DBM: 4-part pay hike for gov’t workers to start in 2025
Other Relevant Tax Updates:
- TAX & BUSINESS-RELATED NEWS [JULY 31-AUGUST 5]
- DEPARTMENT OF JUSTICE LEGAL OPINIONS
- SECURITIES & EXCHANGE COMMISSION OPINIONS
- BIR RULING ON THE DISQUALIFACATION OF NON-EXPORT REGISTERED BUSINESS ENTERPRISE TO THE CREATE LAW VAT ZERO-RATING
I. TAX & BUSINESS-RELATED NEWS [JULY 31-AUGUST 5]
- Dunkin Donuts franchise ordered to pay P64M in tax deficiencies
- Insurance Commission puts Forticare under conservatorship
- Megaworld to build P12-billion township in Batangas with The Farm at San Benito operator
- Taguig court halts Meralco’s contract auctions
- Pogo exodus to hit Bay Area hardest, says Colliers
- Online sellers tax seen boosting BIR revenues
- SC: Electric cooperatives do not have right to exclusive franchise
- DBM: 4-part pay hike for gov’t workers to start in 2025
- At-large former DOF official in multi-billion tax scam granted lower bail
- URC raises core profit by 5%, exits China
- GCash valuation rises to $5B after Japan’s MUFG buy-in, Ayala boost
- Energy giants see no hitches in securing PCC’s nod for LNG deal
- BIR gets nationwide ISO certification, unveils new logo, portal
- Waste-to-energy projects in Baguio to be scrapped
- ACEN takes over Quezon wind project
- Katinko maker eyes two factories at Tarlac ecozone
- BPI to consolidate 13 Robinsons Bank branches in October
- Palawan braces for disaster as quake-free myth shattered
- Batangas property declared as ecozone
- 7 HMOs at risk due to higher capital requirement—IC
- UK faces shortage of skilled workers in technology and banking, report suggests
- OceanaGold Philippines earnings drop in Q2 as production declines
- MPIC buys Mindanao dairy firm
II. DOJ OPINIONS
CDC HAS NO AUTHORITY TO MANAGE THE AREAS COVERED BY NATIONAL COMMISSION ON INDIGENOUS PEOPLE
Atty. D is inquiring regarding the authority of the Clark Development Corporation (CDC) to manage the areas covered by the Clark Special Economic Zone (CSEZ), including the area covered by Certificate of Ancestral Domain Title (CADT) issued to the Tribong Ayta, in light of relevant laws and the Joint Management Agreement (JMA) executed by the CDC, Tribong Ayta, and the National Commission on Indigenous People (NCIP). To be specific, Atty. D wish to clarify the specific mandates of NCIP, Department of Environment and Natural Resources (DENR), and CDC over areas already defined by law. In reply, the DENR is the primary government agency responsible for the conservation, management, development and proper use of the country’s environment and natural resources, specifically forest and grazing lands, mineral resources, including those in reservation and watershed areas, and lands of the public domain, as well as the licensing and regulation of all natural resources as may be provided for by law. On the functions of the DENR over lands of the public domain, Section 4(15) of Executive Order (E.O.) No. 292 states that it shall “exercise exclusive jurisdiction on the management and disposition of all lands of the public domain and serve as the sole agency responsible for classification, sub-classification, surveying and titling of lands in consultation with appropriate agencies.” However, R.A. No. 8371, or the Indigenous Peoples’ Rights Act of 1997 expressly limits the general power of regulatory bodies to issue concessions or licenses on areas that may overlap with any ancestral domain. In conjunction with the function of the NCIP to issue certificates of ancestral land/domain title, both ancestral domain and ancestral land are deemed to have been owned and occupied by Indigenous Cultural Communities/Indigenous People (ICCs/IPs) since time immemorial and are, therefore, no longer part of the public domain. The titles being issued by the NCIP over such areas is mere recognition or formalization of the rights that ICCs/IPs are already enjoying even prior to such issuance. DOJ is the view that there is no conflict between the powers and functions of NCIP and DENR. R.A. No. 8371 is a special law, as it relates specifically to the rights of the ICCs/IPs over their ancestral lands and domain, while E.O. No. 292, in relation to Commonwealth Act No. 141, is the general law, as it relates generally to public lands. CDC’s legal authority to manage and administer the CSEZ, portions of which are covered by CADT, may be treated as a limitation to the Tribong Ayta’s right to use and develop the subject ancestral domain, as provided under R.A. No. 8371 and manifested through the JMA entered into between the relevant parties. Finally, R.A. No. 8371 states that “in case of conflicting interest over lands covered by an ancestral domain, the NCIP shall hear and decide, after notice to the proper parties, the disputes arising from the delineation of such ancestral domains: Provided the dispute is between and/or among ICCs/IPs regarding the traditional boundaries of their respective ancestral domains, customary process shall be followed. [DEPARTMENT OF JUSTICE OPINION NO. 34, SERIES OF 2024, JULY 16, 2024]
WHILE R.A. NO. 11201 OR THE DHSUD LAW GAVE BOTH THE DHSUD & THE HSAC THE POWER TO IMPOSE & COLLECT FINES, THE DHSUD’S POWER RELATES TO THE EXERCISE OF ITS REGULATORY FUNCTION WHILE THE HSAC’S POWER IS IN THE EXERCISE OF ITS ADJUDICATORY FUNCTION
