SUPREME COURT CASES ON THE BIR’S ALPHALISTING REQUIREMENT, REFUND OF LOCAL BUSINESS TAX OF A TOLLWAY OPERATOR & ERRONEOUS INCLUSION OF A DEAD PERSON AS AN INCORPORATOR
Other Relevant Tax Updates:
- TAX & BUSINESS-RELATED NEWS [FEBRUARY 20-28]
- SUPREME COURT CASES ON THE BIR’S ALPHALISTING REQUIREMENT, REFUND OF LOCAL BUSINESS TAX OF A TOLLWAY OPERATOR & ERRONEOUS INCLUSION OF A DEAD PERSON AS AN INCORPORATOR
- DEPARTMENT OF JUSTICE OPINION ON THE FIRB EXTENT OF AUTHORITY TO GRANT TAX INCENTIVES, REVOCATION OF ACCREDITATION OF ERRING HEALTHCARE PROVIDER & PEZA INQUIRY ON THE RULE-MAKING POWER OF THE BIR
1. TAX & BUSINESS-RELATED NEWS [FEBRUARY 20-28]
- SEC flags Platinum coin, pawnshop scam
- 10 high-rise buildings to rise in Cebu City
- Grab yet to refund P 6M to users–PCC
- Makati City padlocks Smart head office over P3.2B in unpaid taxes, lack of business permit
- Alternergy secures 3 new service contracts for offshore wind projects
- Incentives for local pharma, health-care sectors urged
- BSP eyes removal of fees for small-value fund transfers
- Borrowers of closed banks get payment discounts
- BOI to establish one-stop-action center for strategic investments
- Manila among worst cities for creatives — study
- LTO eyes standard driving school rates
- BIR to boost int’l tax collection
- Bill bats for 2-day, monthly ‘menstruation leaves’
- Marcos abolishes DOF’s one-stop-shop tax center due to ‘rightsizing, scams’: Palace
SEC flags Platinum coin, pawnshop scam [Inquirer Mobile, February 28, 2023]
In an advisory on Monday, the SEC said the company, with a business name of Platinumcoin Pawnshop, has no certificate of authority to provide both financial services.
10 high-rise buildings to rise in Cebu City [SunStar Cebu, February 28, 2023]
THE construction of 10 high-rise buildings will now begin after President Ferdinand Marcos Jr. and local officials broke ground on the Cebu City South Coastal Urban Development (Scud) housing project in Barangay San Nicolas on Monday, Feb. 27, 2023.
Grab yet to refund P 6M to users–PCC [Inquirer Mobile, February 28, 2023]
To recall, the PCC ordered Grab Holdings, Inc. and MyTaxi.PH Inc. back in March of last year to pay the remaining P19.3 million to eligible users for violating its price monitoring commitment.
Makati City padlocks Smart head office over P3.2B in unpaid taxes, lack of business permit [Inquirer Mobile, February 27, 2023]
Smart argued that the city has no jurisdiction to audit the company’s financial statements and operations in other branches nationwide, adding that it had submitted all records related to its operations within the city and paid the necessary taxes.
Alternergy secures 3 new service contracts for offshore wind projects [Manila Bulletin, February 27, 2023]
Pioneer renewable energy firm Alternergy Holdings Corporation (Alternergy) has cornered three new service contracts for prospective commercial development of offshore wind farm projects along Tablas Strait straddling Mindoro and Antique provinces.
Incentives for local pharma, health-care sectors urged [Inquirer Mobile, February 27, 2023]
In November of last year, the Philippine Pharmaceutical Manufacturers Association (PPMA) said that only 32 percent of pharmaceutical products being sold in the Philippines are locally manufactured, meaning that the majority of the medicines bought in local stores are imported.
BSP eyes removal of fees for small-value fund transfers [GMA News Online, February 26, 2023]
In a post on his official Twitter account, Medalla cited that a P15 fee—charged by a number of banks for interbank transfers—for a P200 transaction would be “quite large” relative to the amount being sent.
