities, trade business and other activities. [BIR RULING NO. 382-2020, JULY 3, 2020]
EXTENT OF TAX EXEMPTION OF SALE OF BOOKS
A Co., a Commercial Book Importer and Book/E-Book Seller, is requesting for a VAT Exemption Certificate. In reply, Section 109 (1) (R) of the 1997 Tax Code provides that sale, importation, printing or publication of books and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements shall be exempt from VAT. In view thereof, the importation and sale of books, any newspaper, magazines, reviews or bulletins of A Co. books on wholesale/retail basis are exempt from the payment of VAT and from the 3% Percentage Tax. However, if A Co. is engaged in other non-exempt activities such as the printing of brochures, bookbinding, engraving, stereotyping, electrotyping, lithographing, the same are subject to VAT, and the taxpayer shall be required to register its business as VAT business entity and must issue a separate VAT invoice/receipt. Also, the sale of books, newspaper, magazines, reviews and bulletin in digital or electronic format or computerized versions, including but not limited to e-books, e-journals, electronic copies, online library services, CDs and software shall be subject to VAT. Moreover, VAT is an indirect tax payable by the seller and not the purchaser of goods. Thus, the shifting of VAT to A Co. does not make it the person directly liable, and, therefore, it cannot invoke its tax exemption privilege to avoid the passing on or shifting of VAT. Hence, its purchase of goods, properties, or services from its suppliers shall nevertheless be subject to the 12% VAT. [BIR RULING NO. VAT 374-2020, JULY 3, 2020]
VAT EXEMPT AND ZERO-RATING PRIVILEGES ARE ONLY LIMITED TO NECESSARY PURCHASES TO IMPLEMENT INTERNATIONAL AGREEMENT FROM WHICH PRIVILEGES AROSE
The Australian Embassy is seeking confirmation that the purchases of C Co., the managing contractor of the ASEAN-Australia Counter-Trafficking (ASEAN-ACT), ARE exempt from VAT. The ASEAN-ACT is pursuant to the General Agreement on Development Cooperation (GADC) between the Philippines and Australia. In ruling, the BIR made reference to Article 7 of the GADC which provides that project supplies and services shall be subject to VAT at 0% rate while importation of goods shall be exempt from VAT. In relation to Article 7 of the GADC, Section 106(A)(2)(b), 108(B)(3) and 109(1)(K) of the 1997 Tax Code, provides VAT zero-rating and exemption privilege on purchases and importations pursuant to an international agreement to which the Philippines is a signatory. It is emphasized, however, that the VAT privilege shall only be limited to the purchase of good and services and importation of goods necessary to implement the ASEAN-ACT and GADC. [BIR ITAD RULING NO. 001-20, JANUARY 6, 2020]
VII. BIR AND LRA SHARE RECORDS TO IMPROVE TAX ASSESSMENTS AND COLLECTIONS
Revenue Memorandum Circular (RMC) No. 123-2020, issued on November 23, 2020, circularizes the full text of the Memorandum of Agreement (MOA) between the BIR and the LRA on sharing of records in aid of improving tax assessments and collections. The agreement allows LRA to share with BIR the personal data of registered property owners. The BIR can also share personal data of taxpayers with the LRA, which the latter can use to validate tax declarations. The BIR and the LRA shall implement appropriate security measures to ensure protection of the personal information of data subjects, including the policy for retention, destruction and disposal of records.
VIII. BIR CLARIFIES THE LIST OF VAT-EXEMPT DRUGS PURSUANT TO THE CLARIFICATION RAISED BY FDA
Revenue Memorandum Circular (RMC) No. 122-2020, issued on November 23, 2020, circularizes the letter from the Food and Drug Administration (FDA) regarding clarification on the List of VAT-Exempt Drugs under Joint Administrative Order (A.O.) No. 2-2018. In the letter, FDA Director clarifies certain drug products included in the lists initially provided by the FDA that were circulated through RMC No. 62-2020 and RMC No. 101-2020, which is based on the International Non-Proprietary Name (INN) or generic name of the drug products that include salt forms.
