Weekly Tax Updates[March 02, 2021]

Apr 8, 2021 | Tax Updates

JAPAN’S CORONAVIRUS-LINKED BANKRUPTCIES HIT MONTHLY RECORD + FINANCIAL EXECS STRONGLY URGE PASSAGE OF GUIDE BILL TO AID SMALL BUSINESSES + AUSTRALIA PASSES LANDMARK LAW REQUIRING TECH FIRMS TO PAY FOR NEWS

 

 

Other Relevant Tax Updates:

  • Securities and Exchange Commission (SEC) Legal Opinion Digest on How To Fill up Vacancy in the Board
  • Philippine Economic Zone Authority (PEZA) Advisory on Farm-Out Permit Under Work-From-Home (WFH) Arrangement
  • Court of Tax Appeals (CTA) Cases Digest
  • Bureau of Internal Revenue (BIR) Circularizes Additional Personal Equity Retirement Account (PERA) Unit Investment Trust Fund (UITF)
  • BIR Rolls Out the Nationwide Implementation of Online Application for Electronic Tax Clearance for Bidding Purposes/Tax Compliance Verification Certificate Etcbp/Tcvc
  • BIR Prescribes the Submission of Summary Listing of Pre-Existing Loans Covered By Documentary Stamp Tax (DST) Exemption Under Bayanihan Law
  • BIR Circularizes 2021 Priority Programs
  • BIR Provides New Guidelines on Denial of Compromise Settlement and Approval of Termination and Clearance of BIR Assessment
  • BIR Simplifies the Process on Permit to Use Computerized Accounting System/Computerized Books of Accounts (CAS/CBA)
  • Tax and Business-Related News [February 25-March 2]
 
 

I. SEC LEGAL OPINION DIGEST ON HOW TO FILL UP VACANCY IN THE BOARD

VACANCIES IN TRUSTEE MAY BE FILLED UP BY THE REMAINING MEMBERS IF THEY CONSTITUTE QUORUM; OTHERWISE, FILLING UP SHALL BE ADDRESSED IN A REGULAR OR SPECIAL MEETING

P Condominium Corporation is seeking opinion on how it may fill-up the vacancies in its Board of Trustees as a result of resignation of its three (3) out of five (5) members. Also, it is seeking opinion whether the two (2) remaining members of the Board have the power and authority to appoint other members that will replace those who have resigned. In rendering opinion, SEC referred to Section 28 of the Revised Corporation Code and the previous legal opinion rendered in SEC-OGC Opinion No. 13-06 which provides that the remaining members of the board may fill-up the vacancy if such vacancies resulted from reasons other than removal of the trustees or expiration of the term; and that the remaining trustees still constitute a quorum. Otherwise, the vacancies must be filled by other members in a regular or special meeting called for such purpose. In the case of P Condominium Corporation, the remaining members of the Board of Trustees cannot fill-up the vacancies since the remaining members of the board do not constitute a quorum. Hence, the vacancies shall be filled-up through a regular or special meeting of the general membership of P Condominium Corporation. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO. 21-01, JANUARY 21, 2021]

 II. PEZA ADVISORY ON FARM-OUT PERMIT UNDER WFH ARRANGEMENT

PEZA Zone Office NCR Advisory No. 2021-005, dated February 22, 2021, reminds all PEZA enterprises under supervision of Zone Office NCR on filing of 8106 (Farm-Out) Permit Form for I.T. equipment and assets for WFH.

Highlights of the advisory include:

  • Filing of form prior to deploymentof equipment and assets for the WFH starting November 16, 2020 to September 12, 2021.
  • Three (3) documentary requirementsto be submitted to Office of the Zone Manager of the PEZA IT Center.
  • ZONCR will allow advance filingof one (1) PEZA Form 8106 (Farm-Out) Permit to cover the movement and withdrawal of I.T.
  • No prior LOA is requiredfor the movement from their PEZA-registered IT Center facilities to proceed with WFH arrangement until September 12, 2021 or until PEZA issues WFH Guidelines and Application Forms.
  • All surety bonds should be approved firstby Bureau of Customs (BOC) officer.
  • All equipment and other assets which duties and taxes (if imported) or the VAT, if locally sourced has been paid are no longer requiredto post Surety Bond.

