Weekly Tax Updates[June 10-14, 2019]

Jul 5, 2019 | Tax Updates

Findings of fraud based on third-party matching, through letter notice (LN), must be further verified; LN should be converted to letter of authority (LOA) before revenue officer may further examine taxpayer

Relevant Highlights:

  • COURT OF TAX APPEALS (CTA) DIGESTS
  • SECURITIES & EXCHANGE COMMISSION (SEC) OFFICE OF THE GENERAL COUNSEL LEGAL OPINION
  • TAX & BUSINESS-RELATED NEWS [JUNE 30-JULY 3]

I. COURT OF TAX APPEALS (CTA) DIGESTS

  1. Findings of fraud based on third-party matching, through letter notice (LN), must be further verified; LN should be converted to letter of authority (LOA) before revenue officer may further examine taxpayer
  2. Local business tax (LBT) on dividends & interest income from money market placements are only imposed to banks & other financial intermediaries; non-bank financial intermediaries are authorized by the Bangko Sentral ng Pilipinas (BSP) & cannot merely be deemed as one based on functions seen in the articles of incorporation (AOI)
  3. Disputes between government agencies to be settled with Department of Justice (DOJ); CTA has no jurisdiction on disputes between two government agencies
  4. The declaration in its application for business licenses & permits that it is a holding company does not make it ipso facto a taxable holding company for LBT purposes
  5. Preliminary assessment notice (PAN) addressed to a different entity renders the assessment null & void
  6. Refund of input vat attributable to zero rated sales must comply with invoicing compliance requirements & prove existence of zero-rated transaction
  7. It is not within the power of city treasurer to impose LBT assessment on dividends derived by a holding company, unless it is a bank or financial intermediary
  8. Failure to file protest on time not a valid defense against absence of LOA; valid LN does not constitute valid LOA; assessment void without valid LOA
  9. Documentary stamp tax (DST) assessment on advances valid even in the absence of loan agreement; instructional letters, cash vouchers & other documents evidencing advances to affiliates will qualify under loan agreement subject to DST
  10. Transfer of assets & liabilities in exchange for shares of stocks is tax exempt under tax-free exchange provisions of the tax code; taxability of the transfer is only deferred
  11. Refund of input vat attributable to zero rated sales to peza entity must be properly supported by peza documentation & properly complied with the invoicing requirement
  12. Claimant has the burden of proof to establish the factual basis of his or her claims for tax credit or refund

[FINDINGS OF FRAUD BASED ON THIRD-PARTY MATCHING, THROUGH LN, MUST BE FURTHER VERIFIED] [LN SHOULD BE CONVERTED TO LOA BEFORE REVENUE OFFICER MAY FURTHER EXAMINE TAXPAYER]

The Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking the reversal of the earlier decision of the Court in Division cancelling the assessment against the Respondent Admorlina L. Fontejon. The Petitioner argued that the assessment has not yet prescribed given the presence of fraud as evidenced by 90.63% discrepancy on sales based on the third-party matching results. Therefore, the 10-year prescriptive period shall apply. On the non-issuance of LOA, the Petitioner argued that it is of no consequence as to the validity of the subject assessment since the results of the assessment were from LN duly served to the Respondent. Further, Respondent’s denial of receipt of PAN casts serious doubt, since the PAN was received by a certain person via registered mail and that no opposition or comment was submitted within the time allowed by law. In ruling, the Court cited that fraud cannot be presumed for the same should be proven by clear and convincing evidence. Consequently, the Petitioner failed to verify the information gathered from third-party matching. Thus, fraud cannot be established and the 3-year prescriptive period to assess shall apply. Further, even granting the applicability of the 10-year prescriptive period, an LN is not a valid substitute for an LOA for LN should be converted into an LOA before a revenue officer may further examine the taxpayer’s books. Lastly, mere presentation of the registry receipt is not sufficient proof that the PAN was actually received by the Respondent. The burden to prove receipt of letter shifts back to the sender when the receiver denies receipt of the mail. To prove the receipt of a mail, a duly signed registry of receipt or registry return card must be presented.  The Petition for Review is DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS. ADMORLINA L. FONTEJON, CTA EN BANC CASE NO. 1813, MAY 28, 2019]

