BIR STARTS CRACKDOWN ON UNREGISTERED ONLINE BUSINESSES + PEZA ABS-CBN LINGKOD KAPAMILYA TO PROMOTE SUSTAINABLE ECOZONES IN BAGUIO + BIR ISSUES IRR ON LONGER PERIOD TO CLAIM NOLCO UNDER BAYANIHAN 2
Other Relevant Tax Updates:
- Bureau of Internal Revenue (BIR) Ruling Digest
- Supreme Court (SC) Case Digest
- Court of Tax Appeals (CTA) Cases Digest
- Tax And Business-Related News [September 26-October 2]
I. BIR RULING DIGEST
WITHDRAWAL OF TAX EXEMPTION OF CHARITABLE HOSPITAL IN CEBU
H Hospital is seeking tax exemption pursuant to Section 5 of Act No. 3239 passed on November 25, 1925 which provides that all real property of the home and the revenues shall be exempt from the payment of the land tax, income tax, and any other tax established by law. In reply, Executive Order No. 93 issued on December 17, 1986 effectively withdraws the tax and duty incentives granted to government and private entities, with enumerated exceptions. It appears that H Hospital is not one of those whose tax exemptions has been retained. Tax exemptions must be construed strictly against the taxpayer and liberally in favor of the taxing authority. The burden of proof rests upon the party claiming exemption to prove that it is in fact covered by the exemption so claimed. In case of doubt, non-exemption must be favored. Taxes being lifeblood of the government that should be collected without necessary hindrance, every precaution must be taken not to unduly suppress it. [BIR RULING NO. 257-2020, MAY 22, 2020]
II.SC CASE DIGEST
[PROVINCIAL GOVERNMENT OF CAVITE IS ENJOINED TO PROCEED WITH DELINQUENCY SALE FOR NON-PAYMENT OF REAL PROPERTY TAX (RPT)] [TO IMPOSE RPT ON TAXPAYER, WHO WAS NEITHER THE OWNER NOR THE BENEFICIAL USER OF THE PROPERTY DURING THE DESIGNATED PERIODS, WOULD NOT ONLY BE CONTRARY TO LAW BUT ALSO UNJUST]
Petitioners Provincial Government of Cavite and Provincial Treasurer of Cavite filed a Petition for Review on Certiorari assailing the Decision and Resolution of the Court of Appeals (CA) enjoining the Petitioners from conducting a tax delinquency sale of the real properties of Respondent CQM Management, Inc. CA ruled that Respondent was neither the owner nor the entity with the actual or beneficial use or possession of the pieces of real property located at PEZA for which RPT was sought by the Petitioners. CA also ruled that the properties involved were exempt from real estate taxation pursuant to Republic Act (R.A.) No. 7916 otherwise known as the PEZA Law. In ruling, the Supreme Court denied the Petition for failure of Petitioners to show that CA committed any reversible error. Conducting a tax delinquency sale would effectively make Respondent liable for the payment of RPT due which is not only contrary to law, but is also unjust. Lastly, as correctly ruled by the CA, the collection of some of the unpaid RPT already prescribed. Consequently, the Petition was DENIED. [PROVINCIAL GOVERNMENT OF CAVITE AND PROVINCIAL TREASURER OF CAVITE VS. CQM MANAGEMENT, INC., G.R. NO. 248033, JULY 15, 2020]
III. CTA CASES DIGEST
- Absence of Letter Of Authority (LOA)renders the assessment null and void; Memorandum Of Assignment (MOA) without new LOA results in a void assessment; issuance of Formal Assessment Notice (FAN) before the expiration of 15-day period from receipt of Preliminary Assessment Notice (PAN) is a violation of taxpayer’s right
- Waivers extending the prescriptive periodof tax assessments must be compliant with Revenue Memorandum Order (RMO) no. 20-90 and must indicate the nature and amount of the tax due; non-issuance of LOA due to re-assignment results in cancellation of assessment; assessment is null and void for lack of definite date to settle
- To be considered VAT invoice, “TIN-VAT” must be printed and not merely stamped; purchases with pre-printed TIN-V onlywould not be considered as vat invoices/official receipts and would not give rise to any creditable input VAT
- Whenever one party enjoys exemption from Documentary Stamp Tax (DST),the other party who is not exempt shall be the one directly liable to pay
- Input VAT disallowedfor not meeting invoicing requirements
- Sale or disposition of property as a result of auction sale by Local Government Unit (LGU) and the subsequent transfer of property to the new owner is subject to Capital Gains Tax (CGT); CGT is imposed on the transaction itself and not on the actual gain
- Sales to Renewable Energy (RE) developers do not qualify for VAT zero-ratingfor failure to present required documents
- Jurisdiction over a claim for refund of Local Business Tax (LBT)is dependent on the amount of claim; a judgment rendered by a court that has no jurisdiction is no judgment at all
- Assessment is void for failure of the BIR to comply with the due process requirements in the issuance of fan after the expiration of 15-day period from the issuance of pan; premature issuance of fanis factual evidence of disregarding due process
- BIR’s failure to prove fraudas allegedly committed by taxpayer does not extend its right to assess from three (3) years to ten (10) years
- Condominium corporations are not engaged in businesswhen they collect assessments or dues from unit owners
- Taxpayer has 30 days either from the receipt of local treasurer’s decisionor upon the lapse of the 60-day prescribed period to decide to institute judicial protest
- In input VAT refund, taxpayer may submit additional documents in court; documents submitted at the administrative levelare not necessarily fatal to judicial claim