 

III. CTA CASES DIGEST

  • Taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief;the 120+30 day period in refund or tax credit cases is both mandatory and jurisdictional; strict compliance with the 120+30-day period is necessary for such a claim to prosper;
  • Judicial claim for refundpartakes the nature of a tax exemption, and is, therefore, strictly construed against the claimant;
  • Taxpayers shall be informed in writing of the law and the factson which the assessment is made; otherwise, the assessment shall be void; observance of due process is not merely a formal but also a substantive requirement of law; no basis presented on re-allocation of income as basis of Local Business Tax (LBT) assessment;
  • Input VAT refunddenied for petition was filed out of time; the 120+30-day periods to appeal are both mandatory and jurisdictional;
  • Revenue district officer (RDO) has no authority to re-assign examiners; re-assignment requires issuance of a new Letter of Authority (LOA);Memorandum of Assignment (MOA) cannot be equated with LOA;

 

[TAXPAYER-CLAIMANT NEED NOT WAIT FOR THE LAPSE OF THE 120-DAY PERIOD BEFORE IT COULD SEEK JUDICIAL RELIEF] [THE 120+30 DAY PERIOD IN REFUND OR TAX CREDIT CASES IS BOTH MANDATORY AND JURISDICTIONAL] [STRICT COMPLIANCE WITH THE 120+3O-DAY PERIOD IS NECESSARY FOR SUCH A CLAIM TO PROSPER]

Petitioner Lapanday Agricultural and Development Corporation filed a Petition for Review seeking to reverse the CTA 3rd Division’s Resolutions denying its claim for refund or issuance of Tax Credit Certificate (TCC) due to lack of jurisdiction. Petitioner argued that it is entitled to claim for TCC for Taxable Year (TY) 2007 attributable to its zero-rated export sales. In ruling, the Court discussed that Section 112 of the Tax Code, as amended, speaks of two (2) periods: (1) the 120-day period, which serves as a waiting period to give time for the CIR to act on the administrative claim for tax credit or refund; and, (2) the 30-day period, which refers to the period for filing a judicial claim with the CTA. It is settled that the taxpayer may file the appeal within 30 days after the CIR denies the administrative claim within the 120-day waiting period, or it may file the appeal within 30 days from the expiration of the 120-day period if there is inaction on the part of the CIR. It must be emphasized, however, that the judicial claim has to be filed within a period of 30 days after the receipt of Respondent’s decision or ruling or after the expiration of the 120-day period, whichever is sooner. Since the Petition covering the four (4) quarters of TY 2007 was filed with the Court’s 3rd Division only on February 20, 2019 or more than a decade thereafter, the Court cannot entertain anymore the Petitioner’s judicial claim. Consequently, the Respondent’s “deemed a denial” decision became final and executory. Petitioner’s belated filing of its judicial claim is fatal to its claim for its failure to observe the mandatory 120+30-day period, and has, therefore, rendered the CTA 3rd Division devoid of jurisdiction over its Petition for Review. Consequently, the Petition was DENIED and the earlier Resolutions were AFFIRMED. [LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2177, FEBRUARY 3, 2021]

JUDICIAL CLAIM FOR REFUND PARTAKES THE NATURE OF TAX EXEMPTION, AND IS, THEREFORE, STRICTLY CONSTRUED AGAINST THE CLAIMANT

