Weekly Tax Updates[October 23, 2020]

Jan 19, 2021 | Tax Updates

SMALL BUSINESS CORPORATION TO LEND MSMES TO PAY FOR 13TH MONTH PAY + 13TH MONTH PAY TO BE GIVEN PRO RATA BASIS ACCORDING TO PALACE + LABOR DEPT EYES SUBSIDIZING MICRO SMALL BUSINESSES 13TH MONTH PAY

Other Relevant Tax Updates:

  • Court of Tax Appeals (CTA) Cases Digest
  • Bureau of Internal Revenue (BIR) Circularizes the Availability of Electronic Filing And Payment System (EFPS) Version of Excise Tax Return on Sweetened Beverages
  • BIR Implements the Provisions of Bayanihan 2 on Tax Exemption of Certain Payments
  • BIR Issues Regulations on Tax Incentives for the Manufacture or Importation of Certain Equipment, Supplies or Goods
  • BIR Clarifies the Effectivity Date of the Republic Act (R.A.) No. 11467
  • BIR Suspends the Filing and 90-Day Processing of VAT Refund Claims
  • Tax and Business-Related News [October 17-23]
 
 

I. CTA CASES DIGEST

  • BIR must show that reassignment noticewas signed by the Commissioner Of Internal Revenue (CIR) or his duly authorized representative; if Revenue Officer (RO) does not have  pre-requisite authority to continue to conduct taxpayer’s audit, the assessment is void
  • To determine whether an assessment is lawful and valid, it is necessary that the Letter Of Authority (LOA) must not be void; LOA must be served or presented to the concerned taxpayer within thirty (30) days from its date of issuance; LOA is valid only for thirty (30) daysfrom the date of issue, unless served to the concerned taxpayer within the said thirty (30) days, or even after the lapse of the said 30-day period, the same has been revalidated
  • Proof of actual remittance of Creditable Withholding Tax (CWT) to BIR is not a requirement for claiming refund
  • Taxpayer cannot choose to pay assessment and thereafter seek refund within two (2) years from date of payment pursuant to section 196 of the Local Government Code (LGC)
  • Exemption from Real Property Tax (RPT)is not automatic even by virtue of a legislative franchise; a party’s failure to comply with the procedure regarding appeal will render the subject matter thereof final, executory and unappealable

 [BIR MUST SHOW THAT REASSIGNMENT NOTICE WAS SIGNED BY THE CIR OR HIS DULY AUTHORIZED REPRESENTATIVE] [IF RO DOES NOT HAVE  PRE-REQUISITE AUTHORITY TO CONTINUE TO CONDUCT TAXPAYER’S AUDIT, THE ASSESSMENT IS VOID]

Petitioner CIR filed a Petition for Review seeking to reverse the Court in Division’s earlier decision cancelling the assessment issued against the Respondent Ryan Neil Erasmo Alvez. Petitioner argued that the original Complaint is a collection case of a final and executory assessment; hence, the CTA can no longer rule on the validity of the assessment, and the reassignment of the audit investigation was validly supported by a Reassignment Notice duly signed by the Head of the Investigating Office. In ruling, on the issue of jurisdiction of the CTA to rule on the validity of the assessment, the Court disagreed with the contention of the Petitioner. An assessment issued arising from the audit findings of an unauthorized RO is akin to a decision rendered by a Court having no jurisdiction over a case which are both considered void and ineffectual decisions that do not attain finality despite failure of the aggrieved party to appeal the same. This is so since in these scenarios, both decisions are considered non-existent in legal contemplation. On the issue of requisite authority of RO, Section 228 of the Tax Code and Supreme Court decisions provide that in order to prove that the Reassignment Notice authorizing RO to continue the examination of taxpayer’s books of accounts and other accounting records is valid, the BIR must show that the same was signed by the ClR or his duly authorized representative. The Petitioner, unfortunately, failed to discharge the said burden. Consequently, since the RO does not have the pre-requisite authority to conduct Respondent’s audit, the assessments are void. Therefore, it follows, that the assessment cannot be used to enforce the collection of Respondent’s tax liability. The Petition was DENIED for lack of merit, and the earlier decision was AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. RYAN NEIL ERASMO ALVEZ, CTA EN BANC CASE NO. 2076, OCTOBER 8, 2020]