Borrowers of closed banks get payment discounts [The Philippine Star, February 26, 2023]
The PDIC has expanded the implementation of its Closed Bank Loan Incentive Program via CLIP 2.0 that allow borrowers to avail of discounts as they pay off their financial obligations to banks previously shut down by the central bank.
BOI to establish one-stop-action center for strategic investments [Manila Bulletin, February 26, 2023]
Executive Order 18, which mandates the creation of green lanes for strategic investments, mandates the creation of the OSAC-SI within six months from the issuance of the EO. The order was issued on Feb. 13, 2023.
Manila among worst cities for creatives — study [The Philippine Star, February 26, 2023]
The metrics showed that the best city for creatives was the Japanese capital Tokyo, which had the highest number of creative jobs, green spaces, galleries and classes/workshops giving it a dominant 8.0 score.
LTO eyes standard driving school rates [The Philippine Star, February 26, 2023]
The theoretical and practical driving courses are required for new applicants for driver’s licenses, even for students and non-professionals, under Republic Act 1030 that extended the validity of driver’s licenses to 10 years.
BIR to boost int’l tax collection [Inquirer Mobile, February 23, 2023]
The Bureau of Internal Revenue (BIR) is looking to create a separate unit to focus on international tax collection, including onshore transactions of global e-commerce firms, to plug billions of pesos of estimated tax leakage.
Bill bats for 2-day, monthly ‘menstruation leaves’ [Manila Bulletin, February 22, 2023]
Santos penned and filed House Bill (HB) No.6728, titled, “An Act granting menstruation leave of two (2) days a month with fifty (50) percent daily remuneration to all female employees in the private and public sectors”.
Marcos abolishes DOF’s one-stop-shop tax center due to ‘rightsizing, scams’: Palace [ABS-CBN News, February 22, 2023]
Administrative Order No. 4 transferred the processing and issuing of tax clearance certificates to the Bureau of Internal Revenue, while duty drawbacks were transferred to the Bureau of Customs.
2. SC CASES ON THE BIR’S ALPHALISTING REQUIREMENT, REFUND OF LOCAL BUSINESS TAX OF A TOLLWAY OPERATOR & ERRONEOUS INCLUSION OF A DEAD PERSON AS AN INCORPORATOR
[ALPHALISTING REQUIREMENT OF THE BIR SPECIFICALLY ON THE DISCLOSURE OF SENSITIVE PERSONAL INFORMATION SUCH AS THE NAME & TIN IS UNCONSTITUTIONAL] [BIR & SEC REGULATIONS WERE STRUCK DOWN FOR FAILURE TO INCLUDE GUARANTEES TO PROTECT SENSITIVE INFORMATION TO BE COLLECTED] [SEC CANNOT ENFORCE TAX LAWS & REGULATIONS] [DOF & BIR CANNOT REGULATE MATTERS PERTAINING TO SECURITIES & INVESTMENT RELATIONSHIPS]
Petitioners Philippine Stock Exchange, Inc., et.al., filed a Petition for Certiorari and Prohibition assailing the constitutionality of Revenue Regulations (RR) No. 1-2014, Revenue Memorandum Circular (RMC) No. 5-2014, and Securities and Exchange Commission Memorandum Circular (SEC MC) No. 10-2014 (collectively, the questioned regulations), for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioners argued that the right to privacy of the dividend payees would be violated when their names and Tax Identification Numbers are disclosed in the alphabetical list. On the other hand, Respondents Secretary of Finance, Commissioner of Internal Revenue (CIR), and Chairperson of SEC maintained that all withholding agents who received personal information relating to each disclosed investor are covered by the confidentiality rule of the Tax Code and SEC. In ruling, the Court finds that the questioned regulations violate the Petitioners’ right to privacy. It can be argued that the question regulations serve a compelling state interest: the effective and proper collection of taxes. However, the Respondents failed to present any evidence to show and prove that the questioned regulations were narrowly