[LBT ON DIVIDENDS & INTEREST INCOME FROM MONEY MARKET PLACEMENTS ARE ONLY IMPOSED TO BANKS & OTHER FINANCIAL INTERMEDIARIES] [NON-BANK FINANCIAL INTERMEDIARIES ARE AUTHORIZED BY THE BSP & CANNOT MERELY BE DEEMED AS ONE BASED ON FUNCTIONS SEEN IN THE AOI]

The Petitioner Valhalla Properties Limited, Inc. filed a Petition for Review seeking the reversal of the earlier decision of the Court in Division holding that the Petitioner is a non-bank intermediary whose income may be subjected to LBT. The Respondent Treasurer of Davao City argued that the Articles of Incorporation (AOI) of the Petitioner is broad enough to catch all the descriptive functions of a non-bank financial intermediary. In defense, the Petitioner countered that nothing in its AOI indicates that it falls under the category, thus, should not be subject to LBT.  It argued that under the General Banking Act, it is not a non-bank financial intermediary since it has not been declared as such by the Monetary Board. Further, the Petitioner acquired its SMC shares only once after its incorporation and has not bought any shares of stocks or invested in any other corporation other than in SMC. Simply put, its investment is an isolated transaction. In resolving the case, the Court initially determined whether the Petitioner was indeed a non-bank financial institution so that its dividends and interest income are subject to LBT. Accordingly, in order to be considered as a non-bank financial intermediary, it should be authorized by the BSP to perform such functions. Likewise, it must perform its functions on a regular and recurring basis, not on an isolated basis. Upon further verification, it appears that no sufficient evidence can prove that the Petitioner is indeed a non-bank financial intermediary nor it has engaged in the activities of a financial institution. Further, there is no indication that it was authorized by BSP to perform quasi-banking functions. Likewise, the Court was not convinced that the stated primary purpose of the Petitioner in its AOI is broad enough to catch all the descriptive functions of a financial intermediary. Mere allegations without hard evidence are not equivalent to proof. The Petition for Review was GRANTED. Consequently, the Respondent was ORDERED to REFUND to Petitioner the erroneously paid LBT. [VALHALLA PROPERTIES LIMITED, INC. VS. CITY OF DAVAO & HON. RODRIGO S. RIOLA, IN HIS CAPACITY AS THE CITY TREASURER OF DAVAO CITY, CTA EN BANC CASE NO. 1706, MAY 20, 2019]

[DISPUTES BETWEEN GOVERNMENT AGENCIES TO BE SETTLED WITH DOJ] [CTA HAS NO JURISDICTION ON DISPUTES BETWEEN TWO GOVERNMENT AGENCIES]

The Petitioner Department of Energy (DOE) filed a Petition for Review praying for the reversal of the earlier decision holding it liable to excise tax assessment as imposed by the Respondent Commissioner of Internal Revenue. The assessment arose from the exported crude oil pursuant to a service contract with Galoc Production Company.  The Respondent alleged that the Petitioner is liable to pay the excise tax on exported products pursuant to the provisions of Section 130(A)(1) of the Tax Code of 1997, as amended. Petitioner, on the other hand, protested the assessment on the ground that the term “owner” as used in the said provision refers to the service contractor and not petitioner DOE, which is “an agent or instrumentality of the State” and as such, does not own a mining claim or concession. On ruling, the Court noted that a jurisdictional issue arises since the parties involved are both government agencies. In the case of Power Sector Assets and Liabilities Management Corporation vs. Commissioner of Internal Revenue, the Supreme Court has settled this jurisdictional issue stating that under Presidential Decree No. 242, all disputes and claims solely between government agencies and offices, including government-owned or controlled corporations, shall be administratively settled or adjudicated by the Secretary of Justice, the Solicitor General, or the Government Corporate Counsel, depending on the issues and government agencies involved. The Petition for Review is dismissed for lack of jurisdiction. [DEPARTMENT OF ENERGY VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9596, MAY 16, 2019]