IX.CTA CASES DIGEST
- Absence of Letter of Authority (LOA)authorizing Revenue Officer (RO) to examine taxpayer makes the assessment void; Memorandum of Assignment (MOA) signed by Revenue District Officer (RDO) cannot be treated as a valid loa
- Protests shall be considered a request for reconsiderationunless it is clearly indicated that it is for reinvestigation; different consequences of request for reinvestigation and reconsideration
- Courts are mandated to make a ruling despite the silence, obscurity or insufficiency of the laws
- 3-year prescriptive periodapplies to withholding tax assessments; compromise penalty is consensual in nature
- Assessment has attained finality due to absence of valid protest letter filed and only a mere transmittal letterwas submitted; laws are to be applied prospectively, unless retroactive application was provided for
- Violation of the rule against forum shoppingwarrants the dismissal of petition
- Taxpayers must strictly comply with the conditions providing tax exemption for the claim of tax refundto prosper
- Commissioner can decide a refundclaim even if Philippine Economic Zone Authority (PEZA) certificates were not identified; mere general averment of CIR that taxpayer failed to substantiate with proper documentary evidence is not sufficient to convince the court
- Input vat proof of payment is essential to successfully prosecute a vat refund/credit claim;evidence, if not formally offered, may only be considered if identified by the party’s witness and incorporated in case records; taxpayer must present three (3) documents for a sale renewable energy (re) developers qualify for vat zero-rating; power to assess a taxpayer strictly belongs to Commissioner of Internal Revenue (CIR) and not to the courts
- Assessment is null absent prior authority of ROwho conducted audit of taxpayer’s books of accounts and other accounting records; RDO does not have any power to authorize auditor to effect any modification to a previously-issued LOA because only the CIR or his duly authorized representatives are granted such power
[ABSENCE OF LOA AUTHORIZING RO TO EXAMINE TAXPAYER MAKES THE ASSESSMENT VOID] [MOA SIGNED BY RDO CANNOT BE TREATED AS A VALID LOA]
Petitioner IMA Land Holdings, Inc. filed a Petition for Review seeking to cancel the assessment issued by the Respondent CIR. Petitioner argued that the RO replacing the RO originally assigned to the audit has no authority in the absence of a valid LOA and that the MOA assigning the said RO was merely signed by the RDO. Further, Petitioner argued that the 15-day period within which a taxpayer may reply to Preliminary Assessment Notice (PAN) was not observed as the Final Assessment Notice (FAN) was prematurely issued. In ruling, the Court cited Section 13 of the 1997 Tax Code and Revenue Memorandum Order (RMO) No. 43-90 which provide the necessity of an LOA before RO can examine a taxpayer. The MOA assigning the new RO who continued the audit cannot be treated as a valid LOA as it is merely signed by the RDO. RDO is not one of the authorized signatories of an LOA as is not included in the enumeration of authorized signatories laid down in RMO No. 43-90. As held by the Supreme Court in the Medicard case, the absence of authority to examine makes the assessment inescapably void. Lastly, the Respondent failed to observe the 15-day period given to taxpayers to file a reply to the PAN by prematurely issuing the FAN before the lapse of the said 15-day period thereby violating the Petitioner’s right to due process. Thus, the Petition was GRANTED. [IMA LAND HOLDINGS, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9505, NOVEMBER 23, 2020]
[PROTESTS SHALL BE CONSIDERED A REQUEST FOR RECONSIDERATION UNLESS IT IS CLEARLY INDICATED THAT IT IS FOR REINVESTIGATION] [DIFFERENT CONSEQUENCES OF REQUEST FOR REINVESTIGATION AND RECONSIDERATION]
