EOPT IDD Digest on the New Classification of Taxpayers
Other Relevant Tax Updates:
- TAX & BUSINESS-RELATED NEWS [APRIL 29-MAY 6]
- BIR ISSUES IRR ON AMENDMENTS INTRODUCED BY EASE OF PAYING TAXES LAW ON THE CLASSIFICATION OF TAXPAYERS & ADMINISTRATIVE PENALTIES
- SEC LEGAL OPINION ON AMENDMENT & REGISTRATION OF SECURITIES
- SUPREME COURT DECISION ON LITIGATION FINANCING ARRANGEMENT & COPYRIGHTED MUSIC BEING PLAYED PUBLICLY
I. TAX & BUSINESS-RELATED NEWS [APRIL 29-MAY 6]
- MFT scam: SEC bares Isla Lipana-PwC’s hand in Mica Tan’s fabricated billion-peso income
- DOLE stops issuing permits for POGO foreign workers
- CA favors Park N Ride in property rental row
- Gov’t workers group calls for P33,000 minimum monthly wage
- End of an era: Reader’s Digest UK bids goodbye after 86 years
- OceanaGold remits P421 million in taxes to Nueva Vizcaya, Quirino towns
- After 22 years, retirement pay given to 145 employees of IBC-13
- BIR files raps vs firm over P200 million fake receipts
- Maersk’s net profit sinks amid Red Sea attacks
- Leviste buys 8.5% stake of ABS-CBN
- Northern Luzon areas adopt 4-day work week due to heat
- DP World, ATI unveil Tanza barge terminal
- Of ‘Jedis’, ‘padawans’, and dark side of doctors: Senator claims Bell Kenz owned by Luis Go, Berwin Flores, James Cayetano raked in as much as P5 billion in sales from unethical pharma MLM scheme
II. BIR ISSUES IRR ON AMENDMENTS INTRODUCED BY EASE OF PAYING TAXES LAW ON THE CLASSIFICATION OF TAXPAYERS & ADMINISTRATIVE PENALTIES
Revenue Regulations (RR) No. 6-2024 and 8-2024 issued on April 11, 2024, implements the amendments introduced by Republic Act (R.A) No. 11976, otherwise known as the Ease of Paying Taxes Law on the Classification of Taxpayers and the Reduced Administrative Penalties for Small and Micro Taxpayers pursuant to Sections 244 and 245 of the 1997 Tax Code, as amended.
Highlights of the changes include:
A. CLASSIFICATION OF TAXPAYERS
1. Taxpayers shall be classified as follows:
1.1 Micro Taxpayer-gross sales are less than Php 3,000,000
1.2 Small Taxpayer-gross sales from Php 3,000,000 to below Php 20,000,000
1.3 Medium Taxpayer-gross sales from Php 20,000,000 to below Php 1,000,000,000
1.4 Large Taxpayer-gross sales from Php 1,000,000,000 and above
2. “Gross sales” means the total sales, net of Value-Added Tax (VAT), if applicable, during the taxable year, with no
further deductions.
2.1 It covers business income, specifically income from the conduct of trade, business, or exercise of a profession.
2.2 It excludes compensation income under employer-employee relationships, passive income under Sections 24, 25,
27, and 28, and income excluded under Section 32(B) of the Tax Code, as amended.
3. Taxpayers shall be duly notified by the BIR of their classification or reclassification based on the prescribed procedure
to be covered in a separate revenue issuance.
3.1 Initial or first-time registrants are initially classified based on their declaration in the Registration Forms. The
classification shall remain unless reclassified according to the threshold values mentioned above.
3.2 Taxpayers registered in 2022 and prior years without submitted information shall be classified based on their gross
sales in 2022. However, if they are VAT-registered, they shall be classified as Small Taxpayers. Otherwise, or if nonVAT registered, they shall be classified as Micro Taxpayers.
3.3 Taxpayers registered in 2023 or 2024 before April 27, 2024, shall initially be classified as Micro Taxpayers, if nonVAT registered, and Small Taxpayers if VAT registered.
B. REDUCED ADMINISTRATIVE PENALTIES FOR MICRO AND SMALL TAXPAYERS
1. Reduced surcharge of 10% in the following cases:
1.1 Failure to file any return and pay the tax due thereon as required under the provisions of the Tax Code or rules and
regulations, on the date prescribed.
1.2 Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment.
1.3 Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of
the Tax Code or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or
before the date prescribed for its payment.