[THE DECLARATION IN ITS APPLICATION FOR BUSINESS LICENSES & PERMITS THAT IT IS A HOLDING COMPANY DOES NOT MAKE IT IPSO FACTO A TAXABLE HOLDING COMPANY FOR LBT PURPOSES]

The Petitioner Office of the Makati City Treasurer seeks to reverse the earlier decision of the Regional Trial Court cancelling the assessment issued against the Respondent Allons Holdings, Inc. pertaining to the Local Business Tax (LBT) imposed on passive income derived from dividends in a domestic company and interests from deposits in local bank accounts. The Respondent protested the assessment on the grounds that it could not be taxed as a holding company, neither could it be taxed similar to banks and other financial institutions since it is not engaged in the business activity liable to LBT, and it had no taxable gross sales/receipts. The Court ruled that after perusal of the Makati Ordinance, the following conditions must concur, to wit: (1) it is a controlling company; (2) it has one or more subsidies; and (3) its activities are confined primarily to the management of the subsidiary/ies. The third element is lacking since the Respondent’s principal activity is not to manage but merely to own, hold subscribe for, or acquire, use, sell, assign, transfer, mortgage, pledge, or otherwise dispose of real and personal property. Therefore, Respondent cannot be considered as an investment company, nor a bank or other financial institution. Other than the Respondent’s declaration in its application for business permit, there is nothing in the record that even suggests that it is a holding company. As for the taxability of dividend and interest income, the Court cited the Michigan case, a landmark case, which provides that imposition of LBT on dividend income of holding companies violates the limitations set by Section 133(a) of the 1991 Local Government Code. The Petition for Review is hereby DENIED. [MAKATI CITY & THE OFFICE OF THE CITY TREASURER VS. ALLONS HOLDINGS, INC., CTA CASE NO. 195, MAY 15, 2019]

PAN ADDRESSED TO A DIFFERENT ENTITY RENDERS THE ASSESSMENT NULL & VOID

The Petitioner Mindanao Sanitarium & Hospital College, Inc. filed a Petition for Review seeking the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue. Several issues were raised but the Court instead resolved to set aside the resolution of all factual issues and ascertained whether the Petitioner duly received the PAN. The Petitioner argued that the PAN was erroneously served to another entity with a registered name “Mindanao Sanitarium Hospital”, a hospital and not to “Mindanao Sanitarium & Hospital College, Inc.”, a school. In resolving the issue, the Court cited the Supreme Court decided case of Barcelon, Roxas Securities, Inc. vs. Commissioner of Internal Revenue which states that if the taxpayer denies ever having received an assessment from the BIR, it is incumbent upon the latter to prove by competent evidence that such notice was indeed received by the addressee. However, the Respondent failed to discharge this duty and to present substantial evidence showing that the Petitioner indeed received the PAN. Upon perusal of certification issued by the postmaster, the letter was addressed and delivered to Mindanao Sanitarium and Hospital. Records reveal that Petitioner Mindanao Sanitarium and Hospital College, Inc. and Mindanao Sanitarium and Hospital, Inc. are two different entities. Moreover, the Respondent failed to present the registry receipt of assessment as evidence that such PAN was indeed received by the Petitioner. Pursuant to Section 228 of the Tax Code of 1997, as amended, it requires that the taxpayer must first be informed that he is liable for deficiency taxes through the sending of a PAN. Further, it is an elementary rule enriched in the 1987 Constitution that no person shall be deprived of property without due process of law. In view of the foregoing, the instant Petition for Review is GRANTED and the assessment was CANCELLED. [MINDANAO SANITARIUM & HOSPITAL COLLEGE, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 8673, MAY 6, 2019]

REFUND OF INPUT VAT ATTRIBUTABLE TO ZERO RATED SALES MUST COMPLY WITH INVOICING COMPLIANCE REQUIREMENTS & PROVE EXISTENCE OF ZERO-RATED TRANSACTION