Petitioner CIR filed a Petition for Review seeking to reverse the Court’s earlier decision cancelling the assessment issued against Respondent Max’s Sta. Mesa Inc. Petitioner insisted that the Respondent’s protest to the assessment was a request for reinvestigation, thus, the Court has no jurisdiction since the assessment was rendered final and executory due to Respondent’s failure to submit supporting documents within 60 days from filing of the protest. On the other hand, Respondent countered that the determination to submit supporting documents is within the taxpayer’s discretion. In ruling, perusal of the documents showed that the Respondent did not state whether the protest was a request for reconsideration or reinvestigation. In the absence of clear indication that it is for reinvestigation, the Court is inclined to treat the protest as reconsideration. Considering the Respondent’s protest is in the nature of a request for reconsideration, its failure to submit supporting documents should not render the assessment final and executory. Regarding the issue on due process, document shows that the assessment is void for failure of the Petitioner to comply with the 15-day waiting period to reply to the Preliminary Assessment Notice (PAN) before the issuance Formal Assessment Notice (FAN). Simply put, the Petitioner did not accord the Respondent its due process as the FAN was issued on the very same day the protest to PAN. Thus, the Petition was DENIED and the earlier decision was AFFIRMED. [COMMMISSIONER OF INTERNAL REVENUE VS. MAX’S STA. MESA, INC. CTA EN BANC CASE NO. 2036, NOVEMBER 18, 2020]
COURTS ARE MANDATED TO MAKE A RULING DESPITE THE SILENCE, OBSCURITY OR INSUFFICIENCY OF THE LAWS
Petitioner Progressive Grains Milling Corp. filed a Petition for Review seeking to reverse the earlier decision of Respondent Commissioner of Customs denying Petitioner’s offer of settlement and forfeiting in favor of the government 603.15 metric tons (MT) of white rice consigned to Petitioner. Perusal of the documents showed that the subject white rice was not released as it was not covered by an import permit. Such was an excess of the importation of 7,200 MT of Thai white rice covered by an import permit issued by the National Food Authority (NFA) to Petitioner. As a result, Petitioner was assessed customs duties for the excess rice shipment in the amount of Php 4,011,182 with a 30% fine equivalent to the shipment’s landed cost. Further, the excess white rice was subject to a Warrant of Seizure and Detention issued by the District Collector of La Union. Petitioner requested an import permit from the NFA for the excess and manifested to pay the assessed custom duties. Taking cue from the Petitioner’s manifestation to pay, the District Collector recommended that the Respondent grant the Petitioner’s offer to settle. Due to the miscommunication between the Respondent and the NFA on the status of the import permit, Respondent denied Petitioner’s offer of settlement and the forfeiture of the subject white rice in favor of the Government. Given that the Petitioner has no fault on its part, the Court has ruled pursuant to Article 9 of the Civil Code to GRANT the Petition, however, still mandating to pay the assessed customs duties and fine. [PROGRESSIVE GRAINS MILLING CORPORATION VS. COMMISSIONER OF CUSTOMS, CTA CASE NO. 9847, NOVEMBER 18, 2020]
[3-YEAR PRESCRIPTIVE PERIOD APPLIES TO WITHHOLDING TAX ASSESSMENTS] [COMPROMISE PENALTY IS CONSENSUAL IN NATURE]
Petitioner CIR filed a Petition for Review seeking to reverse the Court’s earlier decision cancelling the assessment issued against Respondent First Philippine Electric Corporation. Petitioner argued that the assessment for withholding tax is imprescriptible and what is being collected from the withholding agent is the penalty for failure to perform its duty. Moreover, it argued that the Respondent is liable to imposable compromise penalty. In ruling, the Court cited the Supreme Court case of Commissioner of Internal Revenue vs. La Flor Dela Isabela, Inc., wherein it was held that the withholding tax assessment is not merely an imposition of penalty on the withholding agent and that the collection of withholding taxes falls within the purview of Section 203 of the Tax Code. Thus, the three (3) year prescriptive period applies to withholding tax assessments. As to the compromise penalty, it cannot be imposed or collected without the agreement or conformity of the taxpayer as the compromise penalty is consensual in nature. Thus, the protested assessment by the taxpayer signifies that there was no agreement or conformity. The Petition was DENIED and earlier decision was AFFIRMED [COMMISSIONER OF INTERNAL REVENUE VS. FIRST PHILIPPINE ELECTRIC CORPORATION, CTA EN BANC CASE NO. 2091, NOVEMBER 11, 2020]