 [TO DETERMINE WHETHER AN ASSESSMENT IS LAWFUL AND VALID, IT IS NECESSARY THAT THE LOA MUST NOT BE VOID] [LOA MUST BE SERVED OR PRESENTED TO THE CONCERNED TAXPAYER WITHIN THIRTY (30) DAYS FROM ITS DATE OF ISSUANCE] [LOA IS VALID ONLY FOR THIRTY (30) DAYS FROM THE DATE OF ISSUE, UNLESS SERVED TO THE CONCERNED TAXPAYER WITHIN THE SAID THIRTY (30) DAYS, OR EVEN AFTER THE LAPSE OF THE SAID 30-DAY PERIOD, THE SAME HAS BEEN REVALIDATED]

Petitioner Joselito Ranada Laraya filed a Petition for Review seeking to cancel the assessment issued by the Respondent CIR due to absence of factual and legal bases. On the other hand, Respondent countered that the assessment has long become final, executory and unappelable; and that the assessment is well supported by facts and laws. In appreciation of support, the Court found that the LOA was issued on May 15, 2009 and the same was served to the Petitioner only on June 30, 2009, or forty-six (46) days after the date of its issuance. The LOA should have been served to Petitioner by June 14, 2009, the last day of the 30-day validity period of the LOA, unless the same is revalidated thereafter. Since there was no showing that the subject LOA has been revalidated, the same has already become void, and was already without force and effect when it was served to Petitioner, for the Respondent’s failure to observe the 30-day mandatory period. Thus, the Petition was GRANTED and the assessment was CANCELLED. [JOSELITO RANADA LARAYA VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 8890, OCTOBER 1, 2020]

 PROOF OF ACTUAL REMITTANCE OF CWT TO BIR IS NOT A REQUIREMENT FOR CLAIMING REFUND

Petitioner Sonoma Services, Inc. filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) in the amount of Php 4,993,000 representing excess and unutilized CWT for the year 2015. In ruling, the following requisites must be complied with: (1) refund must be filed within the two-year prescriptive period; (2) the fact of withholding must be established by a copy of a statement duly issued by the payor; (3) the income upon which the taxes were withheld must be included in the return of the recipient. In the appreciation of support, the Petitioner has clearly provided and supported its claims and has fully complied with the foregoing requirements. Likewise, taxpayer does not have to prove actual remittance of the taxes to the BIR. Thus, the Petition was GRANTED and Respondent CIR was ORDERED to fully refund or to issue TCC in favor of Petitioner. [SONOMA SERVICES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9808, OCTOBER 1, 2020]

 TAXPAYER CANNOT CHOOSE TO PAY ASSESSMENT AND THEREAFTER SEEK REFUND WITHIN TWO (2) YEARS FROM DATE OF PAYMENT PURSUANT TO SECTION 196 OF THE LGC

Petitioner Metro Pacific Tollways Development Corporation filed a Petition for Review seeking to reverse the Court Special First Division’s earlier decision affirming the decision of the Regional Trial Court denying its claim for refund of local business tax assessed by the Respondent City Treasurer of Makati. Petitioner argued that the claim is governed by Section 196 and not Section 195 of LGC and that the assessmentS did not attain finality since they were paid within 60 days from notice. On the other hand, Respondent maintained that the assessments have already attained finality, thus, unappealable. In ruling, the Court cited the Supreme Court landmark case in ICTSI, which provides that Section 195 of the LGC applies as it is undisputed that the Petitioner was issued notices of assessment. Therefore, Petitioner should have protested the assessments within 60 days from the date of receipt. Failing to do so, the assessments have become final, executory and demandable. Further, Cosmos case provides that once an assessment is made or issued, the taxpayer cannot choose to pay the assessment and thereafter seek a refund at any time within two (2) years pursuant to Section 196 of the LGC. On Petitioner’s claim that the cases Cosmos and ICTSI are not applicable in the case at bar as they are obiter dictum or mere incidental statements and are not necessary to the decision, the Court disagreed for these are both relevant and applicable. Thus, the Court DENIED the Petition for lack of merit. [METRO PACIFIC TOLLWAYS DEVELOPMENT CORPORATION VS. MAKATI CITY AND NELIA A. BARLIS IN HER CAPACITY AS INCUMBENT CITY TREASURER OF MAKATI CITY, CTA EN BANC CASE NO. 2115, SEPTEMBER 30, 2020]