Undersecretary G is requesting a clarification regarding the transfer of functions and responsibilities from the Housing and Land Use Regulatory Board (HLURB) to the Department of Human Settlements and Urban Development (DHSUD), as well as the scope of the adjudicatory mandate of the Human Settlement Adjudication Commission (HSAC) under the Republic Act (R.A.) No. 11201 or the “Department of Human Settlements and Urban Development Act.” To be specific, the inquiry seeks to clarify as to which office should the regulatory administrative fines and penalties imposed by the HSAC in the exercise of its original and appellate jurisdiction inure, and will the sanctioned party pay the imposed administrative fine and penalty directly to the DHSUD or the HSAC. In reply, with the enactment of R.A. No. 11201, the DHSUD was created through the consolidation of the HUDCC and the HLURB. The regulatory function of the HLURB, including the formulation, promulgation, and enforcement of rules, standards and guidelines over subdivisions, condominiums and similar real estate developments, are transferred to the DHSUD. Moreover, Section 5 (Powers and Functions) of the said R.A. expressly granted the DHSUD the authority to determine, fix, and collect reasonable amounts to be charged as fees and charges necessary for the effective implementation of all laws, rules and regulations enforced by the DHSUD and impose reasonable fines and penalties for violation thereof. Additionally, Section 12 of the said R.A. reconstituted the HLURB and transferred the adjudicatory function of the HLURB to the HSAC, as attached to the DHSUD for policy, planning, and program coordination only. DOJ further stated that, the DHSUD is correct that administrative fines imposed by the DHSUD in the exercise of its regulatory function shall inure to it as its income and shall be deposited to the National Treasury. However, insofar as the fees, fines and penalties imposed by the HSAC in the exercise of its adjudicatory function are concerned, the same should be paid by the concerned parties directly to the HSAC. Thus, shall inure to the HSAC as its income, and shall be deposited to the National Treasury. While R.A. No. 11201 gave both the DHSUD and the HSAC the power to impose and collect fines, the DHSUD’s power relates to the exercise of its regulatory function while the HSAC’s power is in the exercise of its adjudicatory function. [DEPARTMENT OF JUSTICE OPINION NO. 33, SERIES OF 2024, JULY 12, 2024]
III. SEC OPINIONS
MICROFINANCE IS NEITHER A NATIONALIZED NOR A PARTLY NATIONALIZED INDUSTRY WHICH WOULD WARRANT THE APPLICATION OF THE ANTI-DUMMY LAW
C Co., a Microfinance NGO, is seeking an opinion on the applicability of Commonwealth Act (C.A.) No. 108, as amended, or the Anti-Dummy Law to its present set-up. As represented, Co. Co. is a Non-Stock and Non-Profit Microfinance and Non-Government Organization (NGO) registered with the Securities and Exchange Commission (SEC) and engaged in microfinance activities. It has one (1) alien member in its nine (9)-seat Board of Trustees and four (4) aliens as members in its General Assembly. At present, no alien is sitting as its officer. Further, it does not own land in the Philippines. In reply, for the Anti-Dummy Law to apply, the corporation must be engaged in a nationalized or partly nationalized activity. A list of activities which are deemed “nationalized” or “partly nationalized” is provided under the 12th Foreign Investment Negative List (FINL). Citing SEC-OGC Opinion No. 14-05, the Commission opined that foreigners can be elected as directors in proportion to their participation or share in the capital corporation engaged in activities that are reserved to Filipinos but are prohibited from being elected as officers of a corporation, such as the President, Vice-President, Treasurer and Secretary. On the subject of Microfinance NGOs, these organizations are defined as Nonstock, nonprofit organizations duly registered with the SEC, with the primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products, and services. Microfinance is neither a nationalized nor a partly nationalized industry which would warrant the application of the Anti-Dummy Law, as it is not expressly reserved by the law or by the 12th FINL as one of the activities with foreign equity restrictions. SEC highlighted that the Articles of Incorporation of C Co. involves the ownership of real property which is one of the activities reserved by law to Philippine nationals. To determine if a corporation is nationalized or partly nationalized, the corporation’s purpose clause must be examined because it confers, as well as limits, the powers which a corporation may exercise, and the character of a corporation is usually determined by the objects of its formation and the nature of its business. The primary purpose of the corporation, as stated in its AOI, is the first business to be undertaken by the corporation. Hence the primary purpose determines its classification. Outside of the primary purpose, the secondary purpose might determine a corporation’s classification on the condition that the corporation is actually engaged in the business stated therein. SEC then concluded that as long as “C Co. does not own land in the Philippines,” the Anti-Dummy Law does not apply as it is a Microfinance NGO which is not a nationalized or partly nationalized activity. However, in the event that it owns land, the Anti-Dummy Law would apply to it, i.e., aliens cannot be appointed or elected as corporate officers. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO. 24-18, JUNE 25, 2024]