2. Reduced interest by 50% for unpaid amount of tax, except in case of willful neglect to file a return within the
prescribed period, or for false or fraudulent filing of the return.
3. Reduced penalty of Php 500 for each failure to file certain information returns not exceeding Php 12,500 for all such
failures during such calendar year.
4. Reduced compromise penalty rate of 50% in case of a criminal violation by covered taxpayers of Sections 113, 237,
and 238 of the NIRC, not involving fraud based on the applicable rate or amount of compromise under Annex “A” of
Revenue Memorandum Order (RMO) No. 7-2015 and its subsequent amendments, if any.
DOWNLOAD FULL TEXT OF RR 6-2024
DOWNLOAD FULL TEXT OF RR 8-2024
III. SEC LEGAL OPINION ON AMENDMENT & REGISTRATION OF SECURITIES
AMENDMENT OF PRIMARY PURPOSE TO INCLUDE ACTIVITIES THAT ARE SEPARATE & DISTINCT FROM ITS
MAIN BUSINESS ACTIVITY IS NOT ALLOWED WITHOUT THE REQUISITE AMENDMENT
LGEPH, Inc. is seeking an opinion on whether LGEPH and its subsidiaries can engage in BPO operations and
administrative activities, despite being wholesalers, distributors, and retailers. Also, whether LGEPH can amend its
primary purpose to include these activities to collaborate with other LGE subsidiaries. In reply, the Commission referred
to Section 35 of the Revised Corporation Code of the Philippines (RCCP) which states that a corporation’s powers are
limited to what is explicitly stated in its charter or statutes. Express powers are those listed in the Revised Corporation
Code of the Philippines and the corporation’s Articles of Incorporation (AOI). Implied powers are necessary to fulfill the
corporation’s purposes, while incidental powers are those necessary for its existence. However, implied powers must
be reasonably necessary for carrying out express powers. If a business activity is not expressly or impliedly allowed in
the charter, the corporation cannot engage in it. Given this, LGEPH may not engage in BPO operations as the same is
neither part of its express nor its implied powers. Nonetheless, amending the Articles of Incorporation to add new
activities is allowed, but changing the primary purpose to include activities unrelated to the main business is prohibited.
The primary purpose must be singular, while secondary purposes can be multiple. Any purposes not related to the
primary one should be categorized as secondary. Hence, if LGEPH intends to add BPO operations to its business
activities, LGEPH should amend its Secondary Purposes to include BPO operations and/or administrative activities of
a BPO company, so it could legally engage in such activity pursuant to its certificate of registration with the
Commission. [SEC OFFICE OF THE GENERAL COUNSEL LEGAL OPINION NO. 24-05, APRIL 2, 2024]
SRC REGISTRATION REQUIREMENT IS NOT NECESSARY IN THE ABSENCE OF AN INVESTMENT OF MONEY
OF TIMESHARE
M Ownership Resorts, Inc (MORI) is requesting an opinion on whether the requirement of registration of securities
under the Securities Regulation Code (SRC) is applicable to the distribution of the MVCD-EP Documents to the MVC
Timeshare owners who are Philippine residents. In reply, the Commission referred to Section 3.1.20 of the IRR of the
SRC, which outlines securities as encompassing investment contracts, certificates of interest or participation in profit-sharing agreements, certificates of deposit for future subscriptions, and proprietary or nonproprietary membership
certificates in corporations. In addition, securities shall not be sold or offered for sale or distribution within the
Philippines, without a registration statement duly filed with and approved by the Commission. SRC registration is not
needed to distribute MVCD-EP documents to existing MVC Timeshare owners in the Philippines, as they do not invest
monetarily. Without such investment, it does not qualify as an investment contract per the Commission’s view.