 [EXEMPTION FROM RPT IS NOT AUTOMATIC EVEN BY VIRTUE OF A LEGISLATIVE FRANCHISE] [A PARTY’S FAILURE TO COMPLY WITH THE PROCEDURE REGARDING APPEAL WILL RENDER THE SUBJECT MATTER THEREOF FINAL, EXECUTORY AND UNAPPEALABLE]

Petitioner City Assessor’s Office of Valenzuela City filed a Petition for Review seeking reversal of the earlier decision declaring the Respondent’s National Grid Corporation of the Philippines (NGCP) transmission lines exempt from RPT. Petitioner insisted that Respondent’s tax exemption under Republic Act (R.A.) 9511 or An Act Granting NGCP a Franchise NGCP Franchise Law” is an “Act Granting the NGCP a Franchise to Engage in the Business of Conveying or Transmitting Electricity through High Voltage Back-Bone System of Interconnected Transmission Lines, Substations and Related Facilities, and for other purposes” (NGCP Franchise Law) did not supersede the evidentiary requirements under Local Government Code (LGC). Petitioner also pointed out that Respondent’s non-payment of RPT under protest and its failure to raise the same before the Local Board of Assessment Appeals (LBAA) cannot be deemed waived. On the other hand, Respondent countered that the operation and maintenance of the subject transmission lines are covered by its franchise, thus, it’s clear and indisputable that it is exempt from RPT. In ruling, the Court held that the Respondent is not exempt on its compliance with the presentation of documentary requirements under the LGC.  Likewise, it cannot escape the requirement of payment under protest by going straight to the LBAA to appeal the Notice of Assessment (NOA). Its non-compliance is fatal to its appeal. Neither the LBAA nor the Central Board of Assessment Appeal (CBAA) should have acted on Respondent’s appeals. Consequently, the Petition was GRANTED and the Decision and Resolution of the CBAA were REVERSED. Thus, NOA was DECLARED final, executory and unappealable. [CITY ASSESSOR’S OFFICE OF VALENZUELA CITY VS. NATIONAL GRID CORPORATION OF THE PHILIPPINES AND CENTRAL BOARD OF ASSESSMENT APPEALS, CTA EN BANC CASE NO. 2100, SEPTEMBER 23, 2020]

II. BIR CIRCULARIZES THE AVAILABILITY OF EFPS VERSION OF EXCISE TAX RETURN ON SWEETENED BEVERAGES

 Revenue Memorandum Circular (RMC) No. 114-2020, issued on October 20, 2020, circularizes the availability of eFPS version of BIR Form 2200-S on the Excise Tax Return on Sweetened Beverages.

III. BIR IMPLEMENTS THE PROVISIONS OF BAYANIHAN 2 ON TAX EXEMPTION OF CERTAIN PAYMENTS

Revenue Regulations (RR) No. 29-2020, issued on October 15, 2020, implements the provisions of Republic Act (R.A.) No. 11494, otherwise known as the “Bayanihan to Recover as One Act” on the tax exemption of certain income payments. The following are exempt from withholding tax and shall be excluded from gross income:

  1. Retirement benefits received from June 5, 2020 to December 31, 2020 by officials and employees of private firms, provided that such is in accordance with a retirement benefit plan duly-registered with the BIR. However, reemployment within the succeeding 12-month period shall be construed as non-retirement and the retirement benefit previously received shall be taxed accordingly.
  2. COVID-19 Special Risk Allowance received by health worker, either private or public.
  3. Actual Hazard Duty Pay given to Human Resources for Health or persons temporarily hired to complement or supplement the current health workforce.
  4. Compensation paid to public or private health workers who have contracted COVID-19 in the line of duty, amounting to: (1) PHP 1,000,000 in case of death; or (2) Php 100,000 in case of severe or critical sickness; or (3) PHP 15,000 in case of mild or moderate sickness.