RIGHT TO INSPECT CORPORATE BOOKS & RECORDS IS SUBJECT TO LIMITATIONS
Mr. C is requesting on behalf of F Co. an opinion on the inspection of corporate books and records. Mr. K, one of the shareholders of F Co., demanded the inspection of all the corporate records and documents of the corporation. Stated in the letter, that the request made by Mr. K, was so extensive that it covers areas that are not allowed to be disclosed pursuant to relevant laws such as the Intellectual Property Code of the Philippines, as amended, and the Data Privacy Act of 2012. The needed clarification is whether the documents requested by Mr. K are covered by the right to inspection. In reply, Section 73 of the Revised Corporation Code (RCC) provides the right of a stockholder, member, director or trustee (or their duly authorized representative) to inspect and/or reproduce corporate books and records. Subject to limitations, the RCC recognizes the defense available to a director, trustee, or officer for refusing to allow a shareholder or member to exercise the right to inspect or reproduce corporate records, namely, when; the person demanding to examine has improperly used any information secured through any prior examination of the records or minutes of such corporation or for any other corporation; the one requesting to inspect was not acting in good faith or for a legitimate purpose in making his demand; or the requesting party is a competitor, director, officer, controlling shareholder or otherwise represents the interests of a competitor. Lastly, SEC Memorandum Circular No. 25, Series of 2020 provides that any stockholder who abuses his right to inspect shall be penalized under the RCC, without prejudice to the provisions of Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines”, as amended, and Republic Act No. 10173, otherwise known as the “Data Privacy Act of 2012.” [SEC OFFICE OF THE GENERAL COUNSEL OPINION, NO. 24-14, MAY 21, 2024]
IV. BIR RULING
UNDER CREATE LAW, VAT ZERO-RATING IS LIMITED TO GOODS & SERVICES USED EXCLUSIVELY IN THE REGISTERED PROJECT OF THE EXPORT ENTERPRISE
Batangas State University (BSU) is seeking confirmation on the application of VAT zero-rating on its transaction with C Co., a construction company. BSU is registered with the Philippine Economic Zone Authority (PEZA) as an Ecozone Developer or Operator for the “BatStateU Knowledge, Innovation, and Science Technology Park” (KIST). The university has entered into a Construction Agreement with C Co. for Phase 1 of the “Kist Park Site Development” at its Alangilan campus. It is asserted that Section 295(D) of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) allows for VAT exemptions and zero-rating incentives on goods and services used exclusively for the registered project or activity by Registered Business Enterprises (RBEs) such as BSU. In ruling, the BIR made reference to Section 311 of the 1997 Tax Code, as amended by CREATE Law, as implemented by Rule 18 of the Amended Implementing Rules and Regulations (IRR) of CREATE Law, which provides that RBEs may continue to avail of the income tax incentives granted to them before the effectivity of the CREATE Law (i.e., Income Tax Holiday (“ITH”), and a 5% tax on gross income earned incentive after the ITH). However, these income tax incentives are available only during the transitory period. For the ITH, this means the remaining period as specified in the terms and conditions of their registration. For the 5% Gross Income Tax, the transitory period is ten (10) years from the effectivity of the CREATE Law or until April 11, 2031. Regarding the VAT zero-rating incentive, Section 5, Rule 18 of the amended IRR of the CREATE Law states that VAT zero-rating on local purchases applies only to goods and services directly attributable to and exclusively used in the registered project or activity of export enterprises until the expiration of the transitory period. Thus, a Registered Export Enterprise (REE) may still avail itself of the VAT zero rating, but only for goods and services directly attributable to and exclusively used in their registered project or activity. Consequently, since BSU is a non-export enterprise, its income payment to C Co. for the Project’s construction is subject to 12% VAT. [BIR RULING NO. 014-2024, FEBRUARY 22, 2024]
Dunkin Donuts franchise ordered to pay P64M in tax deficiencies [The Philippine Star, August 5, 2024]
In 2018, the Bureau of Internal Revenue filed a complaint against Golden Donuts with the Department of Justice, alleging the company had not paid P1.12 billion in income tax, sales tax and withholding tax as well as surcharges and interest for 2007.