Furthermore, the MVCD-EP is not publicly sold or offered. It is a complimentary upgrade exclusively for existing MVC
Timeshare owners. Consequently, the mandate for registering securities under the SRC does not apply. [SEC OFFICE
OF THE GENERAL COUNSEL LEGAL OPINION NO. 24-04, MARCH 26, 2024]
DOWNLOAD FULL TEXT
IV. SUPREME COURT CASES
CHAMPERTOUS CONTRACT LIKE LITIGATION FINANCING ARRANGEMENT IS VOID FOR BEING CONTRARY
TO PUBLIC POLICY
Petitioner RODCO Consultancy and Maritime Services Corporation filed a Petition for Review on Certiorari assailing
the Court of Appeals (CA)’s earlier Decision and Resolution, which dismissed the Complaint for Sum of Money and
Damages filed against Respondents Floserfino G. Ross (Floserfino) and Antonia T. Ross (Antonia). Petitioner argued
that the Contract between the parties is a Contract of Loan wherein Petitioner undertook to pay for the expenses and
extend assistance to Respondents in recovering their money with the understanding that they will reimburse Petitioner
when they are able to recover their money claims. Petitioner also argued that providing legal services is incidental in
case the claim necessitates the filing of the action before the competent court or quasi-judicial body. On the other hand,
the Respondents countered that their consent in agreeing to the Irrevocable Memorandum of Agreement was vitiated
as they were only made aware of the compensation due to Petitioner after issuing two blank checks. They also insisted
that Petitioner is not permitted to collect lawyer’s fees as its employees and officers are not members of the Philippines
Bar. In ruling, the Court held that the contract entered into by the Petitioner and the Respondents is void. A careful
study of the terms of the Irrevocable Memorandum of Agreement and its supporting documents reveals that the
arrangement between the parties is similar to a litigation financing arrangement. Here, the Petitioner gave money to
finance the labor case instituted by Floserfino against his former employer and assisted him by securing the services
of Atty. Concepcion to handle his case. In exchange, Floserfino and Antonia undertook to reimburse the Petitioner the
expenses it incurred in litigating his labor case. The Court held that the litigation financing arrangement between the
parties is prohibited because it is similar to a “Champertous Contract,” which is void for being contrary to public policy.
The terms of the Irrevocable Memorandum of Agreement are ambiguous as to the exact amount to be recovered from
Floserfino, which is disadvantageous to him. The Petitioner was required to show cause for its alleged unauthorized
practice of law. Consequently, the Petition was DENIED. [RODCO CONSULTANCY & MARITIME SERVICES
CORPORATION HEREIN REPRESENTED BY FROILAN G. CLEMENTE, JR. VS. FLOSERFINO G. ROSS &
ANTONIA T. ROSS, G.R. NO. 259832, NOVEMBER 6, 2023, UPLOADED MARCH 14, 2024]
[THE ACT OF PLAYING RADIO BROADCASTS THROUGH LOUDSPEAKERS CONSTITUTES PUBLIC
PERFORMANCE, REGARDLESS OF CONTROL OVER THE SONGS PLAYED ON THE RADIO] [USING
COPYRIGHTED MUSIC VIA RADIO BROADCAST PLAYED THROUGH LOUDSPEAKERS, AS BACKGROUND
MUSIC IN RESTAURANTS FOR THE ENTERTAINMENT OF CUSTOMERS & FOR THE ENHANCEMENT OF THEIR
DINING EXPERIENCE, FALLS OUTSIDE THE AMBIT OF FAIR USE & THUS AMOUNTS TO COPYRIGHT
INFRINGEMENT]
Petitioners Icebergs Food Concepts, Inc. (Icebergs) and Allan John T. Young filed a Petition for Review on Certiorari
challenging the Court of Appeals (CA)’s Decision affirming the Regional Trial Court (RTC)’s ruling that they are liable
for copyright infringement. Icebergs claimed that it was not engaged in “public performance” as it did not play a sound
recording, but merely switched on a radio transmitter. It also insisted that pursuant to the Principle of Reciprocity,
Respondent Filipino Society of Composers, Authors, and Publishers, Inc. (FILSCAP) cannot collect License Fees from
Icebergs on behalf of United States-based copyright holders. On the other hand, FILSCAP countered that the
Intellectual Property (IP) Code provision on what constitutes public performance is clear, as it includes the “making
audible of recorded sounds in a setting outside the immediate family circle and the playing, either directly or by means
of any device or process of any work that is not a recorded sound or audio-visual work.” In ruling, the Supreme Court
affirmed the rulings of the lower courts. FILSCAP had the authority to license and collect License Fees for the public
performance of musical compositions through the Deeds of Assignment executed by its members and reciprocal
agreements with foreign societies. Also, Icebergs committed copyright infringement by playing copyrighted music
without a License. The Court relied on the definition of public performance in the IP Code, which includes making
recorded sounds audible in a place where persons outside the normal circle of a family and their closest social
acquaintances are present. The Court also cited previous cases that established playing radio broadcasts through
loudspeakers as public performance. On the invocation of “Fair Use,” the Court concluded that Icebergs’ use of
copyrighted music as background music in their restaurants did not constitute “Fair Use.” FILSCAP was entitled to
compensation for the infringement of their copyright, and Icebergs was ordered to pay actual damages, moral and
exemplary damages, attorney’s fees, and monitoring expenses. Consequently, the Petition was DENIED. [ICEBERGS
FOOD CONCEPTS, INC. & ALLAN JOHN T. YOUNG VS. FILIPINO SOCIETY OF COMPOSERS, AUTHORS &
PUBLISHERS, INC., G.R. NO. 256091, APRIL 12, 2023, UPLOADED JANUARY 19, 2024]
MFT scam: SEC bares Isla Lipana-PwC’s hand in Mica Tan’s fabricated billion-peso income [Bilyonaryo, May 6,
2024]
The complaint filed by the SEC with the Department of Justice, a copy of which was obtained by Bilyonaryo.com,
highlighted that Isla Lipana’s questionable audit reports for Tan’s MFT Group of Companies from 2018 to 2021 played
a pivotal role in supporting Tan’s fraudulent scheme to drain funds from the investing public.
