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Tax Bulletin August 2012
2 Tax Bulletin
HighlightsBIR Rulings
• PaymentstoaforeigncorporationforservicesperformedentirelyoutsidethePhilippinesareexemptfromincometaxandvalue-addedtax(VAT).(Page 4)
• DividendspaidbyadomesticcorporationtoanAustraliancorporationaresubjecttothe15%finalwithholdingtax(FWT)underSection28(B)(5)(b)oftheTaxCode.(Page 4)
• IncomederivedfrominvestmentsinthePhilippinesbyforeigngovernmentsisexemptfromincometaxand,consequently,fromwithholdingtax.(Page 5)
• Anupstreammergerwherethesurvivingparentcompanywillnotissuesharesinexchangefortheassetsoftheabsorbedsubsidiaryisnotconsideredatax-freemergerunderSection40(C)(2)oftheTaxCode.(Page 5)
• InatransactionwheretwopersonsexchangedsharesofstockintwocompaniesforsharesofstockinathirdcorporationinseparateDeedsofAssignment,asaresultofwhichthefirstpersongainscontrolof58.15%,andthesecondpersongainscontrolof24.33%,ofthevotingstockofthetransferee-corporation,onlythetransferofthefirstpersonwillbeconsideredatax-freeexchangeunderSection40(C)(2)oftheTaxCode.(Page 6)
BIR Issuances
• RevenueRegulations(RR)No.11-2012amendsSection3ofRRNo.1-2011onexemptionfromdocumentarystamptax(DST)ofremittancesofOverseasContractWorkers(OCWs)orOverseasFilipinoWorkers(OFWs).(Page 7)
• RevenueMemorandumCircular(RMC)No.34-2012clarifiesthetaximplicationsofintegratingtheDomesticPassengerServiceCharge(DPSC)atthepointofsaleofairlinetickets,andprescribesrulesfortheinvoicingandrecordingoftheDPSCinthebooksofairlinecompaniesandairportauthorities.(Page 8)
• RMCNo.35-2012clarifiesthetaxabilityofclubsorganizedandoperatedexclusivelyforpleasure,recreation,andothernon-profitpurposes.(Page 9)
• RMCNo.36-2012clarifieswhetherdocumentsmentionedinSection199oftheTaxCode,asamendedbyRepublicAct(RA)No.9243,aresubjecttotheP15.00DSTprescribedinSection188oftheTaxCode.(Page 10)
• RMCNo.37-2012clarifiesSection11ofRRNo.06-08bymakingitclearthataCertificateAuthorizingRegistration(CAR)isstillnecessarybeforesharesofstocknottradedinthestockexchangemaybetransferred.(Page 10)
• RMCNo.38-2012furtherclarifiesinQuestionandAnswerformattheprovisionsofRRNo.7-2010,asamendedbyRRNo.8-2010,implementingthetaxprivilegesgrantedunderRANo.9994,otherwiseknownasthe“ExpandedSeniorCitizensActof2010.”(Page 11)
• RMCNo.39-2012mandatesthewithholdingofincometaxonbackwages,allowances,andbenefitsreceivedbyemployeesthroughgarnishmentofdebtsorcreditspursuanttoalabordisputeaward.(Page 14)
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• RMCNo.40-2012prescribesaprescriptiveperiodforrulingsissuedpursuanttoSection40(C)(2)oftheTaxCode.(Page 15)
• RMCNo.47-2012prescribestherulesanddeadlinesforthefilingofapplicationsforenrollmentintheVATTaxCreditCertificate(TCC)MonetizationProgram,pursuanttotheDepartmentofFinance(DOF),DepartmentofBudgetandManagement(DBM)andBIRJointCircularNo.2-2012datedMay31,2012.(Page 15)
BOC Issuances
• CustomsAdministrativeOrder(CAO)No.1-2012establishestheAuthorizedEconomicOperator(AEO)Programforexporters.(Page 16)
• CustomsMemorandumOrder(CMO)No.9-2012requirespriorapprovalfromtheCommissionerofCustomsortheDeputyCommissionerfortheManagementInformationSystemandTechnologyGroup(MISTG)forthemanualprocessingofimportentriesinordertoeffecttheclearanceandreleaseofimportedgoods.(Page 18)
PSE Issuance
• PhilippineStockExchange(PSE)MemorandumCNNo.2012-0046remindstheinvestingpublicoftheeffectsofthefailureoflistedcompaniestocomplywiththeminimumpublicownership(MPO)requirementbyDecember31,2012.(Page 19)
SEC Issuances
• SECMemorandumCircular(MC)No.6dispenseswithsomerequirementsinsomeregistrationactivities.(Page 19)
• Foracorporationtopurchase,acquireorownlandinthePhilippines,atleast60%ofthetotalcapitalstockofthecorporationmustbewholly-ownedbyFilipinocitizens.(Page 20)
• AcorporationneedstoamenditsArticlesofIncorporation(AOI)toreflectthechangeofaddressfromonebuildingtoanother,evenifthesecondbuildingiswithinthesamecityormunicipality.(Page 21)
• Indeterminingthecitizenshipofsharesbeingheldintrust,thenationalityofboththetrusteeandthebeneficiaryshouldbeconsidered.(Page 21)
BSP Issuances
• CircularNo.762amendstheregulationsonDepositsforStockSubscriptionsofbanks/quasi-banks.(Page 22)
• CircularNo.763providesforregulatoryrelieftobanksunderrehabilitationprogram.(Page 25)
• CircularNo.764prescribestheRevisedOutsourcingFrameworkforNon-BankFinancialInstitutions(NBFIs).(Page 25)
• CircularNo.765prescribestheRevisedOutsourcingFrameworkforBanks.(Page 26)
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• CircularNo.766prescribestheGuidelinesinStrengtheningCorporateGovernanceandRiskManagementPracticesonTrust,OtherFiduciaryBusiness,andInvestmentManagementActivities.(Page 27)
Court Decision
• Afterreceivinganoticeofassessment,ataxpayermayfilewithin60daysawrittenprotestwiththelocaltreasurer,whichshalldecideonitwithin60days.ThetaxpayercanmakeanappealtotheRegionalTimeCourt(RTC)within30daysfromreceivingthedenialoftheprotest,orfromthelapseofthe60-dayperiodtodecideontheprotest.Thereafter,thetaxpayercanappealthedecisionoftheRTCtotheCourtofTaxAppeals(CTA)within30daysafterreceivingthedecision.(Page 29)
BIR Rulings
BIR Ruling No. 458-2012 dated July 10, 2012
Facts:
BCo.,anon-residentSingaporeancorporation,renderedservicesforFCo.,adomesticcorporation.TheseserviceswereperformedbyBCo.entirelyinIndonesia.FCo.paidservicefeestoBCo.