drawn as the “least restrictive means for effecting the invoked interest.” There may be abuses as a result of the enforcement of the questioned regulations: there is no assurance that the information gathered and submitted to the listed companies pursuant to the questioned regulations will be protected, and not be used for any other purposes outside the stated purpose. Moreover, the Court ruled that the SEC Chairperson had no authority to issue SEC MC No. 10-2014, in the implementation of tax laws and regulations. The Secretary of Finance and the CIR, in including the prohibition on the use of Philippine Central Depositary Inc. (PCD) Nominee in RR No. 1-2014 and RMC No. 5-2014, also acted outside their scope of authority. Consequently, the Petition was GRANTED, and the questioned regulations were STRUCK DOWN for being UNCONSTITUTIONAL. [PHILIPPINE STOCK EXCHANGE, INC., BANKERS ASSOCIATION OF THE PHILIPPINES, PHILIPPINE ASSOCIATION OF SECURITIES BROKERS & DEALERS, INC., FUND MANAGERS ASSOCIATION OF THE PHILIPPINES, TRUST OFFICERS ASSOCIATION OF THE PHILIPPINES & MARMON HOLDINGS, INC. VS. SECRETARY OF FINANCE, COMMISSIONER OF INTERNAL REVENUE & CHAIRPERSON OF THE SECURITIES & EXCHANGE COMMISSION, G.R. NO. 213860, JULY 5, 2022, UPLOADED FEBRUARY 17, 2023]
NON-PRESENTATION OF THE BOI CERTIFICATE OF REGISTRATION AT THE TIME OF PAYMENT OF LBT DOES NOT CONSTITUTE A WAIVER TO RECOVER THE TAX ERRONEOUSLY COLLECTED & PAID
Petitioners City Government of Makati and its City Treasurer filed a Petition for Review on Certiorari assailing the earlier Decision and Resolution of the Court of Tax Appeals (CTA) En Banc affirming with modification the Decision granting the Respondent South Luzon Tollway Corporation’s claim for a tax refund. Petitioners maintained that it was justified in assessing and collecting Local Business Tax (LBT) from the Respondent, as well as denying the refund thereof, because it never presented its Board of Investments (BOI) Certificate of Registration at the time the said tax was paid. Petitioners also posited that assuming that the Respondent is entitled to its claim, it may only be granted in the form of tax credit. In ruling, the Court held that the non-presentation of the BOI Certificate of Registration at the time of payment of LBT is not fatal to the Respondent’s case. Here, the Respondent had successfully discharged the burden of proving tax refund. The Respondent proved its actual payment of LBT subject to refund, as evidenced by Official Receipt issued by Petitioners. Likewise, the Respondent submitted its BOI Certificate of Registration to show that it is a pioneer enterprise exempt from paying said tax when Petitioners collected the same. Thus, the Respondent, is entitled to be refunded of the amount it paid to the Petitioners, in cash, contrary to the Petitioners’ asseveration that the Respondent may only avail of a tax credit. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED. [THE CITY GOVERNMENT OF MAKATI & THE CITY TREASURER OF MAKATI VS. SOUTH LUZON TOLLWAY CORPORATION, G.R. NO. 258121, SEPTEMBER 28, 2022, UPLOADED JANUARY 16, 2023]
[ERRONEOUS INCLUSION OF A DEAD PERSON AS INCORPORATOR DOES NOT CALL FOR THE IMMEDIATE DISSOLUTION OF THE COMPANY] [QUASI-JUDICIAL AGENCIES LIKE THE SEC DO NOT HAVE THE RIGHT TO SEEK THE REVIEW OF AN APPELLATE COURT DECISION REVERSING ANY OF ITS RULINGS BECAUSE IT IS NOT A REAL PARTY IN INTEREST]