The Petitioner Amadeus Marketing Philippines, Inc. filed a Petition for Review seeking for refund or issuance of Tax Credit Certificate (TCC) allegedly representing excess and unutilized input VAT in the amount of Php 16,939,138.14 arising from zero-rated sale of services from Amadeus IT Group SA. In ruling, the court laid down the criteria to be met in order to be entitled to refund. Accordingly, the services must be other than processing, manufacturing or repacking of goods; the recipient of such services is doing business outside the Philippines; the payment for such must be in acceptable foreign currency accounted for in accordance with the BSP Rules; and the claimant must properly comply with the invoicing requirement. To prove compliance, the Petitioner presented the authenticated Articles of Association, as well as the documentation from Spain’s National Securities Market Commission, and the Philippine Securities and Exchange Commission (SEC) Certificate of Non-Registration that Amadeus IT Group SA is a foreign entity. However, the court noted that the Petitioner failed to comply with other requisites, such as its failure to provide bank certification proving that payments were inwardly remitted in acceptable foreign currency and accounted for in accordance with the BSP rules and regulations. Likewise, the Petitioner failed to comply with the invoicing requirements, specifically to indicate “zero-rated sales” on the invoice or receipt, which is stated in Section 113 of the 1997 Tax Code, as amended. The Petition for Review is PARTIALLY GRANTED resulting to a reduced amount of input VAT qualified for refund or issuance of TCC in the amount of Php 2,616,481.61. [AMADEUS MARKETING PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9441, APRIL 30, 2019]

IT IS NOT WITHIN THE POWER OF CITY TREASURER TO IMPOSE LBT ASSESSMENT ON DIVIDENDS DERIVED BY A HOLDING COMPANY, UNLESS IT IS A BANK OR FINANCIAL INTERMEDIARY

The Petitioner South China Resources filed a Petition for Review seeking the reversal of the decision of the Regional Trial Court holding the Petitioner liable to LBT assessment imposed by the Respondent City Treasurer of Makati City. The Petitioner asserts that it is a holding company as evidenced by its Articles of Incorporation. As a holding company, its investments and interest income are not subject to LBT since it merely holds investments in other companies and waits for those companies to declare dividends. Hence, it has no gross sales and/or receipts which are the subject of assessment under Section 3A of the Revised Makati Ordinance contrary to the findings of the Respondent that it renders services to companies. Further, it argued that the Respondent’s act of imposing LBT is ultra vires as it cited the constitutional limitation on the local government’s power to tax. The Respondent countered that the Petitioner is not assessed as a bank or a financial institution but as a holding company at rate a similar to a bank or financial institution. In ruling, the Court GRANTED the Petition resulting to the cancellation of the assessment since the records show that the Petitioner is not a bank or financial intermediary and is only engaged in activities that may be classified as performing functions similar to a bank or other financial institution. [SOUTH CHINA RESOURCES VS. OFFICE OF THE CITY TREASURER AND/OR MAKATI CITY, CTA CASE AC NO. 197, APRIL 30, 2019]

[FAILURE TO FILE PROTEST ON TIME NOT A VALID DEFENSE AGAINST ABSENCE OF LOA] [VALID LN DOES NOT CONSTITUTE VALID LOA] [ASSESSMENT VOID WITHOUT VALID LOA]

The Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking the reversal of the earlier decision of the Court in Division cancelling the assessment issued against the Respondent Catering Professional Inc. as a result of the third-party matching assessment pursuant to LN. The Petitioner argued that the earlier decision of the Court should be reversed because the Respondent failed to file a protest letter on time. The Respondent, on the other hand, countered that neither LOA was served nor was there any actual audit conducted by the Petitioner. In ruling, the Court emphasized that before any revenue officer may conduct an examination and issue an assessment, there must be a valid grant of authority in his or her favor. The LOA serves the authority given to the appropriate revenue officer assigned to perform assessment function. In the absence thereof, the resulting assessment is a nullity. Consequently, the Petition for Review is DENIED. [COMMISSIONER OF INTERNAL REVENUE VS. CATERING PROFESSIONALS INC. CTA CASE NO. 8852, APRIL 29, 2019]