Issue:
AretheservicefeespaidbyFCo.toBCo.subjecttoPhilippineincometaxandVAT?
Ruling:
1. No.UnderSection23(F)oftheTaxCode,anon-residentforeigncorporationistaxableonlyonincomederivedfromsourceswithinthePhilippines,andunderSection42(A)(3),incomefromservicesisconsideredderivedfromsourceswithinthePhilippinesonlyiftheservicesareperformedinthePhilippines.Hence,incomefromservicesperformedbyanon-residentforeigncorporationentirelyoutsidethePhilippinesisexemptfromPhilippineincometax.
2. No.UnderSection108(A)oftheTaxCode,paymentsforservicesaresubjecttoVATonlyiftheservicesareperformedinthePhilippines.
BIR Ruling No. 465-2012 dated July 17, 2012
Facts:
PCo.declaredcashdividendstoitsstockholderswhichincludeDCo.,anon-residentAustraliancorporation.UnderAustraliantaxlaws,foreigndividendsreceivedinAustraliaareexemptfromincometax.
Issue:
ArethecashdividendspaidbyPCo.toDCo.subjecttothe15%FWTunderSection28(B)(5)(b)oftheTaxCode?
PaymentstoaforeigncorporationforservicesperformedentirelyoutsidethePhilippinesareexemptfromincometaxandVAT.
DividendspaidbyadomesticcorporationtoanAustraliancorporationaresubjecttothe15%FWTunderSection28(B)(5)(b)oftheTaxCode.
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Ruling:
Yes.UnderSection28(B)(5)(b)oftheTaxCode,cashand/orpropertydividendsreceivedbyanon-residentforeigncorporationfromadomesticcorporationshallbesubjecttoa15%FWTonthedividendsreceived,subjecttotheconditionthatthecountryinwhichthenon-residentforeigncorporationisdomiciledshallallowacreditagainstthetaxduefromthenon-residentforeigncorporationtaxesdeemedtohavebeenpaidinthePhilippinesequivalentto15%ofthedividend.Thepreferential15%FWTrateappliessinceAustralianlawstreatforeigndividendsreceivedinAustraliaasexemptfromincometax.
However,thefollowingrequirementsmustbecompliedwithwithinareasonabletimepursuanttoRMCNo.80-91:
a) ShowthatthedividendsreceivedbyDCo.fromPCo.werenotamongtheitemsconsideredinarrivingattheincometaxduefromDCo;
b) PresenttheincometaxreturnofDCo.forthetaxableyearwhenthesubjectdividendswerereceived;and
c) SubmitanyauthenticateddocumentsshowingthattheAustralianGovernmentdidnotimposeanytaxonthesubjectdividends.
BIR Ruling No. 495-2012 dated July 31, 2012
Facts:
KCo.,anautonomousgovernmentbodyresponsibleforthemanagementandadministrationofsomeofKuwait’sfunds,derivesincomefromitsinvestmentsinthePhilippinessuchasgovernmentbonds,corporatebondsandbankdeposits.
Issue:
IstheincomederivedbyKCo.frominvestmentsinthePhilippinesexemptfromPhilippineincometax?
Ruling:
Yes.UnderSection32(B)(7)(a)(i)oftheTaxCode,incomederivedbyforeigngovernmentsfrominvestmentsinthePhilippinesisexemptfromincometaxand,consequently,fromwithholdingtax.
BIR Ruling No. 508-2012 dated August 3, 2012
Facts:
ACo.,adomesticcorporation,effectedamergerwithitswholly-ownedsubsidiary,BCo.,anotherdomesticcorporation,whereACo.willbethesurvivingcorporation.Asaresultofthemerger,BCo.willtransferitsassetstoACo.However,sinceBCo.isawholly-ownedsubsidiaryofACo.,ACo.willnolongerissueanysharesofstockinconsiderationfortheassetstransferredbyBCo.pursuanttothemerger.
Issue:
IsthemergerbetweenACo.andBCo.consideredatax-freemergerunderSection40(C)(2)oftheTaxCode?
IncomederivedfrominvestmentsinthePhilippinesbyforeigngovernmentsisexemptfromincometaxand,consequently,fromwithholdingtax.
Anupstreammergerwherethesurvivingparentcompanywillnotissuesharesinexchangefortheassetsoftheabsorbedsubsidiaryisnotconsideredatax-freemergerunderSection40(C)(2)oftheTaxCode.
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Ruling:
No.Thereorganizationisanupstreammergerbetweenaparentcompanyandasubsidiary,wheretheparentcompanywillnotbeissuinganysharestothesubsidiaryinexchangefortheassetstobetransferredasaresultofthemerger.Ineffect,thetransferpartakesofthenatureofadonationmadebyasubsidiarytoitsparentcompany,contrarytowhatiscontemplatedinSection40(C)(2)oftheTaxCode.Inthesamemanner,theintendedmergeralsohastheeffectofdissolvingandliquidatingthesubsidiarywithoutpaymentofcorrespondingtaxes.