- Contractors and licensees of Philippine Amusement And Gaming Corporation (PAGCOR)are exempt from income tax on its gaming revenues; payment of franchise taxexempts PAGCOR contractors and licensees to all taxes from its revenue from casinos; revenues from gaming operations subject to 5% franchise tax
- Late filing due to unavailability of electronic filing and payment system (efps)is subject to penalties
- Offshore sale of service of travel agency may be subject to 0% vatupon meeting requirements; preponderance of evidence as required quantum of proof in the CTA and not substantial evidence; simultaneous imposition of deficiency and delinquency interestonly apply until 31 December 2017
- RMO 43-90, despite being issued more than seven (7) years prior to the effectivity of the 1997 tax code, is still a valid rule; Revenue Officer (RO) may only examine taxpayers’ records pursuant to an LOA; MOA are not valid substitutes of the LOA
- Taxpayer may raise issues, which are considered as matters of record and matters of public importance, for the first time on appeal; absence of ELAinvalidates tax assessments; lack of definite amount of tax liabilitiesand failure to state due date for payment invalidates assessments
- Light rail manila corporation is a common carrier, hence, exempt from LBT; section 311 of the Caloocan updated revenue code is violative of the Local Government Code (LGC)
[ABSENCE OF LOA RENDERS THE ASSESSMENT NULL AND VOID] [MOA WITHOUT NEW LOA RESULTS IN A VOID ASSESSMENT] [ISSUANCE OF FAN BEFORE THE EXPIRATION OF 15-DAY PERIOD FROM RECEIPT OF PAN IS A VIOLATION OF TAXPAYER’S RIGHT]
Petitioner Mytel Mobility Solutions, Inc. filed a Petition for Review seeking cancellation of the assessment issued by the Respondent CIR citing prescription. In ruling, the Court noted that only a Memorandum of Assignment signed by the OIC-Revenue District Officer of RDO 52 was issued to the Petitioner. Likewise, the authority to sign such LOA shall only rest upon the CIR or his duly authorized representative, in this case, the Regional Director. Further, the Respondent failed to observe the 15-day period given to taxpayers to file a reply to PAN before the issuance of FAN. Thus, citing the doctrines laid down in Medicard and Yumex on nullification of the assessment as a result of violation of taxpayer’s right to due process, the Petition was GRANTED resulting in the CANCELLATION of the assessment. [MYTEL MOBILITY SOLUTIONS, INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9786, SEPTEMBER 23, 2020]
[WAIVERS EXTENDING THE PRESCRIPTIVE PERIOD OF TAX ASSESSMENTS MUST BE COMPLIANT WITH RMO NO. 20-90 AND MUST INDICATE THE NATURE AND AMOUNT OF THE TAX DUE] [NON-ISSUANCE OF LOA DUE TO RE-ASSIGNMENT RESULTS IN CANCELLATION OF ASSESSMENT] [ASSESSMENT IS NULL AND VOID FOR LACK OF DEFINITE DATE TO SETTLE]
Petitioner Medical Center Trading Corporation filed a Petition for Review seeking cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner argued that Respondent failed to strictly comply with the due process requirements in the conduct of audit, citing the following: failure to issue Notice of Informal Conference; failure to accord Petitioner the required 15-day period to file its reply to the Preliminary Assessment Notice; failure to complete audit within 60 days required under Revenue Memorandum Order (RMO) No. 36-2010; failure to issue a new LOA on the reassignment to a new audit team; set-in of prescription on the issuance of Formal Assessment Notice (FAN), and defective waiver. In ruling, the Court held that the subject waivers were not valid. Perusal of the documents showed that the waivers failed to indicate the specific tax involved and the exact amount of the tax to be assessed or collected. Likewise, the absence of new eLOA as a result of re-assignment to new examiner invalidates the subject tax assessments. A plain reading of the administrative issuance would reveal that all revenue officers, who are ordered to conduct audit through manually-issued LOAs prior to July 1, 2010, should continue the conduct of audit. However, it is also clear that such directive to continue the audit is subject to the retrieval of the manually-issued LOA and replacement of a new eLOA. Further, in view of the time-honored maxim, indefiniteness of Petitioner’s tax liability and the absence of a due date on the FAN rendered the assessments void. Based on the foregoing discussions, it becomes unnecessary to address the other arguments raised by the parties. Thus, the Petition was GRANTED resulting in the CANCELLATION of the assessment. [MEDICAL CENTER TRADING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9412, SEPTEMBER 23, 2020]
[TO BE CONSIDERED VAT INVOICE, “TIN-VAT” MUST BE PRINTED AND NOT MERELY STAMPED] [PURCHASES WITH PRE-PRINTED TIN-V ONLY WOULD NOT BE CONSIDERED AS VAT INVOICES/OFFICIAL RECEIPTS AND WOULD NOT GIVE RISE TO ANY CREDITABLE INPUT VAT]
Petitioner Kepco Ilijan Corporation filed a Motion for Reconsidering seeking reversal of Court’s earlier decision denying its claim for input VAT refund attributable to its zero-rated sales. Petitioner argued that Revenue Regulations (RR) No. 7-95 does not require the word TIN-VAT to be imprinted on a VAT-registered taxpayer’s supporting invoices and official receipts, and so there is no reason for the denial of its claim. In ruling, the Court held that it correctly disallowed the invoices and receipts as qualified for input VAT for failing to comply with the invoicing requirements. Contrary to Petitioner’s allegation, the regulation specifically requires the VAT registered person to imprint TIN-VAT on its invoices or receipts. Consequently, purchases supported by invoices or official receipts, wherein the TIN-VAT is not printed thereon, shall not give rise to any input VAT. Likewise, upon further examination, some official receipts are not issued in the Petitioner’s name, do not bear the latter’s registered name, address, and TIN. It is, thus, emphasized that compliance with all the VAT invoicing requirements provided by tax laws and regulations is mandatory. Thus, the Motion for Partial Reconsideration was DENIED for lack of merit. [KEPCO ILIJAN CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 6966, SEPTEMBER 22, 2020]