https://bilyonaryo.com/2024/05/06/mft-scam-sec-bares-isla-lipana-pwcs-hand-in-mica-tans-fabricated-billionpeso-income/business/
Indian ambassador links up with PEZA, bares high hopes for PH economy [Manila Bulletin, March 8, 2021]
The Philippine Economic Zone Authority (PEZA) has strengthened its partnership with India in attracting more investors to the Philippines as part of its efforts to revive the country’s economy.
Source: https://mb.com.ph/2021/03/08/indian-ambassador-links-up-with-peza-bares-high-hopes-for-ph-economy/
House committee endorses bill authorizing PDIC to increase deposit insurance coverage [Manila Bulletin, March 8, 2021]
The House Committee on Banks and Financial Intermediaries has recommended passage of a measure granting the Philippine Deposit Insurance Corporation the power to increase the maximum deposit insurance coverage (MDIC) that currently stands at P500,000.
Zonal valuation alone not sole basis of actual market value of land for just compensation – SC [Manila Bulletin, March 7, 2021]
Zonal valuation of a piece of land set by the Bureau of Internal Revenue (BIR) “cannot be the sole basis of just compensation” in the government’s expropriation of privately-owned landholdings.
Tax incentives, smuggling make ecozones the country’s ‘trillion peso blackhole’ – Salceda [Manila Bulletin, March 6, 2021]
Believed to be haven for smuggling activities notwithstanding the hundred of billions in tax incentives granted to them by government, the country’s economic zones have been described in the House of Representatives as the country’s “trillion-peso blackhole” of unrealized revenues.
Duterte reduces, condones real property taxes of independent power producers [ABS-CBN News, March 5, 2021]
President Rodrigo Duterte signed on Thursday an executive order reducing and condoning real property taxes and penalties assessed on power-generation facilities of independent power producers (IPPs) under Build-Operate-Transfer contracts with government-owned or controlled operations.
BSP seen keeping interest rates steady amid expectations of lower inflation in second half [Philippine Daily Inquirer, March 5, 2021]
The central bank will likely keep its key interest rates unchanged when the policy-making Monetary Board convenes later this month to tackle the recent spike in the country’s consumer prices.
Source: https://business.inquirer.net/318949/bsp-seen-keeping-interest-rates-steady-amid-expectations-of-lower-inflation-in-second-half#ixzz6oVmgflVY
DOLE, employers’ group reject ‘no vaccination, no work’ policy [ABS-CBN News, March 4, 2021]
The supposed “no vaccination, no work” policy of some companies is impractical, the labor department and an employers’ group said Thursday.
Source: https://news.abs-cbn.com/business/03/04/21/dole-employers-group-reject-no-vaccination-no-work-policy
BSP seeks Congress OK of new law to protect financial consumers [Philippine Daily Inquirer, March 4, 2021]
Government regulatory agencies will have to unify efforts to protect Filipino consumer rights under a proposed law meant to pave the way for dispute resolution between retail financial companies and their clients.
US to impose anti-dumping tax on 18 countries [ABS-CBN News, March 3, 2021]
The US Department of Commerce is preparing to tax aluminum sheet exporters from 18 countries after determining Tuesday they had benefited from subsidies and dumping.
Source: https://news.abs-cbn.com/business/03/03/21/us-to-impose-anti-dumping-tax-on-18-countries
SSS to expand digital services amid surge in online transactions [ABS-CBN News, March 3, 2021]
The Social Security System (SSS) is poised to expand its digital services to keep up with a surge in online transactions as well as adapt to the new normal brought about by the COVID-19 pandemic.
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