[Editor’s Note: This ruling revokes previous rulings such as BIR Ruling [DA-(S40M-001) 007-09] dated January 13, 2009, BIR Ruling [DA-(S40-M018) 436-08] dated November 14, 2008 and BIR Ruling [DA-(S40M-014) 387-08] dated November 4, 2008. In these rulings, the BIR ruled that the non-issuance of shares by the surviving corporation to the absorbed corporations does not affect the tax-free nature of the mergers since the mergers were between or among affiliated companies ultimately owned by the same parent, or between a parent and a subsidiary (with the parent as the surviving corporation). In these rulings, the BIR also ruled that the transfer of properties as a consequence of mergers is not subject to donor’s tax as there is no intention to donate on the part of any of the parties to the mergers, and the mergers were undertaken for bona fide business purposes.]
BIR Ruling No. 515-2012 dated August 3, 2012
Facts:
Mr.AownssharesinACo.,whileMr.BownssharesinBCo.Mr.AandMr.BexecutedseparateDeedsofAssignmenttotransfertheirrespectivesharesinACo.andBCo.infavorofXCo.,bothinexchangeforXCo.shares.Asaresultofthetransfer,Mr.AandMr.BwillgaincontrolofXCo.byowning58.15%and24.33%,respectively,ofthetotalvotingstockofXCo.
Issues:
1. IsthetransferbyMr.AofhissharesinACo.toXCo.exemptfromCGTandDST?
2. IsthetransferbyMr.BofhissharesinBCo.toXCo.exemptfromCGTandDST?
Ruling:
1. Yes.UnderSection40(C)(2)and6(c)oftheTaxCode,nogainorlossshallberecognizedifpropertyistransferredtoacorporationbyaperson,inexchangeforstockinsuchcorporation,asaresultofwhichsaidperson,aloneortogetherwithothers,notexceedingfourpersons,gainscontrolofsaidcorporation.Theterm“control”shallmeanownershipofatleast51%ofthetotalvotingsharesinthecorporation.
Indeterminingthe51%stockownership,onlythosepersonswhotransferredpropertyforstockinthesametransactionmaybecounteduptoamaximumoffive.Inshort,combiningallthesharestobereceivedbythetransferors,thesameshouldtotaltoatleast51%ofthevotingpowerofallclassesentitledtovote.
WiththeexchangeofsharesofMr.Aalone,healreadygainscontrolofXCo.byacquiring58.15%ofitsvotingshares.Hence,nogainorlossshall
InatransactionwheretwopersonsexchangedsharesofstockintwocompaniesforsharesofstockinathirdcorporationinseparateDeedsofAssignment,asaresultofwhichthefirstpersongainscontrolof58.15%,andthesecondpersongainscontrolof24.33%,ofthevotingstockofthetransferee-corporation,onlythetransferofthefirstpersonwillbeconsideredatax-freeexchangeunderSection40(C)(2)oftheTaxCode.
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berecognizedwithrespecttothetransferbyMr.AofhisACo.sharesinexchangeforsharesofstockofXCo.ThereisnoneedtocombineMr.A’sshareswiththesharesofMr.BtodetermineMr.A’scompliancewiththe51%stockownership.
However,thefollowingrequirementsmustbecompliedwith:
A. Mr.Amustfilewithhisincometaxreturnforthetaxableyearinwhichtheexchangetransactionwasconsummatedacompletestatementofallfactspertinenttotheexchange,including:
1. Adescriptionofthepropertieshetransferred,orhisinterestinsuchproperties,withastatementoftheoriginalacquisitioncost/adjustmentcostbasisorotherbasisatthetimeoftransfer;
2. Thekindsofstockreceivedandpreferences,ifany;3. Thenumberofsharesofeachclassreceived;and4. Thefairmarketvaluepershareofeachclassatthedateofthe
exchange.
B. XCo.mustfilealongwithitsincometaxreturnforthesametaxableyearthefollowing:
1. Acompletedescriptionofthepropertiesreceivedfromthetransferor;
2. Astatementoforiginalacquisitioncostorotherbasisofthepropertiesinthehandsofthetransferorandtheadjustedcostbasisthereofatthetimeofthetransfer;and
3. Informationwithrespecttothecapitalstockofthecorporationincluding:
i. Totalissuedandoutstandingcapitalstockimmediatelypriortoandimmediatelyaftertheexchange;
ii. Classesofstockandnumberofsharesissuedtothetransferorintheexchange;and
iii. Thefairmarketvalueasofthedateoftheexchangeofthecapitalstockissuedtothetransferor.
Lastly,within90daysfromreceiptoftheBIRRuling,thepartiestothetransactionmustsubmitacertifiedtruecopyofthedulyannotatedcertificatesofstockinrespectofthetransferredshares.
2. No.ThetransferbyMr.B,resultinginownershipofonly24.33%ofthetotalvotingsharesinXCo.,shallbetreatedasaseparatetransfersubjecttoCGTandDST.
[Editor’s Note: Section 40(C)(2) allows non-recognition of gain or loss on property-for-share transfers by transferors not exceeding five, as long as the 51% control requirement is met. Since up to five transferors are allowed to not recognize gain or loss on these exchanges, it stands to reason that the shares of the transferee-corporation received by the transferors not exceeding five, would be aggregated to determine compliance with the 51% control requirement. While this particular ruling did not specifically say so, it is possible that the BIR treated the transfer by Mr. B as a transfer separate from the transfer by Mr. A, and therefore did not add the X Co. shares received by Mr. B to the X Co. shares received by Mr. A as part of the 51% control requirement, because the transfers were effected in separate Deeds of Assignment.)