WHENEVER ONE PARTY ENJOYS EXEMPTION FROM DST, THE OTHER PARTY WHO IS NOT EXEMPT SHALL BE THE ONE DIRECTLY LIABLE TO PAY
Petitioner North Negros Biopower, Inc. filed a Petition for Review seeking refund of alleged erroneously paid Documentary Stamp Tax (DST). Petitioner claimed that its loan agreement with International Finance Corporation (IFC) is exempt from DST based on the IFC Articles of Agreement in which the Philippines is also a signatory, thus, the DST payment is erroneous and should be refunded. On the other hand, Respondent CIR countered that immunity of IFC is personal, and, therefore, cannot be transferred to the Petitioner. Further, Section 173 of the Tax Code and Revenue Regulations (RR) No. 9-2000 provide that whenever one party is exempt from the DST, the other party who is not exempt shoulders the liability to pay the DST. In ruling, the Court held that the Petitioner’s basis in claiming exemption (i.e. IFC Articles of Agreement) is only applicable to IFC, and that there is no law establishing the Petitioner’s exemption. Likewise, perusal of the documents showed that IFC recognized that the loan agreement is subject to taxes. Likewise, it stipulated as to who bears the burden of paying the taxes due thereon effectively waiving its immunity and privileges. Thus, the Petition was DENIED. [NORTH NEGROS BIOPOWER, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9920, SEPTEMBER 21, 2020]
INPUT VAT DISALLOWED FOR NOT MEETING INVOICING REQUIREMENTS
Petitioner Financial Times Electronic Publishing Philippines, Inc. filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) amounting to Php 1,890,422.04 on its purchases of goods and services attributable to its zero-rated sales for the period April 1, 2014 to June 30, 2014. In ruling, the Court relied on the report of the court-commissioned independent CPA, which indicates that a portion of the total amount of input VAT which is the subject of the claim of TCC should be disallowed for not being properly substantiated by VAT official receipts or invoices as prescribed under the Tax Code and the Implementing Rules and Regulations. Specifically, the noted defects include: (1) VAT invoices/ORs not dated within the VAT-taxable quarter; (2) supporting documents for purchase of services other than VAT ORs; (3) supporting documents without or with incorrect buyer’s TIN; and (4) supporting documents without or with incorrect buyer’s address. Consequently, the Court PARTIALLY GRANTED the Petition ordering the Respondent CIR to refund the Petitioner in the reduced amount of Php 1,225,701.00. [FINANCIAL TIMES ELECTRONIC PUBLISHING PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9378, SEPTEMBER 17, 2020]
[SALE OR DISPOSITION OF PROPERTY AS A RESULT OF AUCTION SALE BY LGU AND THE SUBSEQUENT TRANSFER OF PROPERTY TO THE NEW OWNER IS SUBJECT TO CGT] [CGT IS IMPOSED ON THE TRANSACTION ITSELF AND NOT ON THE ACTUAL GAIN]
Petitioner City Government of Valenzuela, represented by City Mayor Rexlon T. Gatchalian, filed a Petition for Review seeking refund of alleged erroneously paid CGT and Documentary Stamp Tax (DST) in the amount of Php 2,391,432.47, in relation to the acquisition of property pursuant to auction sale as a result of non-payment of real property tax of the delinquent owner. In ruling, the Court held that despite the involuntary nature of the transfer, the ownership of the subject property was transferred through a sale, exchange or disposition, within the purview of Section 27(D)(5) of the 1997 Tax Code, thus, the transaction is subject to CGT, regardless if there is gain since CGT is imposed on the transaction itself and not on the actual gain. Moreover, the proper party to claim the refund is the seller to whom the tax is imposed by law. On the imposition of DST, Local Government Units are exempt from DST pursuant Section 281 of the Local Government Code of 1991, which states that all certificates, documents, and papers covering the sale of delinquent property to the City, if registered in the Registry of Property, shall be exempt from DST. Thus, the Petition was PARTIALLY GRANTED ordering the Respondent CIR to refund the Petitioner at a reduced amount of Php 486,692.62 representing the erroneously paid DST. [CITY GOVERNMENT OF VALENZUELA, REPRESENTED BY CITY MAYOR REXLON T. GATCHALIAN VS. HON. CEASAR R. DULAY IN HIS CAPACITY AS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9872, SEPTEMBER 17, 2020]
SALES TO RE DEVELOPERS DO NOT QUALIFY FOR VAT ZERO-RATING FOR FAILURE TO PRESENT REQUIRED DOCUMENTS