[DST ASSESSMENT ON ADVANCES VALID EVEN IN THE ABSENCE OF LOAN AGREEMENT] [INSTRUCTIONAL LETTERS, CASH VOUCHERS & OTHER DOCUMENTS EVIDENCING ADVANCES TO AFFILIATES WILL QUALIFY UNDER LOAN AGREEMENT SUBJECT TO DST]

The Petitioner Izone Technologies Philippines filed a Petition for Review seeking the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue.  One of the issues raised by the Respondent was the Petitioner’s failure to subject to DST its “Due to Affiliate” per 2008 Audited Financial Statements (AFS). Conversely, the Petitioner argued that it is not liable for DST in the absence of loans made to Saphie Number One Limited (Saphie). Likewise, the amount was taken from the 2007 AFS and that Saphie is not a related company and the payments made were for the services rendered by the Petitioner. Further, the Petitioner’s accountant mistakenly indicated/treated the transaction as advances. The Respondent countered that if the same was revenue, then the same should have been treated as receivable and not a liability. In ruling, the Court ruled that since the assessed amount is a liability, it may fall within the category of loan agreements subject to DST. Further, since the Petitioner failed to present the 2007 and 2008 Comparative AFS, it cannot ascertain if the assessed amount actually pertains to 2007 and not to 2008. [IZONE TECHNOLOGIES PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 8696, APRIL 29, 2019]

[TRANSFER OF ASSETS & LIABILITIES IN EXCHANGE FOR SHARES OF STOCKS IS TAX EXEMPT UNDER TAX-FREE EXCHANGE PROVISIONS OF THE TAX CODE] [TAXABILITY OF THE TRANSFER IS ONLY DEFERRED]

The Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking the reversal of the earlier decision cancelling the assessment issued against the Respondent Premium Tobacco Redrying & Fluecuring Corporation. The cancellation of income tax assessment is premised that the substantial transfer of assets and liabilities constitute an exchange transaction, hence, no income should be recognized. Likewise, the VAT assessment is cancelled since the Respondent’s transfer of assets to FTC is a subscription contract rather than a contract of sale, for which reason no vatable sales arose on account of such transfer as this is expressly provided for under the law as VAT exempt. The Petitioner argued that the Respondent’s transfer of assets and liabilities in favor of FTC did not have any legitimate business purpose, hence, would not constitute a tax-free exchange transaction. Likewise, the Petitioner defined bona fide business purpose as the transfer of properties for shares of stock which is permanent and not for temporary holding. Further, no ruling was obtained to effect the transfer. The Respondent, on the other hand, countered that it need not secure a BIR ruling confirming the subject transfer as tax-free since it was not required. Also, the bulk of assets it conveyed to FTC did not inure in its favour after the plan of de facto merger occurred, on this ground, the transfer was permanent and not temporary. In ruling, the Court ruled that the gains derived from exchange of property shall be wholly recognized and consequently are subject to tax except if the corporation exchanges its property for shares of stock of another corporation. In this case, by Respondent’s transfer of substantial net assets in favor of FTC in exchange for the latter’s shares of stock and APIC, no sale occurred since its net assets were merely transmuted into shareholdings at FTC. There being no sales incurred by Respondent, the Petitioner may not impose VAT and income tax on such transfer of assets. The Respondent is as well exonerated from DST liability simply because the exchange transaction it entered into with FTC is one under tax-free exchange pursuant to Section 40(C)(2)(a) of the Tax Code, as amended. On a final note, the government’s claim for taxes on exchanges obtaining in the present case is not entirely lost or squandered, but was momentarily deferred. The Petition for Review is DENIED and the earlier decision and resolution is AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS PREMIUM TOBACCO REDRYING & FLUECURING COPORATION, CTA CASE NO. 8897, APRIL 22, 2019]

REFUND OF INPUT VAT ATTRIBUTABLE TO ZERO RATED SALES TO PEZA ENTITY MUST BE PROPERLY SUPPORTED BY PEZA DOCUMENTATION & PROPERLY COMPLIED WITH THE INVOICING REQUIREMENT