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BIR Issuances
Revenue Regulations No. 11-2012 dated August 17, 2012
• Section3ofRRNo.1-2011isamendedtoreadasfollows:
“Section3.TaxTreatment-xxx
C) OtherTaxesandFees:-xxx
TheremittancesofallOCWsorOFWs,uponshowingoftheOverseasExitClearance(OEC),validOverseasWorkersWelfareAdministration(OWWA)MembershipCertificate,or electronic receipt (e-receipt) issued by POEA,bytheOCWsorOFWbeneficiaryorrecipient,shallbeexemptfromthepaymentofdocumentarystamptax(DST)asimposedunderSection181oftheNationalInternalRevenueCodeof1997,asamended.Forthispurpose,inadditiontotheoriginalcopy,aduplicatecopyoracertifiedtruecopyofthevalidproofofentitlementreferredtoaboveshallbesecuredbytheOCWorOFWfromthePOEAorOWWA,whichshallbeheldandusedbyhis/herbeneficiaryintheavailmentoftheDSTexemption.
IncaseofOCWsorOFWswhoseremittancesaresentthroughthebankingsystem,creditedtobeneficiariesorrecipient’saccountinthePhilippinesandwithdrawnthroughanautomatictellermachine(ATM),or sent through non-bank money transfer agents,itshallbetheresponsibilityoftheOCWorOFWtoshowthevalidproofofentitlementwhenmakingarrangementforhis/herremittancetransfers.
xxx”
• Localbanksandnon-bankmoneytransferagentsarerequiredtodocumentremittancesmadebyOCWsorOFWsfollowingtheformatbelow,formonitoringpurposes:
OFW Remittances for the First Quarter of 2012
(ExemptfromDSTimposedunderSec.181oftheNIRC,asamended,perR.A.No.10022)
NameofOCW/OFW
Sender
NameofRecipient
AmountinPesoorPesoEquivalent
ProofofEntitlement
toDSTexemption(i.e.,OEC,e-receipt,orOWWA
MembershipCertificate
DateofTransaction
RemittanceDate
EncashmentDate
1.JuandelaCruz
JanedelaCruz
20,000 **** Feb1,2012 Feb1,2012
****[IndicateControlNumberprovidedbythePOEA]
• Theaboveinformationisrequiredtobefurnished,onaquarterlybasis,totheRevenueDistrictOffice(RDO)orAuditDivisionundertheLargeTaxpayersService(LTS)wherethebanksandnon-bankmoneytransferagentsareregistered,tobesubmittedonorbeforethe20thdayfollowingthecloseofthequarter.
RRNo.11-2012amendsSection3ofRRNo.1-2011onexemptionfromDSTofremittancesofOCWsorOFWs.
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• TheseRegulationsshalltakeeffectafter15daysfromdateofpublicationinanewspaperofgeneralcirculation.
(Editor’s Note: RR No. 11-2012 was published in the ManilaBulletin on August 24, 2012.)
Revenue Memorandum Circular No. 34-2012 dated July 13, 2012
Background
• InaMemorandumofAgreementdatedMay17,2012,theManilaInternationalAirportAuthority(MIAA)andthedomesticairlinecompanieshaveagreedthattheDPSC,whichusedtobecollectedbyMIAAfromdepartingpassengersthroughcounterslocatedintheairport,shallbeintegratedwiththesaleofairlinetickets.
• TheDPSCshallbecollectedfromthepassengersatthetimetheypurchaseairlineticketsfromairlinecompaniesorgeneralsalesagents/travelagents.
• TheDPSCshallthenberemittedtotheMIAAwhichshall,inturn,bechargedservicefeesbytheairlinecompaniesascompensationforcollectingtheDPSConbehalfoftheMIAA.
Collection of the DPSC from passengers
• TheairlinecompanyshallcollecttheDPSCfromthepassengersandshallincludetheDPSCintheofficialreceipt(OR)tobeissuedbytheairlinecompanyfortheairlineticketofthepassenger.
• TheDPSCshallconsistoftheShareofAirportAuthority,whichshallbesubjecttoa12%VAT,andtheAviationSecurityFee(ASF),whichshallbeVAT-exempt.
►• TheVATreceipttobeissuedbytheairlinecompaniesshouldreflecttheVAT-taxableandVAT-exemptcomponentsoftheDPSC.
• TheVATcomponentoftheDPSCshouldbeincludedinthetotalVAT,whichwillincludetheVATontheairlineticket.
• TheShareofAirportAuthorityandtheASFmaybereportedinthefinancialstatementsoftheairlinecompanyasotherincome/expense.
Payment of DPSC by airline company to airport authority
►• TheDPSCcollectedbytheairlinecompanyshallbepaidtotheairportauthority,whichshallthenissueanORtotheairlinecompany,indicatingthefullamountoftheDPSCanditsVAT-taxableandVAT-exemptcomponents.
►• TheDPSCshallnotformpartofthegrossreceiptsoftheairportauthorityinitsdeterminationofcreditablewithholdingtaxesdue.
Payment of Service Fees by airport authority to airline company
• Theservicefeespaidbytheairportauthoritytoairlinecompaniesshallbesubjecttoa5%withholdingVATand2%expandedwithholdingtaxongrosspayments.
• Uponpaymentoftheservicefees,theairlinecompanyshallissueaVATOR.
• ThiscircularshalltakeeffectonAugust1,2012.
RMCNo.34-2012clarifiesthetaximplicationsofintegratingtheDomesticPassengerServiceCharge(DPSC)atthepointofsaleofairlinetickets,andprescribesrulesfortheinvoicingandrecordingoftheDPSCinthebooksofairlinecompaniesandairportauthorities.
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Revenue Memorandum Circular No. 35-2012 dated August 3, 2012
• Incomefromwhateversource,includingbutnotlimitedtomembershipfees,assessmentdues,rentalincomeandservicefees,ofclubsorganizedandoperatedexclusivelyforpleasure,recreation,andothernon-profitpurposes,aresubjecttoincometax.
TheprovisionintheTaxCodeof1977,whichgrantedincometaxexemptiontorecreationalclubs,wasomittedinthecurrentlistoftax-exemptcorporationsundertheTaxCodeof1997,asamended.
• Grossreceiptsofrecreationalclubs,includingbutnotlimitedtomembershipfees,assessmentdues,rentalincomeandservicefees,aresubjecttoVAT.