Petitioner Vestas Services Philippines, Inc. filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) on its input VAT attributable to zero-rated sales. Petitioner claimed that its sales to Energy Development Corporation, a Renewable Energy (RE) developer, are subject to zero-rated VAT, thus, input VAT attributable thereto can be refunded within two (2) years from the close of the taxable quarter where such sales were made. On the other hand, Respondent CIR argued that the Petitioner did not comply with the processing and substantiation requirements for the application of input VAT refund. In ruling, Section 18 of Part III, Rule 5 of the Implementing Rules and Regulations of Republic Act (R.A.) No 9513, otherwise known as the Renewable Energy Act of 2008 provides that in order that sales to RE developers to qualify as zero-rated sales, RE developer should present the following documents: (1) DOE Certificate of Registration; (2) Registration with the BOI; and (3) Certificate of Endorsement by the Department of Energy (DOE). Perusal of the documents showed that the Petitioner’s client was not able to secure a Certificate of Endorsement by the DOE. In the absence of such document, the Petitioner’s sales to its RE Developer client cannot be considered as subject to VAT zero-rating, resulting in the DENIAL of the claim of the Petitioner. [VESTAS SERVICES PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9604, SEPTEMBER 16, 2020]
[JURISDICTION OVER A CLAIM FOR REFUND OF LBT IS DEPENDENT ON THE AMOUNT OF CLAIM] [A JUDGMENT RENDERED BY A COURT THAT HAS NO JURISDICTION IS NO JUDGMENT AT ALL]
Petitioner Swedish Match Philippines, Inc. filed a Petition for Review seeking reversal of the Court in Division’s earlier decision dismissing the case due to lack of jurisdiction. The case stemmed from the claim of refund of the Petitioner relative to the LBT it paid to the Respondent. Petitioner argued that considering that the Local Government Code did not specifically state which court has jurisdiction over a claim for refund of LBT, the said claim falls within the general jurisdiction of the Regional Trial Court (RTC). On the other hand, Respondent insisted that the RTC has no jurisdiction. In ruling, the Court clarified that the authority to exercise either original or appellate jurisdiction over local tax cases is dependent on the amount of claim. Considering that the amount sought to be refunded is below the jurisdictional amount of the RTC, the Municipal Trial Court (MTC) is clothed with ample authority to rule on such claims. Since the RTC has been demonstrated to have no jurisdiction, the Court is constrained to dismiss Petitioner’s claim for lack of jurisdiction. Consequently, the Petition was DENIED and the earlier decision was AFFIRMED. [SWEDISH MATCH PHILIPPINES, INC. VS. THE CITY TREASURER OF THE CITY OF MANILA, CTA EN BANC CASE NO. 2043, SEPTEMBER 11, 2020]
[ASSESSMENT IS VOID FOR FAILURE OF THE BIR TO COMPLY WITH THE DUE PROCESS REQUIREMENTS IN THE ISSUANCE OF FAN AFTER THE EXPIRATION OF 15-DAY PERIOD FROM THE ISSUANCE OF PAN] [PREMATURE ISSUANCE OF FAN IS FACTUAL EVIDENCE OF DISREGARDING DUE PROCESS]
Petitioner Karina, Inc. filed a Petition for Review seeking cancellation of the assessment issued by the Respondent CIR on the ground that it was deprived of its right to due process requirement as a result of premature issuance of FAN. On the other hand, Respondent countered that the Petitioner was afforded with all the rights to protest the assessment. In ruling, the Court noted the testimony of the Revenue Officer who testified that the FAN as sent to the Petitioner through registered mail on the same day that the said notice was issued. Section 3.1.1 of Revenue Regulations (RR) No. 12-99, provides that as part of due process in the issuance of tax assessments, a taxpayer has 15 days within which to reply to the PAN, before the taxpayer can be considered in default. After the lapse of the said period, it is only then that the BIR shall issue FAN. Evidently, the Respondent did not wait for the Petitioner to reply to the PAN before issuing the subject FAN. Thus, FAN was clearly issued prematurely, thereby depriving the Petitioner of the opportunity to be heard on the PAN, in violation of the due process requirement in the issuance of tax assessments. Consequently, the Petition was GRANTED resulting in the CANCELLATION of the assessment. [KARINA, INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9204, SEPTEMBER 10, 2020]
BIR’S FAILURE TO PROVE FRAUD AS ALLEGEDLY COMMITTED BY TAXPAYER DOES NOT EXTEND ITS RIGHT TO ASSESS FROM THREE (3) YEARS TO TEN (10) YEARS
Petitioner Marily Development Corporation filed a Petition for Review seeking cancellation of the assessment issued by the Respondent CIR citing prescription as well as invalidity of the assessment for failure of the Respondent to issue LOA. On the other hand, Respondent countered that the extraordinary 10-year prescriptive period should be applied given the fraud committed by the Petitioner. In ruling, the Court held that no evidence was presented to prove that an LOA was issued by the Respondent. Neither were the revenue officers who actually examined the Petitioner’s books and records presented in Court. On the issue of set-in of prescription, the 3-year period for the Respondent to assess the Petitioner’s internal revenue taxes has already prescribed and that the Respondent failed to present evidence of fraud on the part of the Petitioner for it to establish the 10-year prescription period. Thus, the Petition was GRANTED resulting in the CANCELLATION of the assessment. [MARILY DEVELOPMENT CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9756, SEPTEMBER 10, 2020]
CONDOMINIUM CORPORATIONS ARE NOT ENGAGED IN BUSINESS WHEN THEY COLLECT ASSESSMENTS OR DUES FROM UNIT OWNERS