[ASSESSMENT HAS ATTAINED FINALITY DUE TO ABSENCE OF VALID PROTEST LETTER FILED AND ONLY A MERE TRANSMITTAL LETTER WAS SUBMITTED] [LAWS ARE TO BE APPLIED PROSPECTIVELY, UNLESS RETROACTIVE APPLICATION WAS PROVIDED FOR]
Petitioner University of the Philippines System Admin filed a Petition for Review seeking to reverse the Court’s earlier decision upholding the assessment issued by the Respondent CIR and raising the following errors of the Court in Division: (1) That Petitioner failed to file a timely protest to Formal Assessment Notice (FAN); (2) That assessment issued against Petitioner has not yet prescribed; (3) That Petitioner is liable for alleged deficiency VAT and EWT for taxable year (TY) 2006. In ruling, the Court held that there is nothing in the records that would show that the Petitioner timely filed a valid protest to the FAN. Petitioner filed a letter, but the said letter may be considered a mere transmittal as it does not have the facts, applicable laws, rules and regulations, or jurisprudence on which it has been based. Thus, the assessment has already attained finality. On the issue of prescription, Petitioner failed to present any supporting documents for the Court to determine which portion of the amount assessed pertains to the prescribed period. Lastly, assuming Petitioner did file a valid protest, it could still not claim exemption under Republic Act (R.A.) No. 9500 for the assessment covering Taxable Year (T.Y.) 2006 as R.A. 9500 was signed into law only on April 2008. Applying the law prospectively, the exemption from all taxes and duties of all assets and revenues of Petitioner used for educational purposes or in support thereof introduced in R.A. 9500 cannot cover the assessment for T.Y. 2006. Thus, the Petition was DENIED and earlier decision was AFFIRMED. [UNIVERSITY OF THE PHILIPPINES SYSTEM ADMIN VS COMMISSIONER OF INTERNAL REVENUE, CTA EB NO. 1946, NOVEMBER 18, 2020]
VIOLATION OF THE RULE AGAINST FORUM SHOPPING WARRANTS THE DISMISSAL OF PETITION
Petitioner Cosmos Bottling Corporation filed a Petition for Review seeking to reconsider the Court’s earlier decisions dismissing its Petition for Review on the ground of forum shopping. Forum shopping exists when, as a result of an adverse judgment in one forum, a party seeks another and possibly favorable judgment in another forum other than by appeal or certiorari. Forum shopping also exists when a party institutes two or more actions or proceedings grounded on the same cause, on the gamble that one or the other would make a favorable decision. Petitioner argued that the request letters addressed to the then newly-appointed CIR are mere informal requests and that the CIR is not a forum, therefore, does not require disclosure when it filed a Petition with the CTA pursuant Section 5, Rule 7 of the 1997 Rules of Civil Procedure. In ruling, the Court cited the Supreme Court case Villanueva vs. Adre which provides the rule against forum shopping applies as well to administrative proceedings thereby denying the Petitioner’s claim that the CIR is not a forum. As laid down in Supreme Court cases, the test for determining forum shopping is whether in the two or more cases, there is identity of parties, rights or causes of action, and reliefs sought. Comparison of the letters addressed to the CIR and the Petition filed with the CTA showed the same facts, causes of action, and reliefs sought. As such, the request should have been disclosed by the Petitioner when it filed a Petition with the CTA. As a well settled rule, the penalty against forum shopping is the imposition of summary dismissal on all pending actions based on the same claim in any court. Thus, the Petition was DENIED. [COSMOS BOTTLING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2081, NOVEMBER 10, 2020]
TAXPAYERS MUST STRICTLY COMPLY WITH THE CONDITIONS PROVIDING TAX EXEMPTION FOR THE CLAIM OF TAX REFUND TO PROSPER