IV. BIR ISSUES REGULATIONS ON TAX INCENTIVES FOR THE MANUFACTURE OR IMPORTATION OF CERTAIN EQUIPMENT, SUPPLIES OR GOODS

RR No. 28-2020, issued on October 15, 2020, implements Section 4(cc) and Section 18 of R.A. No. 11494 which provides that the importation of goods identified as critical products, essential goods, equipment or supplies needed to contain and mitigate COVID-19 shall be exempt from VAT, excise tax, and other fees. However, for the purpose of claiming tax exemption, taxpayer claiming such exemption must present a certification from the Department of Trade and Industry (DTI) that the equipment and supplies being imported are not locally available or of insufficient quality and preference. The grant of such exemption shall be in effect from June 25, 2020 to December 19, 2020. Likewise, inputs, raw materials, and equipment necessary for the manufacture of essential goods of medical grade related to containment and mitigation of COVID-19 whether locally-sourced or imported by a registered manufacturer shall likewise be exempt from VAT provided that such manufacturer has a License to Operate issued by the Food and Drug Administration-Department of Health (FDA-DOH) and a Sworn Declaration that the items bought by such manufacturer shall be used to manufacture the essential goods to contain and mitigate COVID-19.

V.BIR CLARIFIES THE EFFECTIVITY DATE OF THE R.A. NO. 11467

RMC No. 98-2020, issued on October 14, 2020, further clarifies the effectivity date of R.A. No. 11467 which amends certain provisions of the Tax Code, as circularized under RMC No. 65-2020. 

The Act was published in the website of the Official Gazette on January 23, 2020 and was later published in printed form on the Official Gazette’s February 10, 2020 issue.  RMC No. 65-2020 circularized the provision of the Act which provides that it shall take effect immediately after its complete publication in a newspaper of general circulation or on January 27, 2020. 

In this regard, RMC No. 98-2020 clarifies that the Act was made effective upon its complete publication in the website of the official Gazette, thus, became effective beginning January 23, 2020. There is neither a law nor any doctrinal court decision expressly stating that online publication of a statute by the Official Gazette is invalid. The Secretary of the Department of Justice explained that what is important is the “fact” of publication by the official publisher of the government, serving constructive notice to the public that the law has been duly enacted. 

VI. BIR SUSPENDS THE FILING AND 90-DAY PROCESSING OF VAT REFUND CLAIMS

RR No. 27-2020, issued on October 6, 2020, implements Section 4(tt) of R.A. No. 11494 which prescribes the extension of the deadline of filing of VAT refund claims whose prescription fall during the effectivity of the law or until the next adjournment of the 18th Congress on December 19, 2020. It can be recalled that under Section 112 of the Tax Code, a taxpayer may file for a claim for refund of input taxes attributable to zero-rated or effectively zero-rated sales within two (2) years after the close of the taxable quarter when the sales were made. The following are the extended deadlines:

 

 

 

Taxable Quarter

Extended Deadline

Calendar Quarter Ending September 30, 2018

December 31, 2020

Fiscal Quarter Ending October 31, 2018

January 15, 2021

Fiscal Quarter Ending November 30, 2018

January 31, 2021

Calendar Quarter Ending December 31, 2018

February 15, 2021

 

 

 

 

 

The 90-day processing of VAT refund claims is likewise suspended during the effectivity the law. In areas where Enhanced Community Quarantine (ECQ) and Modified Enhanced Community Quarantine (MECQ) is in force even after the effectivity of the law, deadline of filing and suspension of processing shall be extended for an additional period of 30 days after the lifting of the ECQ or MECQ.

VII. TAX AND BUSINESS-RELATED NEWS [OCTOBER 17-23]

  • Philippines to allow foreign investors to enter from Nov. 1
  • No BSP digital currency in near future – Diokno
  • Implement progressive tax law, government told
  • SB Corp to lend MSMEs to pay for 13th month pay
  • Pag-IBIG to offer longer payment relief
  • 13th month pay to be given on pro rata basis: Palace
  • SSS extends contribution payment deadline to Nov. 30
  • DOF bullish on long-term investment prospects
  • Labor dep’t eyes subsidizing micro, small businesses’ 13th month pay
  • BOI offers stronger tax perks

Philippines to allow foreign investors to enter from Nov. 1 [ABS-CBN News, October 23, 2020]

Foreigners with investor’s visa will be allowed to enter the Philippines from Nov. 1, Malacañang said Friday, as authorities sought to boost the pandemic-battered economy. 