Petitioner Philippine Associated Smelting and Refining Corporation filed a Petition for Review seeking to reverse the Court in Division’s earlier Decision and Resolution denying its claim for refund or tax credit of excise tax payments due to insufficiency of evidence. Petitioner argued that there is sufficient basis to show that excise taxes were passed on and that Petron paid said excise taxes to the BIR. In ruling, the Court agreed with the findings of the Court in Division that Petitioner is not entitled to refund because it failed to prove that Petron paid to the BIR the excise taxes due on petroleum products it sold to Petitioner and that the said excise taxes were substantially charged to and paid by Petitioner. The Court found that the sales invoices, cash receipts, and accounts payable vouchers do not show any indication that the fuel prices charged by Petron included the excise taxes. Neither did Petitioner offer its Supply or Sales Agreement with Petron which would show that the amounts billed by Petron per the sales invoices are inclusive of excise taxes. Moreover, Petitioner failed to establish that Petron actually paid the said excise taxes to the BIR. Thus, it is incumbent upon the Petitioner to prove not only its entitlement to the grant of the claim under substantive law, but also its compliance with all the documentary and evidentiary requirements provided by the Tax Code, as well as by revenue regulations implementing them. Finding no reversible error committed by the Court in Division, the Petition was DENIED and the earlier Decision and Resolution were AFFIRMED. [PHILIPPINE ASSOCIATED SMELTING AND REFINING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2172, JANUARY 27, 2021]

[TAXPAYERS SHALL BE INFORMED IN WRITING OF THE LAW AND THE FACTS ON WHICH THE ASSESSMENT IS MADE; OTHERWISE, THE ASSESSMENT SHALL BE VOID] [OBSERVANCE OF DUE PROCESS IS NOT MERELY A FORMAL BUT ALSO A SUBSTANTIVE REQUIREMENT OF LAW] [NO BASIS PRESENTED ON RE-ALLOCATION OF INCOME AS BASIS OF LBT ASSESSMENT]

Petitioner City Treasurer of Manila filed a Petition for Review seeking to reverse the Decision and Order rendered by the Regional Trial Court (RTC), and praying that Respondent New Coast Hotel, Inc. be ordered to pay its LBT assessment. Petitioner argued that Respondent deliberately and grossly understated its gross income when it renewed its business permit and license for the years 2014 and 2015. Respondent, on the other hand, countered that Petitioner has no clear legal basis in the assessment for alleged undeclared gross revenues. In the Assailed Decision, the lower court found that the cause of the alleged LBT assessment was the unilateral reallocation of the gross revenues declared for Sing Along (Alcoholic Beverages) into revenues for “Alcoholic Beverages” and “Food and Refreshment”. No legal basis or explanation was indicated in the Assessment Notice and even Petitioner’s witness who prepared such notice failed to explain the basis for the reallocation as well as the rate used for such computation. Thus, the lower court rendered the assessment void for lack of due process. In ruling, the Court held that the Petitioner must be aware that the essence of due process in administrative proceedings is not only for the Respondent to have the opportunity to be heard but also to properly prepare and answer the charges against it. Perusal of the evidence showed that it will be difficult for the Respondent to prepare an adequate defense against such assessment if it is left in limbo guessing on what was the basis for such reallocation of its gross revenues for Sing Along (Alcoholic Beverages) into revenues for “Alcoholic Beverages” and “Food and Refreshment”. Petitioner did not even bother to act on Respondent’s protest and to apprise it of her action. Thus, the Court found legal basis in the cancellation of the notice of assessment. Consequently, the Petition was DENIED. [CITY TREASURER OF MANILA VS. NEW COAST HOTEL, INC., CTA AC NO. 231, JANUARY 13, 2021]

[INPUT VAT REFUND DENIED FOR PETITION WAS FILED OUT OF TIME] [THE 120+30-DAY PERIODS TO APPEAL ARE BOTH MANDATORY AND JURISDICTIONAL]