Petitioner Bahay Bonds 2 Special Purpose Trust filed a Petition for Review seeking refund of erroneously withheld and remitted Final Withholding Tax (FWT) arising from the interest yields of Asset-Backed Securities (ABS). Petitioner argued that the interest yields of the ABS are tax-exempt pursuant to Section 33 of Republic Act (R.A.) No. 9267, otherwise known as “The Securitization Act of 2004”, and Section 15(a) of R.A. No. 8763, otherwise known as “The Home Guaranty Corporation Act of 2000”. The interest yields, being exempt from tax, should have not been subjected to FWT. In ruling, the Court citing the laws the Petitioner used as basis for claiming tax refund held that for the claim to prosper, the Petitioner must prove that the interest yields fall under any of the following cases: (1) the investors of the issued ABS by the Petitioner, pursuant to a plan of securitization as approved by the Securities and Exchange Commission (SEC), are tax exempt; (2) the interest yield is from any low-cost or socialized housing-related ABS; and/or (3) the interests and yields earned or accumulated on mortgage, debentures, bonds, notes, mortgage and ABS, interest under lease, and other credit instruments, are issued by the Home Guaranty Corporation (HGC) or covered by its guaranty, in cash or in bonds. Perusal of the pieces of evidence presented showed that Petitioner has no proof that the ABS was issued pursuant to a plan of securitization as approved by the SEC which is essential to qualify for the first and second case. Petitioner also failed to prove that the yields earned or accumulated on the ABS was issued by the HGC or covered by its guaranty. The burden is on the taxpayer to show that he has strictly complied with the conditions for the grant of the tax refund or credit. Thus, the Petition was DENIED. [BAHAY BONDS 2 SPECIAL PURPOSE TRUST VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9916, NOVEMBER 9, 2020]
[COMMISSIONER CAN DECIDE A REFUND CLAIM EVEN IF PEZA CERTIFICATES WERE NOT IDENTIFIED] [MERE GENERAL AVERMENT OF CIR THAT TAXPAYER FAILED TO SUBSTANTIATE WITH PROPER DOCUMENTARY EVIDENCE IS NOT SUFFICIENT TO CONVINCE THE COURT]
Petitioner CIR filed a Petition for Review seeking to reverse the Court in Division’s earlier decision partially granting refund of excess and unutilized input VAT attributable to zero-rated sales in favour of the Respondent Oncho Philippines Inc. Petitioner claimed that sales to some of Respondent’s clients should not be considered as zero-rated sales since the PEZA certificates were not identified and submitted during the administrative claim. Also, Respondent failed to substantiate with proper documentary evidence its domestic purchases with official receipts/invoices. In ruling, perusal of the documents showed that PEZA certificates of Respondent’s clients were duly identified by the Independent CPA. Even assuming that PEZA certificates were not identified, Petitioner can always immediately decide a refund claim, in view of the recognized principle that the BIR ought to know the records of all taxpayers. Moreover, mere general averment of Petitioner that Respondent failed to substantiate with proper documentary evidence its domestic purchases of services and goods, is not sufficient to convince the Court En Banc that a reversible error was committed by the Court in Division as the same is unsubstantiated, too vague, highly speculative, and uncertain. Thus, the Petition was DENIED and the earlier decision was AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. ONCHO PHILIPPINES INCORPORATED, CTA CASE NO. 9942, OCTOBER 30, 2020]
[INPUT VAT PROOF OF PAYMENT IS ESSENTIAL TO SUCCESSFULLY PROSECUTE A VAT REFUND/CREDIT CLAIM] [EVIDENCE, IF NOT FORMALLY OFFERED, MAY ONLY BE CONSIDERED IF IDENTIFIED BY THE PARTY’S WITNESS AND INCORPORATED IN CASE RECORDS] [TAXPAYER MUST PRESENT THREE (3) DOCUMENTS FOR A SALE RE DEVELOPERS QUALIFY FOR VAT ZERO-RATING] [POWER TO ASSESS A TAXPAYER STRICTLY BELONGS TO CIR AND NOT TO THE COURTS]