Both Taguig City Government (TCG) and Serendra Condominium Corporation (SCC) filed consolidated Petitions for Review seeking reversal of the Court’s earlier decision holding SCC partially liable to LBT, business plate/sticker fee, and environmental impact fee. TCG argued that SCC is engaged in business, and as such, is not exempt from LBT. SCC countered that it is not created for the purpose of engaging in business or with a view to profit and it merely derives funds solely from its members in the form of association dues and as payment for the use of certain facilities and amenities. In ruling, the Court cited Yamane vs. BA Lepanto Condominium case wherein the Supreme Court held that by their nature, condominium corporations are generally exempt from LBT under the Local Government Code. Likewise, condominium corporations are not engaged in business when they collect assessments or dues from unit owners. In addition, in the matter of declaratory relief on the validity of Revenue Memorandum Circular (RMC) No. 65-2012, Supreme Court held that a condominium corporation cannot be considered as engaged in trade or business because it is not designed to engage in activities that generate income or profit but is especially formed for the purpose of holding title to the common area and exist only for the benefit of the condominium owner. Association dues, membership fees, and other assessments/charges collected by the condominium corporation from its members do not constitute gain or profit but are collected purely for the benefit of the condominium owners and are the incidental consequence of a condominium corporation’s responsibility to effectively oversee, maintain, or even improve the common areas of the condominium as well as its governance. The Petition was GRANTED. Consequently, TCG was ORDERED TO REFUND OR ISSUE TAX CREDIT CERTIFICATE in favor of SCC. [TAGUIG CITY GOVERNMENT VS. SERENDRA CONDOMINIUM CORPORATION AND SERENDRA CONDOMINIUM CORPORATION VS. TAGUIG CITY GOVERNMENT, CTA AC CASE NO’S. 229 AND 230, SEPTEMBER 10, 2020]
TAXPAYER HAS 30 DAYS EITHER FROM THE RECEIPT OF LOCAL TREASURER’S DECISION OR UPON THE LAPSE OF THE 60-DAY PRESCRIBED PERIOD TO DECIDE TO INSTITUTE JUDICIAL PROTEST
Petitioner Kuehne+ Nagel, Inc. filed a Petition for Review seeking reversal of the Court in Division’s earlier decision holding it liable to business tax imposed by the Respondent City Treasurer of Paranaque. Petitioner argued that the assessment is void since the Respondent has no power to impose local business tax on freight forwarders. On the other hand, Respondent countered that the Petitioner no longer has any cause of action as the assessment subject is already final and conclusive. In ruling, the Court agreed with the Court in Division holding that Petitioner’s judicial protest filed before the Regional Trial Court was beyond the prescribed period under Section 195 of the Local Government Code. Under the law, the Petitioner has 30 days either from the receipt of local treasurer’s decision or upon the lapse of the 60-day prescribed period to decide, and in this case, until February 2, 2015 to institute a judicial protest. However, perusal of the documents showed that the complaint was only filed on June 15, 2015. Considering the finding that Petitioner’s judicial protest was filed out of time, Petitioner cannot anymore raise any question concerning the validity or correctness of the assessment as the sole avenue to assert the same has been effectively shut. Thus, the RTC, much less this Court, never acquired jurisdiction over the present case. Having no jurisdiction, the Court cannot perform any action, therefore, except to dismiss the same. The Petition was DENIED for lack of merit. [KUEHNE+ NAGEL, INC. VS. CITY OF PARANAQUE AND ANTHONY I. PULMANO, IN HIS CAPACITY AS THE CITY TREASURER OF PARANAQUE, CTA EN BANC CASE NO. 2208, SEPTEMBER 9, 2020]
[IN INPUT VAT REFUND, TAXPAYER MAY SUBMIT ADDITIONAL DOCUMENTS IN COURT] [DOCUMENTS SUBMITTED AT THE ADMINISTRATIVE LEVEL ARE NOT NECESSARILY FATAL TO JUDICIAL CLAIM]
Petitioner BSM Crew Service Centre Philippines, Inc. filed a Petition for Review seeking refund or issuance of Tax Credit Certificate (TCC) on input VAT attributable to its zero-rated sales. Petitioner argued that its VAT refund claim was unanimously recommended for approval by the VAT Credit Audit Division (VCAD). On the other hand, Respondent claimed that the Petitioner failed to substantiate its claim for refund at the administrative level. Likewise, a taxpayer cannot cure its failure to submit document requested by the BIR at the administrative level by submitting said document before the Court. In ruling, the Court held that non-submission of complete supporting documents at the administrative level is not necessarily fatal to the Petitioner’s judicial claim. Taxpayer may present additional documents for its claim for refund at the judicial level. However, in order to be entitled to refund, there are requisites that must be complied with. In the appreciation of support, Petitioner has complied with only two (2) of the six (6) requisites (i.e timely filing of the refund and its VAT registration). Tax refunds, being in the nature of tax exemptions, are construed in strictissimi juris against the taxpayer and liberally in favor of the government. For failing to prove its entitlement, Petitioner’s claim must perforce be DENIED. [BSM CREW SERVICE CENTRE PHILIPPINES, INC. VS COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9892, SEPTEMBER 8, 2020]
[CONTRACTEES AND LICENCEES OF PAGCOR ARE EXEMPT FROM INCOME TAX ON ITS GAMING REVENUE] [PAYMENT OF FRANCHISE TAX EXEMPTS PAGCOR CONTRACTEES AND LICENSEES TO ALL TAXES FROM ITS REVENUE FROM CASINOS] [REVENUES FROM GAMING OPERATIONS SUBJECT TO 5% FRANCHISE TAX]
