BPS TELLS BANKS REGULATED FIRMS: COMPLY WITH 60-DAY GRACE PERIOD ON LOANS UNDER BAYANIHAN 2 + SC DECLARES PROVISIONS ALLOWING MORE TAKEOVER OF PECO ASSETS VALID
Other Relevant Tax Updates:
- Securities and Exchange Commission (SEC) Memorandum Circular (MC) Digest on Additional Guidelines on Security Deposits and Change of Resident Agent of Foreign Corporations
- Court of Tax Appeals (CTA) Cases Digest
- Tax and Business-Related News [September 14-18]
I. SEC MC DIGEST ON ADDITIONAL GUIDELINES ON SECURITY DEPOSITS AND CHANGE OF RESIDENT AGENT OF FOREIGN CORPORATIONS
SEC MC No. 24 Series of 2020, dated August 24, 2020, provides additional guidelines on posting of additional and substitution of security deposits, and change of resident agent of foreign corporations. The circular was issued to complement the previous extension deadlines for the filing of securities deposit and Audited Financial Statements of foreign corporations because of COVID pursuant to the provisions of the Revised Corporation Code and Bayanihan to Heal as One Act.
II. CTA CASES DIGEST
- Requisites to resort to “best-evidence obtainable rule”
- Dividends derived by a holding companyis not subject to local business tax (lbt), unless it is a bank or financial intermediary
- Requisites for valid input vat refundarising from zero-rated sales
- Tax amnesty of 2007does not extend to withholding tax; as part of due process, Preliminary Assessment Notice (PAN) and Formal Assessment Notice (FAN) must show in details the facts on which the proposed assessment is based
- BIR is bound to wait for the expiration of 15 days from date of receipt of PANbefore issuing FAN
REQUISITES TO RESORT TO “BEST-EVIDENCE OBTAINABLE RULE”
Petitioner 8199 Convenience Corporation filed a Petition for Review seeking to reverse the Court’s earlier decision holding the Petitioner liable to the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner argued that its assessment based on the “best evidence obtainable rule” is without basis, and, therefore, violated its right to due process. Further, it cited Revenue Memorandum Circular (RMC) No. 23-00 which provides that resort to the aforesaid rule can only be done in any of the following: (1) the report or records requested from the taxpayers are not forthcoming, that is the records are lost; (2) the taxpayer refuses to submit such records; and, (3) the reports submitted are false, incomplete or erroneous. However, Petitioner admitted that it had omitted transmittal of its books of accounts, official receipts, invoices as well as other supporting documents to the Respondent with the reason that it had experiences in the past wherein the latter did not return its complete records. In ruling, the Court found no error in Respondent’s resort to the “best evidence obtainable rule” as Petitioner’s case falls under RMC No. 23-00, specifically, when a taxpayer refuse to submit the records required. Thus, the Petition was DENIED. [8199 CONVENIENCE CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA EB NO. 1912, SEPTEMBER 3, 2020]
DIVIDENDS DERIVED BY A HOLDING COMPANY IS NOT SUBJECT TO LBT, UNLESS IT IS A BANK OR FINANCIAL INTERMEDIARY
Petitioner Makati City Treasurer and City of Makati filed a Petition for Review seeking to reverse the decision of the Regional Trial Court cancelling the LBT assessment issued against the Respondent Mermac Inc. In ruling, City Treasurer has no authority to represent the City of Makati given the absence of prior ordinance or resolution from the Sangguniang Panglungsod which is necessary for any city official to exercise such power. On the substantive issue on the imposition of LBT on the dividend income of holding companies, it is essential to determine whether an entity is performing functions or activities that may be classified as a bank or other financial institutions. Since the Court found that the Respondent was not performing similarly to a bank or other financial institution, the Petition was DENIED. [MAKATI CITY TREASURER AND CITY OF MAKATI VS. MERMAC INC, CTA EB NO.2131, SEPTEMBER 2, 2020]
REQUISITES FOR VALID INPUT VAT REFUND ARISING FROM ZERO-RATED SALES
Petitioner Gamesa Eolica, SL-Unipersonal-Philippine Branch filed a Petition for Review seeking for refund or issuance of Tax Credit Certificate (TCC) of its alleged excess and unutilized input VAT arising from zero-rated sales to Renewable Energy (RE) Developers in the amount of Php 12,646,222.73. In ruling, the Court discussed the criteria that a claimant-taxpayer must satisfy in order to be entitled to refund of unutilized input VAT attributable to zero-rated sales, to wit: (1) the claims should be filed within the prescribed period; (2) there must be zero-rated sales; (3) the input VAT should be incurred or paid; (4) the input VAT should be attributable to zero-rated sales; and (5) that the input VAT should not be applied against any output VAT liability. In the appreciation of support, it was noted that the Petitioner is compliant with all of the foregoing requisites except that some documents did not fully substantiate its claims. The Court agreed with the exceptions/findings of the Independent CPA and his recommendation to disallow Petitioner’s input VAT in the amount of Php 2,035,545.54 for failure to meet the substantiation requirements. Thus, the Petition was PARTIALLY GRANTED, ordering the Respondent CIR to refund or to issue TCC in favor of the Petitioner in the reduced amount of Php 10,610,677.24. [GAMESA EOLICA, SL-UNIPERSONAL-PHILIPPINE BRANCH VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9668, SEPTEMBER 2, 2020]