Insurance Commission puts Forticare under conservatorship [The Philippine Star, August 5, 2024]
In a notice, IC commissioner Reynaldo Regalado said Forticare is being placed under conservatorship, a status that would allow the regulator to be involved in the management until the viability of the HMO is restored.
Megaworld to build P12-billion township in Batangas with The Farm at San Benito operator [GMA News Online, August 5, 2024]
The township will also be directly connected to The Farm at San Benito, with residents and visitors given access to the facilities and amenities of the wellness resort.
Taguig court halts Meralco’s contract auctions [The Philippine Star, August 5, 2024]
The court’s directive stemmed from a petition for injunction filed by members of the Malampaya consortium. This consists of Prime Energy, UC 38 LLC, Prime Oil and Gas Inc. and the Philippine National Oil Company-Exploration Corp.
https://www.philstar.com/business/2024/08/05/2375606/taguig-court-halts-meralcos-contract-auctions
Pogo exodus to hit Bay Area hardest, says Colliers [Philippine Daily Inquirer, August 3, 2024]
Jara explained that vacancy may increase to a maximum of 51 percent in the Bay Area spanning Roxas boulevard if Pogos exit the market this year.
https://business.inquirer.net/472733/pogo-exodus-to-hit-bay-area-hardest-says-colliers
Online sellers tax seen boosting BIR revenues [The Manila Times, August 3, 2024]
“The collections are not as high, because many purchases have shifted from traditional to online. So, there are many transactions online that the BIR isn’t capturing, that’s why we are focusing on taxing those on online platforms,” he added.
SC: Electric cooperatives do not have right to exclusive franchise [The Manila Times, August 2, 2024]
MANILA, Philippines – A Supreme Court ruling dismissed the petition of the Iloilo Electric Cooperative, Inc. I, II, and III (ILECOs) that challenged the validity of Republic Act (RA) 11918, which expanded the franchise of another electricity provider, MORE Electric and Power Corp. (MORE), to areas within ILECOs’ franchise.
DBM: 4-part pay hike for gov’t workers to start in 2025 [INQUIRERPLUS, August 2, 2024]
Starting next year, government employees will get the first two of a four-tranche salary increase totaling P70 billion which will be taken from the proposed 2025 national budget, the Department of Budget and Management (DBM) said on Thursday.
https://plus.inquirer.net/news/dbm-pay-hike-for-govtworkers-to-start-in-2025/
At-large former DOF official in multi-billion tax scam granted lower bail [Rappler, August 2, 2024]
The Sandiganbayan has allowed the reduction of bail for Asuncion Magdaet, a former finance official involved in the multi-billion peso Tax Credit Certificate (TCC) scam in the mid-1990s.
https://www.rappler.com/philippines/asuncion-magdaet-tax-credit-certificate-scam-granted-lower-bail/
URC raises core profit by 5%, exits China [Manila Bulletin, August 2, 2024]
URC also disclosed its strategic exit from China, where it operates cereals and snacks businesses. Manufacturing and selling have ceased, with the full closure expected by 2025.
https://mb.com.ph/2023/2/10/urc-raises-core-profit-by-5-exits-china
GCash valuation rises to $5B after Japan’s MUFG buy-in, Ayala boost [GMA News Online, August 2, 2024]
Mobile wallet GCash, operated by Globe Fintech Innovations Inc. (Mynt), has more than doubled its valuation after it secured fresh investments from Ayala Corporation and Japanese lender Mitsubishi UFJ Financial Group (MUFG).
https://www.gmanetwork.com/news/money/companies/915641/gcash-mufg-ayala/story/
Energy giants see no hitches in securing PCC’s nod for LNG deal [Philippine Daily Inquirer, August 2, 2024]
It was in March when Meralco PowerGen Corp. (MGen), Aboitiz Power Corp. and San Miguel Global Power Holdings Corp. (SMGP) joined hands for a landmark agreement that aims to bolster energy security while delivering “cost-efficient” power to consumers.