The Petitioner Intergraph Process and Building Solutions Philippines Inc. filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) in the aggregate amount of Php 15,282,401.06 allegedly representing its excess and unutilized input VAT arising from services rendered to PEZA entities. In ruling, the court cited the Cross Border Doctrine as applied in the case of Toshiba Information Equipment Philippines vs. Commissioner of Internal Revenue that sales of goods and services by VAT registered taxpayers to entities located in the ecozone are considered “export sales” subject to 0% VAT Rate. To prove its claim, the Petitioner presented as support the PEZA Certification and a letter from the PEZA General confirming the issuance of VAT zero-rating certifications of the entities/clients of the Petitioner. In the appreciation of support, the court finds that the claimed zero-rated sales by the Petitioner to one of their transacting entities shall be denied as zero-rated transaction for failure to prove that the said client is duly registered with PEZA. Moreover, the court noted that some input taxes should be disallowed due to failure to comply with the invoicing requirements pursuant to the provisions of Sec110 (A), 113(A)(2), and (B)(4), and 237 of the Tax Code of 1997, as amended. The Petition for Review is PARTIALLY GRANTED resulting in a reduced valid claim in the amount of Php 14,964,108.71. [INTERGRAPH PROCESS & BUILDING SOLUTIONS PHILIPPINES, CTA CASE NO. 9454, APRIL 15, 2019]

CLAIMANT HAS THE BURDEN OF PROOF TO ESTABLISH THE FACTUAL BASIS OF HIS OR HER CLAIMS FOR TAX CREDIT OR REFUND

The Petitioner Tullett Prebon (Philippines), Inc. filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) on alleged excess and unutilized Creditable Withholding Taxes (CWT) for calendar year (CY) 2013. In the resolution, the Court cited that in order to claim refund or TCC, the claim for refund must be filed within the two-year prescriptive period; the fact of withholding must be established by a copy of a statement duly issued by the payor to the payee, showing the amount paid and the amount of tax withheld therefrom; and that the income upon which the taxes were withheld must be included in the return of the recipient. In the appreciation, the Court noted the following resulting to disallowance and yielded income tax due: revenue subject of CWT refund cannot be traced in the general ledger; improperly-filled up CWT; CWT exceeded those reflected per schedule/ITR or vice versa; prior year’s credits are already utilized. The Petition is DENIED. [TULLETT PREBON (PHILIPPINES), INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9320, APRIL 12, 2019]

II. SEC OFFICE OF THE GENERAL COUNSEL OPINION

  1. A corporation may engage in incidental or implied activities essential or necessary to carry out its purpose or purposes even in the absence of wordings in the purpose clause of the articles of incorporation (AOI)
  2. Application of Retail Trade Liberalization Act (RTLA) to clark freeport zone; RTLA & Foreign Investment Acts (FIA) shall still be complied notwithstanding registration under Clark Development Corporation (CDC)

A CORPORATION MAY ENGAGE IN INCIDENTAL OR IMPLIED ACTIVITIES ESSENTIAL OR NECESSARY TO CARRY OUT ITS PURPOSE OR PURPOSES EVEN IN THE ABSENCE OF WORDINGS IN THE PURPOSE CLAUSE OF THE AOI

The subject corporation is seeking clarification on whether or not it may enter into lawful arrangements with third persons, whether natural or juridical, for the use of available spaces and facilities within the club for valuable consideration, and for purposes which are not contrary to or inconsistent with the objectives of the corporation. In the rendition of opinion, the SEC cited Section 35 of the Revised Corporation Code which states that implied or incidental powers are the corporation’s powers, attributes, and properties, incidental to its existence, and essential or necessary to carry out its purpose or purposes in its AOI. Further, upon perusal of the subject corporations’ secondary purpose, the same is substantially similar to Section 35 of the law. Since the proposed arrangements with third parties will result in the promotion of the social and physical well-being of its members, and the income shall be used for maintenance and operations of the yatch club, the SEC opined that the corporation is allowed to lease real property or enter into agreements with third parties, so long as it remains  necessary in the conduct of its corporate business. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO. 19-22, JUNE 14, 2019]