Ilalliburton Worldwide Limited-Philippine Branch (“HWL”) and CIR filed a consolidated Petitions for Review seeking modification of Court in Division’s earlier decision partially granting HWL’s claim for refund or issuance of TCC representing its unutilized excess input VAT for taxable year 2014 attributable to its zero-rated sales. In ruling, the Court disagreed with HWL claims that BIR Form 1600 is the proof for the claimed input tax on income from non-resident. In Section 110 of the Tax Code, proof of payment of the input VAT is essential to prosecute a VAT refund/credit claim. On the argument of HWL that said documents were attached to the Omnibus Motion making the same part of the records of the case lacks merit. It was held that evidence, if not formally offered, may only be considered identified by the party’s witness and were incorporated in case records. Moreover, HWL failed to prove that the services it rendered to RE developers qualify for VAT zero-rating since HWL was only able to present DOE Certificate of Registration. However, HWL failed to show RE developer’s Registration with BOI and Certificate of Endorsement by the DOE. Finally, the Court cannot impose VAT on HWL’s sales that were not proven to have qualified for VAT zero-rating. Basic is the rule that the power to assess a taxpayer strictly belongs to CIR and not to the Courts. In view of the foregoing, the Court in Division’s earlier resolutions and decisions were REVERSED and SET ASIDE for failure of HWL to prove entitlement to VAT refund or TCC. [ILALLIBURTON WORLDWIDE LIMITED-PHILIPPINE BRANCH VS. COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF INTERNAL REVENUE VS. ILALLIBURTON WORLDWIDE LIMITED- PHILIPPINE BRANCH, CTA EN BANC CASE NO. 2042, OCTOBER 29, 2020]
[ASSESSMENT IS NULL ABSENT PRIOR AUTHORITY OF RO WHO CONDUCTED AUDIT OF TAXPAYER’S BOOKS OF ACCOUNTS AND OTHER ACCOUNTING RECORDS] [RDO DOES NOT HAVE ANY POWER TO AUTHORIZE AUDIT OR TO EFFECT ANY MODIFICATION TO A PREVIOUSLY-ISSUED LOA BECAUSE ONLY THE CIR OR HIS DULY AUTHORIZED REPRESENTATIVES ARE GRANTED SUCH POWER]
Petitioner CIR filed a Petition for Review seeking to reverse CTA 1st Division’s earlier decision cancelling the assessment issued against the Respondent Lancaster Colors, International, Inc. In ruling, absent any prior authority on the part of the RO who conducted the audit examination of taxpayer’s books of accounts and other accounting records, the deficiency tax assessment is a nullity. Perusal of the documents showed that after the subject LOA was issued by Regional Director Mendoza in favor of RO Avila to conduct tax investigation, the BIR through RDO Ramos-Lafuente subsequently issued a MOA RO Garfin and GS Aguinaldo. RDO does not have any power to authorize audit examination of taxpayers or to effect any modification or amendment to a previously-issued LOA because only the CIR or his duly authorized representatives are granted such power. Thus, assessment is invalid for lack of the requisite LOA. Consequently, the Petition was DENIED and the earlier decision was AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. LANCASTER COLORS, INTERNATIONAL, INC., CTA EN BANC CASE NO. 2048, OCTOBER 28, 2020]
X. TAX AND BUSINESS-RELATED NEWS [NOVEMBER 21-29]
- DOF sees CREATE transmittal to Malacañang in December
- SEC taps PayMaya for digital payments
- Makati urges SMEs to tap LGU’s cash grant
- BIR implements another reshuffle to hit 2021 tax goal
- Finance chief orders BIR, Customs to investigate cooperatives used for rice imports
- CREATE bill hurdles Senate on final reading after DOF agrees to easing some provisions
- France says will apply ‘digital tax’ for 2020 despite US retaliation threat
- Revenue collections defy pandemic, exceed targets in Central Luzon
- Duterte reveals names of BIR personnel dismissed over corruption
- DTI urges gyms to waive membership fees during lockdown
- 107-year old Manila school to close doors in 2022
- COA disallows another P153.13M worth of tax credits
DOF sees CREATE transmittal to Malacañang in December [Manila Bulletin, November 29, 2020]
The Department of Finance (DOF) is hopeful that Congress could transmit to President Rodrigo R. Duterte its unified version of the corporate recovery and tax incentives for enterprises (CREATE) law within December.