Petitioner SMMC Philippines, Inc. filed a Petition for Review praying for the refund of unutilized input VAT for the 1st and 2nd quarters of CY 2012. In ruling, the Court discussed the criteria that a claimant-taxpayer must satisfy in order to be entitled to refund. On the timeliness, the Court noted that Petitioner belatedly filed its claim for refund. Reckoned from August 1, 2014, the date of submission of complete documents in support of the application filed, Respondent had 120 days or until November 29, 2014, within which to act on Petitioner’s claim for refund. Respondent’s inaction as of November 29, 2014, therefore, is deemed a denial of Petitioner’s claim. After the lapse of the 120-day period, Petitioner had 30 days from November 29, 2014, or until December 29, 2014, to elevate its claim before the Court. However, perusal of the documents showed that the Petition for Review was only filed only on July 6, 2015, which is 189 days late. Petitioner erroneously believed that it can wait until it received Respondent’s decision, even after the 120-day waiting period, before it could file a judicial claim for refund with the CTA. In a number of past cases, the Supreme Court already interpreted Section 112(C) of the 1997 Tax Code such that the law prescribes a waiting period of only 120 days and Respondent’s inaction within the said period is deemed a denial of the claim. In view of the foregoing, Petitioner’s claim was clearly filed beyond the period prescribed by law. Consequently, there was no need to discuss compliance with the other requisites. Thus, the Petition was DENIED for lack of jurisdiction. [SMMC PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9082, JANUARY 12, 2021]

[RDO HAS NO AUTHORITY TO RE-ASSIGN EXAMINERS] [RE-ASSIGNMENT REQUIRES ISSUANCE OF A NEW LOA] [MOA CANNOT BE EQUATED WITH LOA]

Petitioner People of the Philippines filed a Petition for Review seeking nullification of the CTA 3rd Division’s Resolution granting the Demurrer to Evidence in favor of Respondent Robigie Corporation. Petitioner asserted that LOA is not the only authority to empower the Revenue Officers (ROs) and that MOA will suffice. On other hand, Respondent firmly attested to the importance of issuing a new LOA for purposes of granting authority to a new set of ROs to continue the tax investigation. Following its position that the assessments are deemed invalid, Respondent concludes that Petitioner has no right to collect the alleged deficiency taxes. Perusal of records showed that the supposed authority of ROs to conduct the investigation was based on various MOAs issued by RDOs and merely based on an Assignment Slip. In ruling, the Court discussed that the requirement to issue an LOA is based on the clear and categorical mandate of the Tax Code. It is the Revenue Regional Director (RD) and not an RDO, who is authorized to issue an LOA. With regard to the re-assignment of the audit to a new set of officers, issuance of a new LOA is mandatory to replace the officer/s named in the previous LOAs. Simply put, the said MOAs cannot be equated with the LOA, as required by law and jurisprudence. Correspondingly, not having a valid authority to examine or reinvestigate, the subject tax assessments are deemed void. Thus, the tax collection case filed by Petitioner against Respondent must necessarily fail. Finding no cogent reason to disturb the assailed Resolution, the Petition was DENIED for lack of merit. [PEOPLE OF THE PHILIPPINES VS. ROBIEGIE CORPORATION, CTA EN BANC CASE NO. 2188, JANUARY 8, 2021]

 IV.BIR CIRCULARIZES ADDITIONAL PERA UITF

Revenue Memorandum Circular No. 25-2021, issued on February 24, 2021, circularizes additional PERA UITF duly approved by the Bangko Sentral ng Pilipinas (BSP).

 

Name of Bank

Name of Fund

Subtype

Detailed

Type of Fund

Denomination

Date of BSP

Approval

Philippine National Bank

PNB PERA Bond Fund

Bond

Medium Term

PERA Bond Fund

Philippine

Peso

January 21, 2021

 

 V. BIR ROLLS OUT THE NATIONWIDE IMPLEMENTATION OF ONLINE APPLICATION FOR eTCBP/TCVC

Revenue Memorandum Circular No. 24-2021, issued on February 24, 2021, circularizes the nationwide implementation of online application for eTCBP/TCVC through Bureau’s Official Electronic Mail Address.