[TAX AMNESTY OF 2007 DOES NOT EXTEND TO WITHHOLDING TAX] [AS PART OF DUE PROCESS, PAN AND FAN MUST SHOW IN DETAILS THE FACTS ON WHICH THE PROPOSED ASSESSMENT IS BASED]
Petitioner Morning Star Milling Corporation filed a Petition for Review seeking reversal of the Court’s earlier decision finding the Petitioner liable for alleged deficiency assessment. Petitioner argued that the Respondent CIR committed grave and reversible error in issuing the decision considering that the withholding taxes are covered by Republic Act (R.A.) No. 9480 or the Tax Amnesty Law of 2007; that the PAN and FAN are devoid of facts on which assessment were based; that the Waiver executed was invalid; and the period to assess has prescribed. In ruling, the Court held that the Tax Amnesty under R.A. No. 9489 does not extend to withholding agents with respect to their withholding tax liabilities, thus, subject tax assessment is not covered by the immunities and privileges granted under the amnesty. However, perusal of the documents showed that the subject PAN and FAN are void, as a consequence of the violation of Petitioner’s right to due process. As part of due process in the issuance of tax assessment, Petitioner must be fully apprised of the factual bases of the assessments, and must not be left unaware on how Respondent CIR appreciated the explanations or defenses raised in connection with the assessments. Consequently, tax assessment are null and void, thus, it is unnecessary to address the other issues raised by the parties. The, Petition was GRANTED and the earlier decision was REVERSED and SET ASIDE. [MORNING STAR MILLING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9294, AUGUST 26, 2020]
BIR IS BOUND TO WAIT FOR THE EXPIRATION OF 15 DAYS FROM DATE OF RECEIPT OF PAN BEFORE ISSUING FAN
Petitioner Jollibee Worlwide Pte. Ltd. filed an Amended Petition for Review seeking to cancel the assessment issued by the Respondent CIR, and to refund or issue Tax Credit Certificate (TCC) representing the illegally assessed and collected taxes. Petitioner argued that the assessment was issued in violation of its right to due process since the FAN was issued even before the expiration of the 15-day period to respond to PAN pursuant to Revenue Regulations (RR) No. 12-99. In ruling, the Court held that the Respondent failed to observe due process requirements in the issuance of FAN. Under Section 3 of RR No. 12-99, CIR or his duly authorized representative is duty bound to wait for the expiration of 15 days from the date of receipt of the PAN before issuing the FAN. Perusal of the documents showed that the Petitioner received the PAN dated December 28, 2012 on January 10, 2013. Subsequently, Petitioner received FAN on January 15, 2013, which is only five (5) days from the receipt of PAN. Thus, the assessment was declared void ordering the Respondent to refund the Petitioner of erroneously paid tax. [JOLLIBEE WORLWIDE PTE. LTD. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9005, AUGUST 26, 2020]
III. TAX AND BUSINESS-RELATED NEWS [SEPTEMBER 14-18]
- BSP tells banks, regulated firms: Comply with 60-day grace period on loans under Bayanihan 2
- Safeguard duties on cars opposed
- Bank of Japan upholds policies as economy slowly revives
- 26 of 62 licensed POGOs share same address with their service providers – AMLC
- Dominguez cool to proposal for DOF to chair graft-ridden PhilHealth
- Global recession not as deep as expected: OECD
- BDO rural bank unit opens digital channels to extend ‘lifeline loans’, other services for MSMEs
- SC declares provisions allowing MORE takeover of PECO assets valid
- Fed seeks to offer reassurance amid push for new US stimulus
- Virus cost global tourism $460 billion in January-June: UN
- Low interest rates ‘here to stay’: European economist
- Foreign direct investments up in June as advanced economies reopen: BSP
- Philippines borrows 50-B yen from Japan for disaster management, COVID-19 response
- Landbank offers P150,000 loan for private school students
- Higher dollar remittances from land-based Pinoy workers in July offset losses from seafarers
- NTC’s order recalling frequencies has ‘no additional impact’, says ABS-CBN
BSP tells banks, regulated firms: Comply with 60-day grace period on loans under Bayanihan 2 [ABS-CBN News, September 18, 2020]
All financial institutions regulated by the Bangko Sentral ng Pilipinas are “immediately required” to comply with the 60-day grace period on loans under the Bayanihan 2 law which took effect on Sept. 15, Gov. Benjamin Diokno said Friday.
Safeguard duties on cars opposed [Philippine Daily Inquirer, September 18, 2020]
A group of vehicle importers said they were concerned about an ongoing government probe of their vehicle importation in the past few years, warning that it would deter the flow of new investments into the sector at a time when demand was already low.
