WEEKLY TAX UPDATES [OCTOBER 16-20]

BIR ISSUANCE

Revenue Memorandum Order (RMO) No. 27-2017 dated August 29, 2017 provides for the creation of Alphanumeric Tax Code for Microfinance Non-government organization pursuant to Republic Act No. 10693, otherwise known as the Microfinance NGOs Act

 

COURT OF TAX APPEALS (CTA) CASE DIGESTS FOR THIS WEEK

 

A CTA DECISION ON THE REQUIREMENT OF CREDITABLE WITHHOLDING TAX (CWT) REFUND

CIR and AXIA Power Holdings Corporation (AXIA) filed a Consolidated Petitions for Review seeking the reversal of the earlier decision of CTA 3rd Division granting the partial refund on the unutilized excess CWT of AXIA, as a result of its merger with Marubeni Energy Services Corporation, the absorbed company. It was the CIRs claim that AXIA is not entitled to refund for failure to indicate the amount of CWT in the accompanying Schedule of Sales in its 2008 Annual Income Tax Return (ITR) as well as its failure to present various payors and withholding agents to establish the validity of the claim of refund pursuant to Revenue Regulations (RR) No. 2-98, as amended by RR 2-2006. The Court En Banc finds no cogent reason to reverse the findings of the CTA 3rd Division citing that there is neither a law nor a jurisprudence stating that taxpayers failure to fill-up CWT details in the accompanying Schedule of Sales would lead to disallowance of the claim of tax refund. Section 2.58.3 of RR No. 2-98 only requires the taxpayer to declare on its gross income in the Annual ITR the income payments of which the withholding was made. Likewise, there is no need for the presentment of lists of various payors and withholding agents for the respondent for it is the responsibility of the payors and the agents to withhold and present the Certificate of Tax Withheld at Source (BIR Form 2307) as a proof of withholding. Petition for Review is DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS AXIA POWER HOLDINGS PHILIPPINES CORPORATION, CTA EB NO. 1411 & AXIA POWER HOLDINGS PHILIPPINES CORPORATION VS COMMISSIONER OF INTERNAL REVENUE, CTA EB NO. 1416, SEPTEMBER 28, 2017]

 

VAT EXEMPTION GRANTED TO PERSONS TRANSACTING WITH PAGCOR & PAGCOR-AUTHORIZED BINGO OPERATORS

CIR filed a Petition for Review seeking the reversal of the earlier decision of the Court in Division partially granting the refund of Perception Gaming, Inc. (PGI) representing its erroneously paid output VAT. CIR claims  that  the  tax  exemption privilege of PAGCOR  is  extended  only to  those  persons or entities  directly contracting with PAGCOR in casino operations, such as the PAGCOR Authorized Bingo Operators, and not to those who are merely contracting with PAGCOR-Authorized Bingo Operators, as in  the case herein of respondent PGI. The Court rules otherwise citing the provisions of Section 108 (B)(3) of the National Internal Revenue Code of 1997 which states that any service performed in the Philippines by VAT-registered persons, such as respondent PGI, to entities enjoying tax exemption under special laws, such as PAGCOR and the PAGCOR-Authorized Bingo Operators, is  subject to zero percent (0%)  VAT. Therefore, by subjecting its gross receipts for technical services rendered to the PAGCOR-Authorized Bingo Operators to VAT resulted to erroneously paid output VAT. The Petition for Review is therefore DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS. PERCEPTION GAMING, INC. CTA CASE NO. 1431, SEPTEMBER 28, 2017]

 

PRIOR APPLICATION FOR TAX TREATY NOT MANDATORY

CIR filed a Petition for Review seeking the reversal of the Court in Division’s earlier decision on the cancellation of income tax assessment against Respondent Lufthansa German Airlines-Philippine Branch. CIR insisted that the Respondent Lufthansa must be subjected to a rate of 2.5% pursuant to Section 28(A)(3)(a) of the Tax Code of 1997, as amended, and not the 1.5% rate as stated in the Tax Treaty, in the absence of duly-filed and approved application of Tax Treaty Relief pursuant to Revenue Memorandum Order No. 1-2000. The Court ruled otherwise pointing out that prior application is not mandatory before a taxpayer can enjoy the relief provided under Philippine tax treaties. It is also emphasized that the application for a tax treaty relief from the BIR merely operate to confirm the entitlement of the taxpayer to the relief, and not for the granting of the relief being sought, thus rendering the CIR's claim illogical. The Petition for Review is DENIED. [COMMISSIONER OF INTERNAL REVENUE VS. LUFTHANSA GERMAN AIRLINES, CTA CASE NO. 8601, OCTOBER 3, 2017]