VI. BIR PRESCRIBES THE SUBMISSION OF SUMMARY LISTING OF PRE-EXISTING LOANS COVERED BY DST EXEMPTION UNDER BAYANIHAN LAW

Revenue Memorandum Circular (RMC) No. 22-2021, issued on February 18, 2021, prescribes the submission by all covered institutions of Summary Listing of All Pre-Existing Loans as of the effectivity date of Republic Act (R.A.) No. 11494 otherwise known as “Bayanihan to Recover as One Act”, in hard and soft copies based on the prescribed format provided in this RMC. Failure to comply will result in the imposition of corresponding administrative penalties as well as additional DST due against the covered institutions.

VII. BIR CIRCULARIZES 2021 PRIORITY PROGRAMS

Revenue Memorandum Circular No. 23-2021, issued on February 18, 2021, prescribes the Calendar Year 2021 BIR Priority Programs and Projects. Among the priority programs in addition to the yearly programs of Run After Tax Evaders (RATE) Program, Oplan Kandado, broadening of the tax base and intensified audit include innovating taxpayer experience and BIR service process such as automation of preparation and issuance BIR Form 2307, streamlining of withholding tax rates, re-architecture and enhancement of Electronic Documentary Stamp (eDST) System, Online Registration and Update System (ORUS), TIN Verifier Mobile Application, Integrated Contact Center Solution and Chatbot, development of eFiling System, eAppointment, Information and Communications Technology (ICT) Solutions for Improved Taxpayers Services-Availment of Commercial Data Center, roll-out of Digital Workplace such as integration and segmentation, and optimization of Internal Revenue Integrated System (IRIS) and Cloud Computing Provisioning of all DX System-Driven Projects.

VIII. BIR PROVIDES NEW GUIDELINES ON DENIAL OF COMPROMISE SETTLEMENT AND APPROVAL OF TERMINATION AND CLEARANCE OF BIR ASSESSMENT

Revenue Memorandum Order No. 8-2021, issued on February 17, 2021, provides new policies and procedure in the issuance of the Notice of Denial (NOD) of Application for Compromise Settlement at the level of the Regional Office as well as the issuance of Authority to Cancel Assessment (ATCA) and Certificate of Approval (CA) for applications duly approved by the National Evaluation Board (NEB).

All denials on applications for compromise settlement that resulted from the deliberations conducted by the Regional Evaluation Board, which involves basic tax of ₱ 500,000 and below, shall be signed by Regional Director while denied cases involving more than ₱ 500,000 basic tax shall be signed by the Commissioner of Internal Revenue. On applications for compromise settlement duly approved by the NEB, including cases subject of Judicial Compromise Agreement (JCA), the same shall be signed by the Assistant Commissioner of the Collection Service, except those involving large taxpayers’ cases, which shall be signed by the Assistant Commissioner of the Large Taxpayers Service. The entire docket of the case as well as the signed approval shall then be transmitted back to the concerned office having jurisdiction thereto who shall then prepare the corresponding Notice of Lifting on whatever collection enforcement notices previously issued.  

All ATCAs on applications for compromise settlement duly approved by the NEB shall be signed by the concerned Regional Director or the Assistant Commissioner where the case originated.

IX. BIR SIMPLIFIES THE PROCESS ON PERMIT TO USE CAS/CBA

Revenue Memorandum Order (RMO) No. 9-2021, dated February 1, 2021, simplifies the procedures and requirements for those taxpayers who wish to apply for Permit to Use CAS and CBA. Taxpayers with pending applications for Permit To Use CAS, CBA, and/or its Components, which were filed with the National Accreditation Board (NAB) and are pending with NAB before the issuance of RMO No. 9-2021 shall be processed under RMC No. 10-2020. All applications filed thereafter shall be processed following the provisions stated in this RMO.