Petitioner Travellers International Hotel Group, Inc. filed a Petition for Review seeking cancellation of the income tax assessment issued by the Respondent CIR. Petitioner argued that as a licensee of PAGCOR, it is exempted from income tax on revenues derived from its gaming operation by virtue of Section 13 (2) of Presidential Decree (P.D.) No. 1869. On the other hand, Respondent argued that no law exempts the Petitioner from income tax on its revenues derived from gaming operations. In ruling, the Court held that Section 1 of Republic Act (RA) No. 9337 or an Act Amending Certain Provisions of the 1997 Tax Code was neither amended nor repealed. As such, PAGCOR, its contractees and licensees remain exempted from the payment of corporate income tax and other taxes upon payment of the 5% Franchise Tax. Since the law is clear, exemption inures to their benefit. Thus, the Petition was GRANTED resulting in the CANCELLATION of the assessment. [TRAVELLERS INTERNATIONAL HOTEL GROUP, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9769, SEPTEMBER 8, 2020]
LATE FILING DUE TO UNAVAILABILITY OF EFPS IS SUBJECT TO PENALTIES
Petitioner BAP Credit Bureau, Inc. filed a Petition for Review seeking the reversal of the CTA 2nd Division’s earlier decision upholding the penalties imposed by the Respondent CIR as a result of late filing of its 2014 Annual Income Tax Return (ITR). Petitioner argued that it is entitled to the claim of refund for erroneously paid and collected penalties as a result of late filing. Perusal of the documents showed that the Petitioner filed its 2014 AITR on April 16, 2015 which is one (1) day late from the April 15, 2015 statutory deadline due to the unavailability of eFPS. Respondent countered that it has previously issued circulars and a memorandum order directing taxpayers to manually file and pay its tax due in the case of unavailability of the eFPS. In ruling, the Court held that the late filing was inexcusable given that the Respondent has already issued Revenue Memorandum Circular No. 14-2015 and Revenue Memorandum Order No. 5-2002 providing the guidelines and procedures in the case of eFPS unavailability. The Petition was denied for lack of merit. [BAP CREDIT BUREAU, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2095, SEPTEMBER 3, 2020]
[OFFSHORE SALE OF SERVICE OF TRAVEL AGENCY MAY BE SUBJECT TO 0% VAT UPON MEETING REQUIREMENTS] [PREPONDERANCE OF EVIDENCE AS REQUIRED QUANTUM OF PROOF IN THE CTA AND NOT SUBSTANTIAL EVIDENCE] [SIMULTANEOUS IMPOSITION OF DEFICIENCY AND DELINQUENCY INTEREST ONLY APPLY UNTIL 31 DECEMBER 2017]
Both the CIR and Sabre Travel Network Philippines, Inc. filed a Petition for Review seeking the reversal of the CTA 2nd Division’s earlier decision cancelling the VAT assessment issued against the Respondent Sabre Travel Network Philippines, Inc. (Sabre) and partially upholding the assessment on Final Withholding VAT and Final Withholding Tax (FWT). CIR claimed that aside from proving that the revenues are paid in acceptable foreign currency, Sabre failed to prove that it met the other requisites laid down in landmark cases already decided in the past by the Supreme Court for its revenues to qualify as VAT zero-rated. On the other hand, Sabre argued that CTA 2nd Division erred when it required a higher degree of proof than substantial evidence leading the Court to affirm the CIR’s assessment on deficiency Final Withholding VAT and FWT arising from payments of cost reimbursements to Sabre Singapore. Likewise, Sabre argued that simultaneous imposition of deficiency and delinquency interest is prohibited under Tax Reform for Acceleration and Inclusion (TRAIN) Law. In ruling, the Court held that that in order to qualify as VAT-zero rated, the following requisites must be satisfied: (1) services must be other than processing, manufacturing, or repacking of goods; (2) payment for such services must be in acceptable foreign currency accounted for in accordance with Bangko Sentral ng Pilipinas rules and regulation; and (3) recipient of such services must be doing business outside the Philippines. Perusal of the documents showed that the Respondent was able to prove that it satisfied all the enumerated requirements. On the issue of required evidence to refute the assessment on Final Withholding VAT and FWT, substantial evidence is the quantum of proof required before the administrative and quasi-judicial bodies, and not before the Courts such as the CTA citing Section 5 of Rule 133. On the issue of simultaneous imposition of deficiency and delinquency interest, Section 249 of the Tax Code of 1997, as amended by Section 75 of TRAIN law and implemented by Revenue Regulations No. 21-2018 prohibits the simultaneous imposition of both the deficiency and delinquency interests. Thus, the Court PARTIALLY GRANTED the Petition upholding the assessment with modification. [COMMISSIONER OF INTERNAL REVENUE VS. SABRE TRAVEL NETWORK PHILIPPINES, INC. AND SABRE TRAVEL NETWORK PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO’S. 1932 AND 1937, SEPTEMBER 3, 2020]
[RMO 43-90, DESPITE BEING ISSUED MORE THAN SEVEN (7) YEARS PRIOR TO THE EFFECTIVITY OF THE 1997 TAX CODE, IS STILL A VALID RULE] [RO MAY ONLY EXAMINE TAXPAYERS’ RECORDS PURSUANT TO AN LOA] [MOA ARE NOT VALID SUBSTITUTES OF THE LOA]