https://business.inquirer.net/472593/energy-giants-see-no-hitches-in-securing-pccs-nod-for-lng-deal
BIR gets nationwide ISO certification, unveils new logo, portal [Philippine News Agency, August 2, 2024]
“The BIR marks its 120th anniversary with achievements worthy of ‘Bagong Pilipinas’. Our 100% Nationwide ISO Certification marks the shift of BIR into a more service-oriented agency. Our new BIR logo marks our adaptation to the 21st century. Our new BIR web portal marks our commitment to the digitalization of our services,” said Lumagui.
https://business.inquirer.net/472599/bir-gets-nationwide-iso-certification-unveils-new-logo-portal
Waste-to-energy projects in Baguio to be scrapped [INQUIRERPLUS, August 2, 2024]
Toward the end of 2023, Magalong signed a memorandum of agreement (MOA) with the Metro Global Holdings Corp., a company owned by businessman Robert John Sobrepeña, which is developing a 15-megawatt waste-to-energy plant in neighboring Sablan town in Benguet province.
https://plus.inquirer.net/news/waste-to-energy-projects-in-baguio-to-be-scrapped/
ACEN takes over Quezon wind project [The Philippine Star, August 2, 2024]
In a regulatory filing, ACEN said it signed a share purchase agreement and deed of absolute sale of shares with boutique RE firm Maraj Energy and Development Corp. to buy out its stake in Real Wind Energy Inc. (RWEI).
https://www.philstar.com/business/2024/08/02/2374710/acen-takes-over-quezon-wind-project
Katinko maker eyes two factories at Tarlac ecozone [INQUIRERPLUS, August 1, 2024]
The maker of popular oil liniment and ointment brand Katinko will build two more factories within the Victoria Industrial Park in Tarlac, effectively tripling its output capacity in the economic hub with an estimated investment of P400 million.
https://plus.inquirer.net/business/katinko-maker-eyes-two-factories-in-tarlac-ecozone/
BPI to consolidate 13 Robinsons Bank branches in October [GMA News Online, August 1, 2024]
According to BPI head of consumer banking Maria Cristina “Ginbee” Go, the bank ended June with 865 branches. This includes 157 branches of the former Robinsons Bank, of which 13 will be consolidated in October.
Palawan braces for disaster as quake-free myth shattered [INQUIRERPLUS, August 1, 2024]
The provincial board of Palawan has called on the Provincial Disaster Risk Reduction Management Office (PDRRMO) to focus on enhancing its earthquake preparedness after government volcanologists warned that the province is not free from earthquakes after all. The warning was issued as board members sought an explanation after the Philippine Institute of Volcanology and Seismology (Phivolcs) detected several quakes in the waters off Palawan since June.
https://plus.inquirer.net/news/palawan-braces-for-disaster-as-quake-free-myth-shattered/
Batangas property declared as ecozone [The Philippine Star, August 1, 2024]
President Marcos has declared a property in Malvar, Batangas as part of the Lima Technology Center-Special Economic Zone.
https://www.philstar.com/nation/2024/08/01/2374621/batangas-property-declared-ecozone
7 HMOs at risk due to higher capital requirement—IC [Manila Bulletin, July 31, 2024]
Under this proposal, the capital base for HMOs will be increased to P50 million for existing domestic HMOs by year-end and to P100 million by the end of 2025 – matching the requirement for new HMOs.
https://mb.com.ph/2024/7/31/7-hm-os-at-risk-due-to-higher-capital-requirement-ic
UK faces shortage of skilled workers in technology and banking, report suggests [Mirror, July 31, 2024]
Recruitment firm Hays has identified the UK as one of the top five countries facing a significant shortage of skilled workers, according to their report. Alongside New Zealand, Portugal, Canada and Switzerland, the UK may struggle to fill high-demand and emerging roles in the future.
https://www.mirror.co.uk/money/uk-faces-shortage-skilled-workers-33363409
OceanaGold Philippines earnings drop in Q2 as production declines [GMA News Online, July 31, 2024]
This comes as the company said gold production declined to 23.1 thousand ounces (koz) from 32.2 koz the previous year, while copper production fell to 2.8 thousand tonnes (kt) from 3.4 kt. All-in sustaining costs increased to $1,250 per ounce from $740 per ounce.
MPIC buys Mindanao dairy firm [The Philippine Star, July 31, 2024]
Metro Pacific Investments Corp. (MPIC) yesterday formalized its buyout of Bukidnon Milk Co., founded by the How family, by issuing a downpayment for the deal estimated at more than P700 million.
https://www.philstar.com/business/2024/07/31/2374181/mpic-buys-mindanao-dairy-firm
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