[APPLICATION OF RTLA TO CLARK FREEPORT ZONE] [RTLA & FIA SHALL STILL BE COMPLIED NOTWITHSTANDING REGISTRATION UNDER CDC]

A foreign national planning to incorporate a 100% foreign corporation located at Clark Freeport Zone (CFZ), primarily to engage in a restaurant business, is seeking clarification if it is exempt from the requirements of Republic Act (RA) No 8762 or The Retail Trade Liberalization Act of 2000 (RTLA) and RA No 7042 or Foreign Investment Acts (FIA) since CFZ is managed by Clark Development Corporation (CDC). In previous opinions issued by the Commission to PEZA-registered entities, the SEC opined that PEZA registration shall not preclude the company from complying with the provisions of RTLA and FIA unless the case falls within the exceptions of the said laws. As regards the nationality requirement issue, SEC opines that it shall depend on the provisions of the law governing the ecozone and the rules issued by its implementing authority. Based on the governing law, the CDC has the power to authorize a corporation or any business organization formed under any foreign law to do business or engage in an industry inside the zone. Thus, the answer to the query would ultimately depend on CDC’s discretion as the promulgating agency competent to issue rules on the matter and to construe and implement the same by reason of specialized knowledge and jurisdiction. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO 19-21, MAY 29, 2019]

III. TAX & BUSINESS-RELATED NEWS [JUNE 30-JULY 3]

  1. Macasaet as GSIS president and general manager?
  2. Dole-administered database to track foreign workers’ tax payments sought
  3. SEC issues cease-and-desist order against mining corp
  4. BSP to hasten Islamic banking rules
  5. BIR making database for foreign workers
  6. PEZA seeks audit of tax incentives
  7. BSP sees huge improvement in financial inclusion programs
  8. DOF: No more business permit fee for clinics, offices of self-employed pros
  9. Dominguez: Poll results show TRAIN law not unpopular
  10. Property values up in Q1
  11. DTI-DOF compromise on tax incentives shaping up
  12. BIR to collect POGO taxes starting this month
  13. SEC okays P3-B IPO of 3 ACE hospitals
  14. DOF studying tax for ‘alcopops’

Macasaet as GSIS president and general manager? [Philippine Daily Inquirer, July 3, 2019]

Following the resignation of Jesus Clint Aranas from the Government Service and Insurance System (GSIS), the country’s biggest state-run pension fund was left without a president and general manager.
Source: https://business.inquirer.net/273819/macasaet-as-gsis-president-and-general-manager#ixzz5sdGFcrsk 

Dole-administered database to track foreign workers’ tax payments sought [Philippine Daily Inquirer, July 3, 2019]

The government will come up with a single interagency database containing the names and information of all foreign workers in the country in a bid to collect all the personal income taxes due from them, especially those working in Philippine offshore gaming operators (Pogo).
Source: https://business.inquirer.net/273849/dole-administered-database-to-track-foreign-workers-tax-payments-sought#ixzz5sd5vh1F3

SEC issues cease-and-desist order against mining corp [Philippine Daily Inquirer, July 3, 2019]

The Securities and Exchange Commission (SEC) has issued a cease-and-desist order against Alabel Maasim Mining (ALMAMICO) Corp. and related cooperatives for soliciting investments from the public without the necessary license and in a manner resembling a “Ponzi” scheme.
Source: https://business.inquirer.net/273834/sec-issues-cease-and-desist-order-against-mining-corp#ixzz5sd6HQVGq

BSP to hasten Islamic banking rules [Manila Bulletin, July 3, 2019]

The Bangko Sentral ng Pilipinas (BSP) will fast-track the issuance of regulations and rules for the development of Islamic finance in the country as soon as President Duterte approves and signs the Islamic Banking Law.