Petitioners Azucena Locsin-Garcia (Azucena) and the Securities and Exchange Commission (SEC) filed their separate Petitions for Review assailing the earlier Decision and Resolution of the Court of Appeals (CA) declaring that the inclusion of the name of Pacita Javier (Pacita) as incorporator of Respondent AZ 17/31 Realty, Inc. albeit she was already deceased, did not amount to fraud insofar as the procurement of the company’s certificate of registration was concerned. Azucena sought revocation of the Respondent’s registration because the Respondent made it appear that Pacita was still very much alive, was able to sign the Articles of Incorporation (AOI), act as initial director when in truth, and in fact, she was already dead three and a half (3 ½) years prior to its incorporation. SEC argued that the falsification and misrepresentation of material facts in the AOI amount to fraud. On the other hand, granting it committed a mistake in the AOI, Respondent prayed that any of the lesser penalties of suspension and/or fine be imposed in lieu of revocation. In ruling, the Court held that the Petition of SEC must be expunged for lack of capacity to sue. On Azucena’s Petition, the Court discussed that while Pacita’s inclusion as an incorporator may be the subject of a criminal case for fraud under the Revised Penal Code, it does not equate to fraud contemplated under the Corporation Code for dissolution of a corporation. The name of Pacita should be dropped as an incorporator and her subscription, including earnings, returned to her estate. Instead of hastily ordering the dissolution of the Respondent, the SEC should have ordered it to amend its AOI. For compliance purposes, the Court deemed that a period of six (6) months is reasonable. Non-compliance will merit the Respondent’s revocation of its certificate of registration. Consequently, the Petition of SEC was DENIED on grounds that it is not a real party in interest. The Petition of Azucena was also DENIED, and the earlier Decision and Resolution were AFFIRMED with MODIFICATION. [SECURITIES & EXCHANGE COMMISSION VS. AZ 17/31 REALTY, INC., G.R. NO. 239010 & AZUCENA LOCSIN-GARCIA VS. AZ 17/31 REALTY, INC., G.R. NO. 240888, JULY 6, 2022, UPLOADED DECEMBER 13, 2022]
3. DEPARTMENT OF JUSTICE OPINION ON THE FIRB EXTENT OF AUTHORITY TO GRANT TAX INCENTIVES, REVOCATION OF ACCREDITATION OF ERRING HEALTHCARE PROVIDER & PEZA INQUIRY ON THE RULE-MAKING POWER OF THE BIR
FIRB MAY ONLY LEGALLY GRANT INCENTIVES IT IS AUTHORIZED BY LAW TO DO, ANYTHING OUTSIDE OF THOSE ARE BEYOND ITS POWER
The Department of Budget and Management is seeking an opinion relative to a request for clarification of the Fiscal Incentives Review Board (FIRB) Secretariat in response to the Department of Trade and Industry-Board of Investment’s query on the procedure and requirements to secure FIRB’s approval to grant a Tax Expenditure Subsidy (TES) for the Comprehensive Automotive Resurgence Strategy (CARS) Program. In rendering an opinion, the Department of Justice (DOJ) declined the request for dispute settlement, having been improperly filed. Nonetheless, without prejudice to a Petition that may be properly filed, the DOJ opines that the Tax Payment Certificate (TPC) cannot be granted by the FIRB as a TES under Section 15(c) of the General Appropriations Act (GAA), it is beyond its power provided by law. Further, the DOJ finds the CARS program to be incompatible with the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act) both in terms of operations and incentives given. Section 294 of the 1997 Tax Code, as amended by the CREATE Act, provides for only five (5) types of tax incentives that may be granted by the FIRB to registered projects or activities. They are (a) Income Tax Holiday (ITH); (b) Special Corporate Income Tax (SCIT) Rate; (c) Enhanced Deductions; (d) Duty Exemption on importation; and (e) Value-Added Tax (VAT) exemption on importation and VAT zero-rating on local purchases. Meanwhile, registered participants of the CARS program are entitled to two (2) kinds of fiscal support, that is (a) Fixed Investment Support (FIS); and (b) Production Volume Incentive (PVI). Thus, assuming for the sake of argument that the CARS program participants went through FIRB’s procedures and FIRB grants their request for incentives, FIRB may only grant those incentives it is authorized by law to grant, that is those provided by Section 294 of the 1997 Tax Code, as amended, and not the FIS and PVI under the CARS program. [DEPARTMENT OF JUSTICE OPINION NO. 5, SERIES OF 2023, FEBRUARY 2, 2023]