Petitioner CIR filed a Petition for Review seeking reversal of the CTA 2nd Division’s earlier decision cancelling the assessment issued against the Respondent Securities Transfer Services, Inc. Petitioner insisted that RMO No. 43-90 on the acquisition of authority of the RO is inapplicable since this was promulgated seven (7) years prior to the 1997 Tax Code. In ruling, RMO provides that a new LOA must be issued even if the authority to examine the books of account and other accounting records of the taxpayer is merely assigned to another RO. Even if RMO No. 43-90 will be deemed without force and effect, the 1997 Tax Code provides that an RO must be clothed with authority, through an LOA, to conduct the audit of the taxpayer. Thus, notwithstanding the issuance of MOA, the reassignment would still require the issuance of a new LOA. For conducting the audit without the proper authority, CTA 2nd Division correctly invalidated the assessment. Consequently, the Petition was DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS. SECURITIES TRANSFER SERVICES, INC., CTA EN BANC CASE NO. 2057, SEPTEMBER 3, 2020]
[TAXPAYER MAY RAISE ISSUES, WHICH ARE CONSIDERED AS MATTERS OF RECORD AND MATTERS OF PUBLIC IMPORTANCE, FOR THE FIRST TIME ON APPEAL] [ABSENCE OF eLA INVALIDATES TAX ASSESSMENTS] [LACK OF DEFINITE AMOUNT OF TAX LIABILITIES AND FAILURE TO STATE DUE DATE FOR PAYMENT INVALIDATES ASSESSMENTS]
Petitioner Robinsons Toys, Inc. filed a Petition for Review seeking cancellation of the assessment issued by the Respondent CIR. Petitioner argued that the assessment is void due to the absence of eLA to support the audit. On the other hand, Respondent argued that the Court’s power of judicial review over decisions of Respondent is by nature exclusive and appellate, and Petitioner should not be allowed to raise issues for the first time on appeal. In ruling, the Court has taken the issues citing the Supreme Court-decided case in CIR vs. Eastern Telecommunications Philippines, Inc. which provides exceptions to the general rule and held that appeals can also raise questions of law or fact on the following: (1) matters of record having some bearing on the issue submitted which the parties failed to raise or the lower court ignored; and (2) questions involving matters of public importance. Likewise, there is no showing that the present manually-issued LOA has been retrieved and replaced by an eLA. Clearly, ROs who continued the audit were not authorized through an eLA to proceed with the audit. Further, perusal of the documents showed lack of definite amount of tax liabilities and failure to state due date for payment in the subject Formal Assessment Notice. Consequently, the Petition was GRANTED resulting in the CANCELLATION of the assessment. [ROBINSONS TOYS, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9161, SEPTEMBER 2, 2020]
[LIGHT RAIL MANILA CORPORATION IS A COMMON CARRIER, HENCE, EXEMPT FROM LBT] [SECTION 311 OF THE CALOOCAN UPDATED REVENUE CODE IS VIOLATIVE OF THE LGC]
Petitioner Light Rail Manila Corporation filed a Petition for Review seeking to reverse the decision of the Regional Trial Court, denying its Petition for Injunction, Prohibition, Mandamus and Declaration of Nullity of Section 311 of the Caloocan City Ordinance with application for Temporary Restraining Order and Writ of Preliminary Injunction. Petitioner insisted that it is a common carrier or at a very least, a transportation contractor, hence, should be exempted from the payment of the business tax under LGC. In ruling, the Court found the Petitioner to have satisfied all the requirements for it to be considered a common carrier, and, thus, it is exempt from the payment of LBT under Section 113 (i) of the LGC. The conclusion was also bolstered by its continuous filing of common carriers tax to the national government by virtue of Section 117 of the Tax Code; thus, if the LGU was to impose similar taxes on a common carrier, double taxation would inevitably occur. The Court also ruled that Section 311 of the Caloocan Updated Revenue Code is violative of the LGC since it provides for “payment under protest”, which is not necessary for filing a protest against assessments for LBT, and shortening of the sixty (60)-day period to thirty days within which to protest against the assessment. As regards LBT, 60-day period provided in Section 195 of the LGC should be observed. Thus, the application for a Writ of Prohibition was GRANTED. Respondents were ORDERED to DESIST from assessing LBT on its gross receipt; and Section 311 of the Caloocan Updated Revenue Code was declared NULL AND VOID. [LIGHT RAIL MANILA CORPORATION VS. CITY OF CALOOCAN, CTA AC NO. 224, SEPTEMBER 2, 2020]
IV.TAX AND BUSINESS-RELATED NEWS [SEPTEMBER 26-OCTOBER 2]
- Senators warned against giving SMC tax perks for airport project
- Businesses get longer tax relief from COVID-19-induced losses
- Japan unemployment rises to highest rate since 2017
- Businesses get longer tax relief from COVID-19-induced losses
- Bangko Sentral approves P540 billion loan to National Gov’t
- SSS to release pensions via PESONet starting October, drops issuance of checks
- BDO says qualified clients may apply for 60-day loan reprieve under Bayanihan 2
- BIR starts crackdown on unregistered online businesses
- Gov’t eyes Pagcor, PCSO privatization to raise revenues, pay debt
- PEZA, ABS-CBN Lingkod Kapamilya to promote sustainable ecozones in Baguio
- GSIS reopens emergency loan program
- House ends deliberation on proposed 2021 DOF budget, except BIR’s
- DTI: 90,000 businesses remain closed amid pandemic
- BTr offering ‘premyo bonds‘ again in November
Senators warned against giving SMC tax perks for airport project [Philippine Daily Inquirer, October 2, 2020]
A private think tank urged senators to strike down the tax break they intended to award to San Miguel Corp. (SMC) for its P735-billion airport project, saying this would set a dangerous precedent and “opens the floodgates for more corporate lobbying.”