Section105oftheTaxCodeprovidesthatanypersonwho,inthecourseoftradeorbusiness,sells,barters,exchanges,leasesgoodsorproperties,rendersservices,andanypersonwhoimportsgoods,shallbesubjecttoVAT.Thephrase“inthecourseoftradeorbusiness”meanstheregularconductorpursuitofacommercialoraneconomicactivity,includingtransactionsincidentalthereto,byanypersonregardlessofwhetherthepersonengagedthereinisanon-stock,non-profitprivateorganization.Thus,evenanon-stock,non-profitorganizationorgovernmententityisliabletopayVATonthesaleofgoodsorservices.ThisconclusionwasalsoaffirmedbytheSupremeCourtinCommissioner of Internal Revenue vs. Court of Appeals and Commonwealth Management and Services Corporation, G. R. No. 125355, March 30, 2000.
Revenue Memorandum Circular No. 36-2012 dated August 3, 2012
►• Onlyinstruments,documentsandpapersexpresslyenumeratedinSection199oftheTaxCodeareexemptfromDST.
►• ThefollowingcertificatesandothernecessarydocumentsissuedbytheConstructionIndustryAuthorityofthePhilippinesaresubjecttotheP15.00DSTimposedinSection188oftheTaxCode:
1. CertificateofRegistrationofOverseasContractors;2. CertificateofRenewalofRegistrationofOverseasContractors;3. Contractor’sLicense(Original);4. Certificateofwhetheracertaincontractorislicensed;5. Certifiedtruecopiesoflicensecertificates;6. Certifiedtruecopiesofdocuments,suchasAffidavitofUndertakingof
SustainingTechnicalEmployee(STE)andCurriculumVitaeofSTE;7. CertificateofAccreditationofArbitrators;and8. CasedocumentstobeusedtosupportpetitionorappealintheCourtof
Appeals.
Revenue Memorandum Circular No. 37-2012 dated August 3, 2012
►• Section11ofRRNo.06-08providesthatnosale,exchange,transferorsimilartransactionintendedtoconveyownershipof,ortitleto,anyshareofstockshallberegisteredinthebooksofthecorporationunlessthereceiptsofpaymentofthetaxhereinimposedisfiledwith,andrecordedby,thestocktransferagentorsecretaryofthecorporation.
►►• TheaboveprovisionofRRNo.06-08hascreatedconfusiononwhetheraCertificateAuthorizingRegistration(CAR)isstillnecessarybeforesharesofstocknottradedinthestockexchangemaybetransferred.
RMCNo.36-2012clarifieswhetherdocumentsmentionedinSection199oftheTaxCode,asamendedbyRANo.9243,aresubjecttotheP15.00DSTprescribedinSection188oftheTaxCode.
RMCNo.37-2012clarifiesSection11ofRRNo.06-08bymakingitclearthataCARisstillnecessarybeforesharesofstocknottradedinthestockexchangemaybetransferred.
RMCNo.35-2012clarifiesthetaxabilityofclubsorganizedandoperatedexclusivelyforpleasure,recreation,andothernon-profitpurposes.
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►►• Inordertotransferownershipofsharesofstocknottradedinthestockexchange,itisnecessarytosecureaCARpursuanttoRevenueMemorandumOrder(RMO)No.15-03.ThereceiptsofpaymentofthetaxshouldalsobefiledandrecordedbythesecretaryofthecorporationpursuanttoSection11ofRRNo.06-08.
Revenue Memorandum Circular No. 38-2012 dated August 3, 2012
►• Incomputingthe20%discountandtheexemptionfromVAT,theformulais:
TotalBillingAmountless12%VATx20% = SeniorCitizen
No.ofCustomers Discount
Theaboveformulawillapplyifnoindividualizedfooditemcanbeorderedorifthetransactionwiththeseniorcitizenisnotprocessedseparately.Thetotalbillingamountusedinthecomputationofthe20%discountistheamountexclusiveoftheVAT.
►• Forrestaurants,thediscountshallbeforthesaleoffood,drinks,dessertandotherconsumableitemsservedbytheestablishments,includingvaluemealsandpromotionalmeals,offeredfortheconsumptionofthegeneralpublic.Condimentsandsideproductsfallwithintheambitof“otherconsumableitemsservedbytheestablishments.”
►• Innocaseshallthediscountgrantedtoseniorcitizensbelessthan20%.Thereshouldbenofixed,maximumamountorcapwhichwilllimitthediscountbelowthe20%rate.The20%discountshallbegiventogoodspurchasedbyseniorcitizensbasedonthesellingpriceexclusiveofVAT.
►• The20%discountandVATexemptionshallalsoapplytosetmealspurchasedbyseniorcitizens,provided,however,thatthemealshallbelimitedtoasingle-servingmealwithbeverageforanindividualseniorcitizen.
►►• The20%discountshallapplytodine-in,take-outandtake-homeorders(excludingbulkorders)aslongasitistheseniorcitizenhimself/herselfwhoispresentandpersonallyordersandcanshowavalidseniorcitizenidentification(ID)card.Iftheseniorcitizenmerelytakeshometheunfinishedorunconsumeddine-inorder,he/sheshallstillbeentitledtothe20%discount,providedtheleftoverisnotpartofbulkorders.
►►• Ifthegroupofdinersiscomposedofseniorcitizenswhoorderedgroupmealsorfooditemsforsharinginrestaurants,eachseniorcitizenwithavalidseniorcitizen’sIDcardshallbeentitledtothe20%discountandVATexemption.Ifnotalltheseniorcitizenshavetheirvalidseniorcitizen’sIDcards,thevalueofthefoodpurchasedattributabletoseniorcitizenswithseniorcitizen’scardsmaybecomputedusingtheformulaabove.
►►• Bulkordersarenotentitledtothe20%discountandVATexemptionsincetheyarewithinthecontextofpre-contractedorpre-arrangedgroupmealsorpackages.