X. TAX AND BUSINESS-RELATED NEWS [FEBRUARY 25-MARCH 2]

  • Tobacco excise tax collection exceeds target in February: DOF
  • SEC launches online payment system
  • AMLC eases registration of POGOs, realtors
  • PH exports get preferential tariff from UK
  • DoubleDragon REIT IPO gets OK from PSE, set for market debut on Mar. 23
  • Japan’s coronavirus-linked bankruptcies hit monthly record
  • Financial execs ‘strongly urge’ passage of GUIDE bill to aid small businesses
  • PEZA approved investments soar 139% in January; 300,000 still out of work
  • Australia passes landmark law requiring tech firms to pay for news

Tobacco excise tax collection exceeds target in February: DOF [ABS-CBN News, March 1, 2021]

The Bureau of Internal Revenue exceeded its tobacco excise tax target collections for the month of February after Japan Tobacco hiked payment by over 100 percent, the finance department said Monday. 

Source: https://news.abs-cbn.com/business/03/01/21/tobacco-excise-tax-collection-exceeds-target-in-february-dof

SEC launches online payment system [Manila Bulletin, March 1, 2021]

The Securities and Exchange Commission (SEC) has launched its online payment system Monday, (March 1) to make it faster, more convenient, and secure when paying registration and other transaction fees.

Source: https://mb.com.ph/2021/03/01/sec-launches-online-payment-system/

AMLC eases registration of POGOs, realtors [Philippine Star, February 28, 2021]

The guidelines were eased as real estate developers and brokers as well as POGOs only have until March 16 to register with the AMLC. These entities are now covered persons under the amended Anti-Money Laundering Act of 2001 that took effect on Jan. 30.

Source: https://www.philstar.com/business/2021/02/28/2080794/amlc-eases-registration-pogos-realtors

PH exports get preferential tariff from UK [Philippine Daily Inquirer, February 27, 2021]

Philippine exports under the Generalized Scheme of Preference (GSP) will continue to enter the United Kingdom tariff-free this year through its own GSP, the Department of Trade and Industry (DTI) said.

Source: https://business.inquirer.net/318565/ph-exports-get-preferential-tariff-from-uk#ixzz6nvvdkfME 

DoubleDragon REIT IPO gets OK from PSE, set for market debut on Mar. 23 [ABS-CBN News, February 26, 2021]

DoubleDragon’s DDMP REIT Inc. is all set for stock market debut on March 23, as the Philippine Stock Exchange approved its planned initial public offering (IPO) on Friday. 

Source: https://news.abs-cbn.com/business/02/26/21/doubledragon-reit-ipo-gets-ok-from-pse-set-for-market-debut-on-mar-23

Japan’s coronavirus-linked bankruptcies hit monthly record [ABS-CBN News, February 26, 2021]

The number of coronavirus pandemic-induced corporate bankruptcies in Japan reached a monthly record of 126 in February, with the restaurant and apparel industries hardest hit, a survey by a credit research company showed Friday.

Source: https://news.abs-cbn.com/business/02/26/21/japans-coronavirus-linked-bankruptcies-hit-monthly-record

Financial execs ‘strongly urge’ passage of GUIDE bill to aid small businesses [ABS-CBN News, February 25, 2021]

A group composed of the country’s top financial executives is urging Congress to pass a bill that seeks to provide financial assistance to distressed micro, small and medium enterprises (MSMEs).

Source: https://news.abs-cbn.com/business/02/25/21/financial-execs-strongly-urge-passage-of-guide-bill-to-aid-small-businesses

PEZA approved investments soar 139% in January; 300,000 still out of work [Manila Bulletin, February 25, 2021]

New committed investments approved by the Philippine Economic Zone Authority (PEZA) in January this year soared 139 percent, but there are still over 300,000 workers displaced from the continued non-operation of more than 300 locators.

Source: https://mb.com.ph/2021/02/24/peza-approved-investments-in-january-soar-139/

Australia passes landmark law requiring tech firms to pay for news [ABS-CBN News, February 25, 2021]

Australia’s parliament passed landmark legislation Thursday requiring global digital giants to pay for local news content, in a move closely watched around the world.

Source: https://news.abs-cbn.com/business/02/25/21/australia-passes-landmark-law-requiring-tech-firms-to-pay-for-news

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