Businesses get longer tax relief from COVID-19-induced losses [Philippine Daily Inquirer, October 2, 2020]
With the implementation of the Bayanihan to Recover as One Act in full swing, taxpayers will enjoy various tax exemptions under the law, including relief among businesses losing money amid the pandemic.
Japan unemployment rises to highest rate since 2017 [ABS-CBN News, October 2, 2020]
Japan’s unemployment rate rose to 3.0 percent in August, the highest figure since mid-2017, official data showed Friday, illustrating the pandemic’s effect on the country’s tight labor market.
Source: https://news.abs-cbn.com/business/10/02/20/japan-unemployment-rises-to-highest-rate-since-2017
Bangko Sentral approves P540 billion loan to National Gov’t [ABS-CBN News, October 1, 2020]
The Bangko Sentral ng Pilipinas on Thursday said the Monetary Board has approved the National Government’s request for a fresh P540 billion loan.
SSS to release pensions via PESONet starting October, drops issuance of checks [ABS-CBN News, October 1, 2020]
The Social Security System on Thursday said it would release pensions through PESONet and eliminate distribution through checks to expedite monthly crediting.
BDO says qualified clients may apply for 60-day loan reprieve under Bayanihan 2 [ABS-CBN News, October 1, 2020]
BDO Unibank on Thursday said qualified clients may apply for the 60-day grace period on payment of loans under the Bayanihan to Recover as One law or Bayanihan 2.
BIR starts crackdown on unregistered online businesses [Philippine Daily Inquirer, October 1, 2020]
The Bureau of Internal Revenue (BIR) starting today will go after unregistered online businesses despite the challenges posed by the lack of physical addresses and possibly even financial documents to audit.
Gov’t eyes Pagcor, PCSO privatization to raise revenues, pay debt [Philippine Daily Inquirer, September 30, 2020]
The Department of Finance (DOF) will push through with the plan to privatize the commercial functions of the Philippine Amusement and Gaming Corp. (Pagcor) and the Philippine Charity Sweepstakes Office (PCSO) to raise additional revenues and repay the debt pile that the government accumulated amid the COVID-19 pandemic.
PEZA, ABS-CBN Lingkod Kapamilya to promote sustainable ecozones in Baguio [ABS-CBN News, September 29, 2020]
The Philippine Economic Zone Authority (PEZA) has signed a deal with ABS-CBN Lingkod Kapamilya Foundation to promote green, healthy, and sustainable economic zones in Baguio, the agency said on Tuesday.
GSIS reopens emergency loan program [Philippine Daily Inquirer, September 29, 2020]
Members and pensioners of the state-run Government Service Insurance System (GSIS) have another chance to avail themselves of the COVID-19 emergency loan program, which has been extended until Dec. 27 amid a prolonged pandemic.
Source: https://business.inquirer.net/308417/gsis-reopens-emergency-loan-program#ixzz6Zi5D7eZR
House ends deliberation on proposed 2021 DOF budget, except BIR’s [ABS-CBN News, September 28, 2020]
The House of Representatives terminated on Monday its deliberation on the proposed 2021 budget of the Department of Finance and its attached agencies, except the Bureau of Internal Revenue.
DTI: 90,000 businesses remain closed amid pandemic [Philippine Daily Inquirer, September 28, 2020]
Around 90,000 businesses, mostly micro small & medium enterprises (MSMEs), remain closed as the coronavirus pandemic continues to cause chaos on the economy, Department of Trade and Industry (DTI) Secretary Ramon Lopez told senators Monday.
Source: https://business.inquirer.net/308391/dti-90000-businesses-remain-closed-amid-pandemic#ixzz6Zi5YPIrm
BTr offering ‘premyo bonds‘ again in November [Philippine Daily Inquirer, September 26, 2020]
The Bureau of the Treasury will again sell the so-called “premyo bonds” to small investors in November, as many foreign investors are getting rid of their bond holdings due to falling interest rates in the Philippines.
Source: https://business.inquirer.net/308272/btr-offering-premyo-bonds-again-in-november#ixzz6Zi5hwGak
If you wish to get a copy of the complete texts of the above issuances, send us an email thru taxseminars@dmdcpa.com.ph.
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