►►• Mealsprimarilypreparedandintentionallymarketedforchildrenandnotforseniorcitizen’spersonalconsumptionarenotentitledtothe20%discount.
RMCNo.38-2012furtherclarifiesinQuestionandAnswerformattheprovisionsofRRNo.7-2010,asamendedbyRRNo.8-2010,implementingthetaxprivilegesgrantedunderRANo.9994,otherwiseknownasthe“ExpandedSeniorCitizensActof2010”.
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►►• TheMostExpensiveMealCombination(MEMC)isanamountcorrespondingtothecombinationofthemostexpensiveandbiggestsingle-servingmealwithbeverageservedinaquickservicerestaurant.TheMEMCisdeemedflexibleandisadjustedaccordinglybyfoodestablishmentstoestimateasinglefoodpurchaseofanindividualseniorcitizen.MEMCisappliedonlytotake-out,take-home,drive-thruanddeliveryorders.
►►• Pasalubongfooditemswhicharesingle-serving/solomealsforthepersonalandexclusiveconsumptionoftheseniorcitizenareentitledtothe20%discountandVATexemption.Otherpasalubongfooditems(e.g.,boxofbiscocho,bottlesofginamos,severalpacketsofmangopreserves)whicharenotforthepersonalandexclusiveconsumptionoftheseniorcitizenarenotentitledtothe20%discountandVATexemption.Thislimitationextendstonoveltyitemsornon-consumablessoldinrestaurants.
►►• Called-inorphoned-inordersareentitledto20%discountandVATexemption.Theyare,likewise,subjecttocertainconditions,i.e.,seniorcitizenIDcardnumbermustbegivenwhilemakingtheorderoverthetelephone;theseniorcitizenIDcardmustalsobepresentedupondeliverytoverifytheidentityoftheseniorcitizenentitledtothe20%discountandVATexemption.
►►• Incaseofcalled-inorphoned-inordersofgroupmeals,thefoodestablishmentsmustdeterminethenumberofseniorcitizenscomprisingthegroup,andthe20%discountshallbecomputedbasedonthevalueofthefoodattributabletothequalifiedseniorcitizens.TheseniorcitizenIDcardnumber/smustbegivenwhilemakingthecalled-inorphoned-inorderandtheIDcard/smustbepresentedupondelivery.
►►• Apurchaseofawholecakeorpizzamaybeconsideredasapurchaseofagroupmealormealforsharing.Ifthewholecakeorpizzapurchasedisgoodfor5personsandthegroupiscomposedof5seniorcitizens,eachwithavalidseniorcitizenIDcard,theyshallbeentitledtothe20%discountortheentirefoodpurchaseshallbeentitledtothe20%discount.Ifthegroupiscomposedofseniorcitizens,butnotallhavetheirvalidseniorcitizenIDcard/s,orcomposedofseniorcitizensandnon-seniorcitizens,thevalueofthecakeorpizzaattributabletothequalifiedseniorcitizen/sshallbecomputedusingtheformulaabove.Iftheseniorcitizenpurchasesasliceofcakeorpersonalservingofcake,heshallbeentitledtothe20%discount.
►►• Thepurchasebyaseniorcitizenofalcoholicbeveragesifservedasasingleservingdrinkisentitledtothe20%discountandVATexemption.Thediscountandexemptionshallnotbegiventopurchases“inbulk”,“inbuckets”,or“incases”.However,alcoholicbeveragespurchasedinabar,cluborcabaretareexemptfromVATbutsubjecttoamusementtaxof18%underSection125oftheTaxCode.Theseniorcitizenmaystillbeentitledtothe20%discountonthepurchaseofthealcoholicdrink,butshallonlybelimitedtoasingleservingofalcoholicdrink.
►• Cigarettes/cigarsarenotfoodoressentialitemsdeemedentitledtothe20%discount.
►• The20%discountandVATexemptionprivilegeshallalsoapplytomedicinespurchasedfromdrugstores,hospitalpharmacies,medicalandopticalclinics,andsimilarestablishments,includingnon-traditionaloutletsdispensingmedicines.
►►• Adeliveryfee/chargenotbilledseparatelyissubjecttothe20%discount.Ifthedeliveryfee/chargeisbilledseparately,itisnotentitledtothe20%discountandissubjecttoVAT.
►►• Tollfeesarenotsubjecttothe20%discount.
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►►• Taxifaresaresubjecttothe20%discount.
►►• Inthepurchaseofgoodsandserviceswhichareonpromotionaldiscount,theseniorcitizenshallavailofeitherthepromotionaldiscountorthe20%discount,whicheverishigher.However,thediscountgiventotheseniorcitizenshallinnocasebelessthan20%.ThesaleofgoodsonpromotionaldiscountisstillVAT-exempt.
►►• The20%discountgivenbythebusinessestablishmentsisdeductiblefromtheirgrossincomeduringthesametaxableyearwhenthesaiddiscountsaregiven,andtheinputtaxattributabletotheVAT-exemptsaleisconsideredascostoranexpenseaccountofthebusinessestablishments.BoththediscountandinputVATthataretreatedascostorexpenseaccountsareabsorbedbytheState.
►►• IncaseofbusinessestablishmentswhicharenotsubjecttoVATbuttopercentagetaxbecausetheirgrossannualsales/receiptsdonotreachtheP1,919,500.00thresholdamountunderRRNo.16-2005asamendedbyRRNo.16-2011,seniorcitizensarenotexemptfromthepaymentofthepercentagetax.RANo.9994doesnotincludeexemptionfromthepaymentofpercentagetax.Theexemptiondoesnotcoverotherindirecttaxesthatmaybepassed-onbythesellertotheseniorcitizenbuyer,suchaspercentagetax.Insuchcase,thediscountmustbeonthetotalcostofthegoodsorserviceschargedbytheseller,exclusiveofthetax.