Source: https://news.abs-cbn.com/business/10/23/20/foreigners-with-investor-visas-allowed-in-philippines-starting-nov-1

No BSP digital currency in near future – Diokno [Manila Times, October 23, 2020]

The Bangko Sentral ng Pilipinas is studying a credit rating model that is not based on collateral for micro, small Sentral ng Pilipinas (BSP) is not keen on issuing its own digital currency anytime soon, as it needs to be studied further, its chief said on Thursday.

Source: https://www.manilatimes.net/2020/10/23/business/business-top/no-bsp-digital-currency-in-near-future-diokno/784320/

Implement progressive tax law, government told [Manila Times, October 22, 2020]

The government must implement a progressive tax law, spend more on its coronavirus disease 2019 (Covid-19) pandemic response and improve the health sector to ensure the recovery of the Philippine economy, according to current and former government officials.

Source: https://www.manilatimes.net/2020/10/22/business/business-top/implement-progressive-tax-law-government-told/783724/

SB Corp to lend MSMEs to pay for 13th month pay [Manila Bulletin, October 21, 2020]

Trade and Industry Secretary Ramon M. Lopez has proposed to share P4 billion out of the P10 billion allocation from the Bayanihan 2 as soft loans to micro, small and medium enterprises (MSMEs) to pay for the 13th month pay of their workers.

Source: https://mb.com.ph/2020/10/21/sb-corp-to-lend-msmes-to-pay-for-13th-month-pay/

Pag-IBIG to offer longer payment relief [Manila Times, October 21, 2020]

The Home Development Mutual Fund (Pag-IBIG Fund) is offering up to six months of payment relief, more affordable amortization and waived penalties under its special restructuring program to help home loan borrowers cope during the coronavirus disease 2019 pandemic, its top executives announced on Monday.

Source: https://www.manilatimes.net/2020/10/21/business/business-top/pag-ibig-to-offer-longer-payment-relief/783321/

13th month pay to be given on pro rata basis: Palace [ABS-CBN News, October 20, 2020]

Workers’ 13th month pay will be given on a “pro rata” basis, which means that they might not get it in full, Malacañang said Monday.

Source: https://news.abs-cbn.com/business/10/19/20/13th-month-pay-to-be-given-on-pro-rata-basis-palace

SSS extends contribution payment deadline to Nov. 30 [ABS-CBN News, October 19, 2020]

The Social Security System said it has extended further the contribution payment deadline to Nov. 30 in consideration of those affected by the coronavirus pandemic.

Source: https://news.abs-cbn.com/business/10/19/20/sss-extends-contribution-payment-deadline-to-nov-30

DOF bullish on long-term investment prospects [Philippine Daily Inquirer, October 19, 2020]

Despite high COVID-19 cases and a prolonged quarantine, the Philippines’ solid macro fundamentals prepandemic remain attractive to foreign investors, the Department of Finance (DOF) said.

Source: https://business.inquirer.net/309927/dof-bullish-on-long-term-investment-prospects#ixzz6bgFWuhEN 

Labor dep’t eyes subsidizing micro, small businesses’ 13th month pay [ABS-CBN News, October 18, 2020]

The labor department is considering to provide a subsidy for the 13th month pay of micro and small enterprises workers, its chief said Sunday.

Source: https://news.abs-cbn.com/video/business/10/18/20/labor-dept-eyes-subsidizing-micro-small-businesses-13th-month-pay

BOI offers stronger tax perks [Manila Bulletin, October 18, 2020]

Manufacturers in the Philippines are allowed to carry over any operating loss from financial year 2020-2021 as tax deduction from gross income over the next five taxable years, according to the Board of Investments (BOI).

Source: https://mb.com.ph/2020/10/18/boi-offers-stronger-tax-perks/

If you wish to get a copy of the complete texts of the above issuances, send us an email thru taxseminars@dmdcpa.com.ph.