Source: https://business.inquirer.net/307556/safeguard-duties-on-cars-opposed#ixzz6YNoziyEI
Bank of Japan upholds policies as economy slowly revives [ABS-CBN News, September 17, 2020]
Japan’s central bank on Thursday said it would maintain its ultra-loose monetary policy as the virus-hit economy gradually picks up, with no big changes announced the day after new Prime Minister Yoshihide Suga took office.
Source: https://news.abs-cbn.com/business/09/17/20/bank-of-japan-upholds-policies-as-economy-slowly-revives
26 of 62 licensed POGOs share same address with their service providers – AMLC [Philippine Daily Inquirer, September 17, 2020]
Twenty-six of the 62 registered Philippine Offshore Gaming Operators (POGOs) in the Philippines share the same address with their service providers, the Anti-Money Laundering Council (AMLC) said Thursday.
Dominguez cool to proposal for DOF to chair graft-ridden PhilHealth [Philippine Daily Inquirer, September 17, 2020]
Finance Secretary Carlos G. Dominguez III is cool to the proposal of Senate President Tito Sotto that the head of the Department of Finance (DOF)-which oversees the country’s fiscal health-should also chair the board of the graft-ridden Philippine Health Insurance Corp. (PhilHealth).
Global recession not as deep as expected: OECD [ABS-CBN News, September 16, 2020]
The global recession this year will not be as deep as expected as a result of countries’ efforts to counter the economic fallout from the coronavirus pandemic, the OECD said on Wednesday.
Source: https://news.abs-cbn.com/business/09/16/20/global-recession-not-as-deep-as-expected-oecd
BDO rural bank unit opens digital channels to extend ‘lifeline loans’, other services for MSMEs [ABS-CBN News, September 16, 2020]
BDO Unibank said Wednesday its rural banking unit opened digital channels to reach more consumers in need of loans and other services.
SC declares provisions allowing MORE takeover of PECO assets valid [ABS-CBN News, September 16, 2020]
In a closely-contested vote, the Supreme Court ruled Tuesday in favor of MORE Electric and Power Corp. against rival Panay Electric Company (PECO) in declaring the takeover provisions of its franchise valid, said SC spokesperson Brian Keith Hosaka.
Fed seeks to offer reassurance amid push for new US stimulus [ABS-CBN News, September 16, 2020]
Armed with a new interest rate strategy, the Federal Reserve will seek to reassure the US economy rattled by the coronavirus downturn as it wraps up its policy meeting on Wednesday.
Virus cost global tourism $460 billion in January-June: UN [ABS-CBN News, September 16, 2020]
The coronavirus crisis cost the global tourism sector $460 billion in lost revenue during the first six months of 2020 as the number of people traveling plunged, the UN said Tuesday.
Source: https://news.abs-cbn.com/business/09/16/20/virus-cost-global-tourism-460-billion-in-january-june-un
Low interest rates ‘here to stay’: European economist [ABS-CBN News, September 15, 2020]
Record low interest rates are “here to stay” as monetary authorities across the globe seek to accelerate the recovery of businesses affected by the COVID-19 pandemic, an economist based in Europe said on Tuesday.
Source: https://news.abs-cbn.com/business/09/15/20/low-interest-rates-here-to-stay-european-economist
Foreign direct investments up in June as advanced economies reopen: BSP [ABS-CBN News, September 15, 2020]
Net inflows of foreign direct investments (FDI) grew 7.1 percent in June to $481 million compared to the same month last year, the Bangko Sentral ng Pilipinas said Tuesday.
Philippines borrows 50-B yen from Japan for disaster management, COVID-19 response [ABS-CBN News, September 15, 2020]
The Philippines is borrowing 50 billion yen (around $470 million or P22.9 billion) from Japan to fund disaster management and quick response to the COVID-19 crisis, the Department of Foreign Affairs said on Tuesday.
Landbank offers P150,000 loan for private school students [ABS-CBN News, September 15, 2020]
The state-run Land Bank of the Philippines (Landbank) is offering loans up to P150,000 per student to parents and guardians who may find it difficult to raise money for tuition during the COVID-19 pandemic, the Department of Finance (DOF) said.
Source: https://news.abs-cbn.com/business/09/15/20/landbank-offers-p150000-loan-for-private-school-students
Higher dollar remittances from land-based Pinoy workers in July offset losses from seafarers [Philippine Daily Inquirer, September 15, 2020]
Dollar remittances from expatriate Filipinos grew for the second consecutive month in July due mainly to the increase in the hard currency sent home by land-based workers with longer-term employment contracts, according to the central bank.
NTC’s order recalling frequencies has ‘no additional impact’, says ABS-CBN [ABS-CBN News, September 14, 2020]
ABS-CBN Corp said Monday the National Telecommunications Commission’s order to recall frequencies previously assigned to ABS-CBN Corp and ABS-CBN Convergence Inc has “no additional impact” to the company.
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