Source: https://business.mb.com.ph/2019/07/03/bsp-to-hasten-islamic-banking-rules/

BIR making database for foreign workers [Manila Bulletin, July 3, 2019]

The Bureau of Internal Revenue (BIR) is developing an interagency database of foreign nationals working in the country to effectively monitor them and ensure that correct amount of taxes are paid to the government, the Department of Finance (DOF) said.

Source: https://business.mb.com.ph/2019/07/03/bir-making-database-for-foreign-workers/

PEZA seeks audit of tax incentives [Manila Bulletin, July 3, 2019]

The Philippine Economic Zone Authority (PEZA) is hiring an audit firm to conduct a performance audit of the tax incentives it granted to investors whether these have contributed to the economy or not.

Source: https://business.mb.com.ph/2019/07/03/peza-seeks-audit-of-tax-incentives/

BSP sees huge improvement in financial inclusion programs [Manila Bulletin, July 3, 2019]

The digitization of financial services is changing the way the Bangko Sentral ng Pilipinas (BSP), known globally as a leader in financial inclusion (FI) agenda, is expanding and improving FI initiatives.

Source: https://business.mb.com.ph/2019/07/02/bsp-sees-huge-improvement-in-financial-inclusion-programs/

DOF: No more business permit fee for clinics, offices of self-employed pros [Philippine Daily Inquirer, July 2, 2019]

The government has harmonized the taxes and other fees that self-employed professionals such as doctors, accountants, and lawyers, among others, pay to local government units (LGUs) to cut red tape.
Source: https://business.inquirer.net/273774/dof-no-more-business-permit-fee-for-clinics-offices-of-self-employed-pros#ixzz5sd6V8idn

Dominguez: Poll results show TRAIN law not unpopular [Philippine Daily Inquirer, July 1, 2019]

Finance Secretary Carlos Dominguez on Monday (July 1) expressed confidence the other packages of the Duterte administration’s comprehensive tax reform program would sail smoothly through the 18th Congress as fears of a backlash from the electorate had been proven wrong by results of the May 13 midterm elections.
Source: https://business.inquirer.net/273677/dominguez-poll-results-show-train-law-not-unpopular#ixzz5sd6wxjwt

Property values up in Q1 [Manila Times, July 1, 2019]

HIGHER prices of townhouses and condominium units pushed residential property values up in the first quarter of the year, the Bangko Sentral ng Pilipinas (BSP) reported.

Source: https://www.manilatimes.net/property-values-up-in-q1/577423/

DTI-DOF compromise on tax incentives shaping up [Manila Bulletin, July 1, 2019]

A compromise between the Departments of Finance and Trade and Industry on the TRABAHO Bill, the second package of the Duterte administration’s comprehensive tax reform program, is shaping up that may grant investors longer transition period but higher tax on gross income earned (GIE) that would generate P30 billion to P40 billion in additional annual revenues for the government.

Source: https://business.mb.com.ph/2019/07/01/dti-dof-compromise-on-tax-incentives-shaping-up/

BIR to collect POGO taxes starting this month [Manila Bulletin, July 1, 2019]

The Bureau of Internal Revenue (BIR) will start collecting withholding taxes from foreign workers in the offshore gaming industry starting this month, the Department of Finance (DOF) said.

Source: https://business.mb.com.ph/2019/07/01/bir-to-collect-pogo-taxes-starting-this-month/

SEC okays P3-B IPO of 3 ACE hospitals [Manila Bulletin, June 30, 2019]

The Securities and Exchange Commission (SEC) has approved the plans of three more members of the Allied Care Experts (ACE) Medical Group to raise as much as P1 billion each in separate initial public offerings (IPOs).

Source: https://business.mb.com.ph/2019/06/30/sec-okays-p3-b-ipo-of-3-ace-hospitals/

DOF studying tax for ‘alcopops’ [Manila Bulletin, June 30, 2019]

The Department of Finance (DOF) is studying the proposal to create a separate tax for light alcoholic flavored beverages that are becoming the preferred drinks of millennials.

Source: https://business.mb.com.ph/2019/06/30/dof-studying-tax-for-alcopops/

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