SEC taps PayMaya for digital payments [Manila Bulletin, November 29, 2020]
Filipino businessmen can soon pay cashless for their Securities and Exchange Commission (SEC) registration, business licenses, fines, penalties, seminars and trainings, via the commission’s Paymaya-powered online portal.
Makati urges SMEs to tap LGU’s cash grant [Manila Bulletin, November 29, 2020]
The local government covering the country’s financial hub is urging business owners to tap its cash grant program that aims to help the local economy recover from the pandemic-induced downturn.
BIR implements another reshuffle to hit 2021 tax goal [Manila Bulletin, November 29, 2020]
The Bureau of Internal Revenue (BIR) has reshuffled another batch of revenue district officers to boost the chances of the agency in reaching its huge collection target next year.
Source: BIR implements another reshuffle to hit 2021 tax goal – Manila Bulletin (mb.com.ph)
Finance chief orders BIR, Customs to investigate cooperatives used for rice imports [ABS-CBN News, November 27, 2020]
Finance Secretary Carlos Dominguez III has ordered the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) to help the Department of Agriculture in investigating the alleged use of cooperatives by private traders as dummies for rice imports.
CREATE bill hurdles Senate on final reading after DOF agrees to easing some provisions [ABS-CBN News, November 26, 2020]
The Senate on Thursday approved on final reading the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, after the Department of Finance (DOF) agreed to ease several provisions that might discourage investors from coming to the Philippines.
France says will apply ‘digital tax’ for 2020 despite US retaliation threat [ABS-CBN News, November 25, 2020]
France will require online technology giants to pay a new “digital tax” on their 2020 earnings, the finance ministry said Wednesday, despite Washington’s warning that it could retaliate with new tariffs on French imports.
Revenue collections defy pandemic, exceed targets in Central Luzon [Philippine Daily Inquirer, November 25, 2020]
Despite the ongoing COVID-19 pandemic, revenue collection by the Bureau of Internal Revenue (BIR) in Central Luzon surpassed its target for October by over 60 percent.
Duterte reveals names of BIR personnel dismissed over corruption [Manila Bulletin, November 24, 2020]
President Duterte has bared another list of government personnel, this time from the Bureau of Internal Revenue (BIR), who had been dismissed for alleged corruption.
Source: Duterte reveals names of BIR personnel dismissed over corruption – Manila Bulletin (mb.com.ph)
DTI urges gyms to waive membership fees during lockdown [ABS-CBN News, November 24, 2020]
The Department of Trade and Industry urged gyms and sports facilities to waive the membership payments they were supposed to collect during the COVID-19 lockdowns.
107-year old Manila school to close doors in 2022 [Manila Bulletin, November 22, 2020]
The College of the Holy Spirit Manila (CHSM) in Mendiola is closing its doors in 2022, citing difficulties in attracting new students and operational challenges brought about by the coronavirus pandemic.
Source: 107-year old Manila school to close doors in 2022 – Manila Bulletin (mb.com.ph)
COA disallows another P153.13M worth of tax credits [Philippine Daily Inquirer, November 21, 2020]
Another P153.13 million in tax credit certificates (TCCs) earlier issued by an arm of the Department of Finance (DOF) through a scam involving unqualified—and some even nonexistent—garments and textile companies have been disallowed by the Commission on Audit (COA) as part of the crackdown on illegal tax perks given away over a decade ago.
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