►►• Theamountofsalesthatmustbereportedfortaxpurposesistheundiscountedsellingpriceandnottheamountofsalesnetofdiscount.Thegrosssellingpriceandthesalesdiscountmustbeseparatelyindicatedintheofficialreceiptorsalesinvoiceissuedbytheestablishmentforthesaleofgoodsorservicestotheseniorcitizen.
►►• IfthesellerusesaPointofSaleMachineorCashRegisterMachine,themachinetapeshouldbeabletosegregatetheexemptsalefromthetaxablesale.Ifthemachinesareincapableofsegregation,theyshouldbere-programmedtocomplywiththerequirement.Inthemeantime,amanualinvoice/receiptshallbeissuedbytheseller.
►►• Thesellermayopttoissueaseparateinvoice/receiptonitssaletoseniorcitizens.Theseparateinvoice/receiptwillreflecttheamountofthediscountandthetotalamountpayable.Theword“VAT-ExemptSale”mustbewrittenorprintedprominentlyonthefaceoftheinvoice/receipt.
►►• Thesellermayissueoneinvoice/receiptfortheentiretransactionifthemerchandise/servicewassoldunderasingletransactioncomprisedofasaletoaseniorcitizenandasaletoanon-seniorcitizen,providingforaproperbreakdownoftheexemptsaleandtaxablesale.Theinvoicemustproperlyreflectthediscountontheexemptsale.TheVATdueonthetaxablesalemustbeseparatelybilledintheinvoice/receipt.
►►• Theincomestatementofthesellermustreflectthediscount,notasareductionofsalestoarriveatnetsales,butasadeductionfromitsgrossincome(saleslesscostofsales).Thus,the20%discountshallbetreatedasanecessaryandordinaryexpensedulydeductiblefromthegrossincome,providedthatthesellerdoesnotoptfortheOptionalStandardDeductionduringthetaxablequarter/year.
►►• Theinputtaxattributabletotheexemptsaleshallnotbeallowedasaninputtaxcreditbutmustbetreatedasacostoranexpenseaccountbytheseller.
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►• Businessestablishmentsgivingsalesdiscountstoqualifiedseniorcitizensarerequiredtokeepaseparateandaccuraterecordofsales,whichshallincludethenameoftheseniorcitizen-purchaser,OfficeforSeniorCitizensAffairs-ID,grosssales/receipts,salesdiscountsgranted,datesoftransactionsandinvoice/ORnumberforeverysaleortransactiontoseniorcitizen.TheinvoicingrequirementsinSection4.113-1ofRRNo.16-2005mustalsobecompliedwith.
►• Aspecialdiscountof5%oftheregularretailpriceofbasicnecessitiesandprimecommoditiesasdefinedundertheJointDepartmentofAgriculture(DA)andDepartmentofTradeandIndustry(DTI)AdministrativeOrderNo.10-02,Seriesof2010,shallbegrantedtoseniorcitizensontheirpurchases,takingintoaccountthatsaidpurchasesshallbeforthepersonalandexclusiveconsumptionand/orenjoymentoftheSeniorCitizen.
►►• PurchasesofbasicnecessitiesandprimecommoditiesbyseniorcitizensasdefinedunderSection2ofJointDTI-DAAdministrativeOrderNo.10-02,Seriesof2010,arenotexemptfromVAT.
►►• Toiletries,suchastoothpaste,bathsoapandtissuepaperarenotentitledtothe5%specialdiscount.OnlytheitemslistedunderRANo.7581orthePriceActareidentifiedasbasicnecessitiesandprimecommoditiessubjecttothe5%specialdiscount.However,powdered,liquid,barlaundryanddetergentsoapareconsideredbasicnecessitiessubjecttothe5%specialdiscount.
►►• “Maximumpurchaseperweek”meansthatseniorcitizensshallenjoyaspecialdiscountof5%oftheregularretailprice,withoutexceptionfromVAT,ofbasicnecessitiesandprimecommoditiesprovidedundertheJointDTI-DAAdministrativeOrderNo.10-02,providedthatthetotalamountofsaidpurchasesshallnotexceedthemaximumamountpercalendarweek.ThemaximumamountisP1,300.00percalendarweek,aftercombiningsetlimitsunderprimecommoditiesandbasicnecessities,withoutcarryoveroftheunusedamount.
Revenue Memorandum Circular No. 39-2012 dated August 3, 2012
►►• Backwages,allowances,andbenefitsawardedinalabordisputeconstituteremunerationforservicesthattheemployeewouldhaveperformedintheyearwhenactuallyreceived,orduringtheperiodofhisdismissalfromtheservicewhichwassubsequentlyruledasillegal.Theemployeeshouldreportasincomeandpaythecorrespondingincometaxesbyallocatingorspreadinghisbackwages,allowancesandbenefitsthroughtheyearsfromhisseparationuptothefinaldecisionofthecourtawardingthebackwages.Thebackwages,allowancesandbenefitsaresubjecttowithholdingtaxonwages(WTW).
►►►• Ifthejudgmentawardedinalabordisputeisenforcedthroughgarnishmentofdebtsduetotheemployerorothercreditstowhichtheemployerisentitled,thepersonowingsuchdebtsorhavingpossessionorcontrolofsuchcredits(e.g.,banksorotherfinancialinstitutions)wouldnormallyreleaseandpaytheentiregarnishedamounttotheemployee.Asaresult,employerswhoaremandatedtowithholdtaxesonwagescannotwithholdtheappropriatetaxduethereon.
►►►• UnderSection78(D)(1)oftheTaxCodeandSection2.78.4(A)ofRRNo.2-98,asamended,theterm“employer”includespersonshavingcontrolofthepaymentofwagesorsalaries.Inthiscase,thegarnisheesarethepersons
RMCNo.39-2012mandatesthewithholdingofincometaxonbackwages,allowances,andbenefitsreceivedbyemployeesthroughgarnishmentofdebtsorcreditspursuanttoalabordisputeaward.