[BOTH NATIONAL HEALTH INSURANCE ACT & UNIVERSAL HEALTH ACT PROVIDE REVOCATION OF ACCREDITATION OF ERRING HEALTH CARE PROVIDER] [PHILHEALTH HAS THE DISCRETION TO PERMANENTLY REVOKE THE ACCREDITATION OF A HEALTH CARE PROVIDER OR TO RESTORE ITS ACCREDITATION, DEPENDING ON ITS FINDINGS & ASSESSMENTS]
Philippine Health Insurance Corporation (PhilHealth) is requesting an opinion on whether the Republic Act (R.A.) No. 11223 or the Universal Health Care Act be given retroactive application to pending cases if favorable to the respondent health care provider. In ruling, the Department of Justice disagreed with PhilHealth’s view that the penal provisions of R.A. No. 11223 being more favorable to the respondent should be applied retroactively. While at first glance, the law may appear to be more favorable to the respondent health care provider since PhilHealth has the discretion to impose a penalty of fine only or suspension of contract or accreditation whichever is shorter or both, a careful perusal of the entirety of the said law, however, reveals that it is in fact provides for a much stiffer penalty. While the law does not expressly provide for the penalty of revocation of accreditation, it does state, however, in its Implementing Rules and Regulations that recidivists may no longer be contracted as participants of the Program, which operates as a revocation of accreditation of the health care provider. Both R.A. No. 7875, or the National Health Insurance Act of 1995, as amended, and R.A. No. 11223 explicitly state that recidivists may no longer be accredited or contracted as participants of the Program. However, PhilHealth may lift the penalty of revocation of accreditation if based on its assessment, the erring health care provider has already faithfully complied with all its requirements and guidelines. [DEPARTMENT OF JUSTICE OPINION NO. 04, SERIES OF 2023, JANUARY 30, 2023]
PEZA INQUIRING TO DOJ ON ISSUES ON BIR ISSUANCES ON CREATE LAW IS NOT WITHIN DOJ BUT FIRB
Philippine Economic Zone Authority (PEZA) is requesting a legal opinion on certain issues affecting its Registered Business Enterprises since Republic Act (R.A.) No. 11534, or the “Corporate Recovery and Tax Incentives for Enterprises Act” (CREATE), took effect on April 11, 2021. Specifically, the issue centered on whether BIR Revenue Regulations (RR) No. 21-2021 is an ultra vires issuance that contradicts Sections 294 and 295 of the Tax Code, as amended, and that has no legal effect, and whether PEZA can implement its established Work-From-Home policy despite Section 309 of the Tax Code, as amended. In rendering an opinion, the Department of Justice opined that it is constrained to decline the rendition of an opinion since the resolution of issues involved would require an interpretation of RR No. 21-2021 and Section 309 of the Tax Code, as amended by the CREATE Law. Further, under Section 4 of the Tax Code, it is the Commissioner of Internal Revenue (CIR) who has the exclusive and original jurisdiction to interpret the provisions of the Tax Code and other tax laws, though subject to review by the Secretary of Finance. Also, as a matter of principle, the Secretary of Justice does not render an opinion on matters falling within the jurisdiction of another office over which he possesses no supervisory or revisory authority. In this case, the Fiscal Incentives Review Board (FIRB), which has the power to exercise policymaking and oversight functions on the administration and grant of incentives, should be given the first opportunity to address the second query. Moreover, the BIR has already issued Revenue Memorandum Circular (RMC) No. 24-2022 to clarify certain issues relating to the implementation of RR No. 21-2021. [DEPARTMENT OF JUSTICE OPINION NO. 02, SERIES OF 2023, JANUARY 25, 2023]