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owingdebtsduetotheemployerorinpossessionorcontrolofcreditstowhichtheemployerisentitled.Accordingly,theyareincontrolofthepaymentofbackwages,allowancesandbenefits,andtheyareauthorizedtodeductandwithholdtheincometaxduefromthebackwages,allowances,andbenefitstobepaidtotheemployees,andare,therefore,liableforsuchdeductions.
►►►• GarnisheesofajudgmentawardinalabordisputeareconstitutedaswithholdingagentswiththedutyofdeductingthecorrespondingWTWduethereonequivalentto5%oftheportionofthejudgmentawardrepresentingthetaxablewages,allowances,andbenefits.
Revenue Memorandum Circular No. 40-2012 dated August 3, 2012
►►►• Section40(C)(2)oftheTaxCodeprovidesforthenon-recognitionofgainorlossin(i)casesofmergersorconsolidations,and(ii)property-for-shareswapswherethetransferor,aloneortogetherwithothersnotexceedingfour,gainscontrolofthetransferee-corporation.
►►►►• RulingsissuedunderSection40(C)(2)ofTaxCodeshallbevalidonlyfor90days,countedfromthedateofthereceiptoftherulingbyanyofthepartiestotheexchangetransaction.Thepropertiesandsharesofstockinvolvedinthetransfershouldbeconveyedtothetransferee/sandtransferor/s,respectively,withinthisperiod.
►►►►• PursuanttoRRNo.18-2001andRMONo.32-2001,aphotocopyoftheTransferCertificateofTitle(TCT)/CondominiumCertificateofTitle(CCT)/ShareofStockthatbearstheannotationofsubstitutedbasisoftherealproperty/sharesofstocktransferred/receivedinconnectionwiththetransaction,dulycertifiedbytheRegisterofDeeds/CorporateSecretary,shouldbesubmittedtotheLawDivision,BIR,7/FNationalOfficeBuilding,Diliman,QuezonCity,alsowithinthe90-dayperiodfromdateofreceiptoftherulingorcertificationbyanyofthepartiestotheexchangetransaction;otherwise,therulingshallbevoidandtheChiefoftheLawDivisionshallreferthecasetotheProsecutionDivisionforappropriateaction.
►►►►• AnyviolationofthisCircularbyanyofthepartiestotheexchangetransaction,orbyanypublicofficeroremployee,shallbesubjecttotheappropriatepenaltiesunderSections269and275oftheTaxCode.
►►►►• RevenueDistrictOfficesaredirectednottohonorsuchrulingsbeyond90dayscountedfromthedateofreceiptoftherulingbyanyofthepartiestotheexchangetransaction,unlessanextensionofperiodisgrantedbytheCommissionerinmeritoriouscases.
Revenue Memorandum Circular No. 47-2012 dated August 14, 2012
►►►►• ThedeadlineforfilingapplicationsforVATTCCMonetizationshallbeasfollows:
Type of TCC Filing Period
ForrevalidatedandunexpiredTCCsoriginallyissuedin2002and2003
July17,2012toSeptember1,2012
Forrevalidatedand/orunexpiredTCCsoriginallyissuedin2004untilApril11,2012
July17,2012toOctober17,2012
RMCNo.40-2012prescribesaprescriptiveperiodforrulingsissuedpursuanttoSection40(C)(2)oftheTaxCode.
RMCNo.47-2012prescribestherulesanddeadlinesforthefilingofapplicationsforenrollmentintheVATTCCMonetizationProgram,pursuanttotheDOF,DBMandBIRJointCircularNo.2-2012datedMay31,2012.
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►►►►• TheapplicationforenrollmentintheVATTCCMonetizationProgramforVATTCCsthatweresolelyissuedbytheBIRshallbefiledwiththeBIRVATTCC-issuingoffice,usingtheapplicationformforenrollmentwhichcanbedownloadedfromtheBIRwebsiteatwww.bir.gov.ph.
►►►►►• ForVATTCCsthatwerejointlyissuedbytheDOFOne-Stop-ShopInter-AgencyTaxCreditandDutyDrawbackCenterandtheBIR,theapplicationforenrollmentinsaidprogramcanbedownloadedfromtheDOFwebsiteathttp://taxcredit.dof.gov.ph.
►►►►• VATTCCholderswithpendingapplicationsforcashconversionofoutstandingVATTCCspursuanttoSection204(C)oftheTaxCodecanstillapplyforenrollmentintheMonetizationProgrambywithdrawingthepreviouslyfiledapplicationforcashconversionandfilinganewapplicationforenrollmentwithsaidprogramwiththeVATTCC-issuingofficesdesignatedastheReceivingOfficesfortheProgram’sApplicationforEnrollment.
[Editor’s Note: RMO 47-2012 was amended by RMO 51-2012 dated August 31, 2012 to extend the deadline for filing applications for monetization for revalidated and unexpired TCCs originally issued in 2002 and 2003, from September 1, 2012 to “September 15, 2012 or the expiration of the TCC, whichever comes first.”]
BOC Issuances
Customs Administrative Order No. 1-2012 dated June 26, 2012
►►►►►• CAONo.1-2012shallinitiallyapplytoexportersinsidetheClarkFreeportZonewithinthejurisdictionofthePortofClark.UponthedirectiveoftheBOCCommissioner,itshallcoverexportersinotherselectedairorseaports.
►►►►►• TheCommissionerofCustomsshallconstituteacommitteeheadedbyaDeputyCommissionerinchargeofaccreditationofAEOs.ThecommitteeshallperformotherfunctionsasmaybedeterminedbytheCommissioner.
►►►►►• RequirementsundertheAEOProgram:
1. Dulyfilled-upApplicationForm
2. Disclosureofthefollowinginformation:
a. Organizationalcharacteristics;b. Compliancerecord;c. Volumeofbusiness;d. Goods;e. Internalproceduresrelatedtodeclaration.
3. Companysecurityprofileincluding:
a. Asummaryofthecompany’ssecuritymanagementsystem;b. Asummaryofthecompany’sriskassessmentprocess;c. Measurestoenhancethesecurityofthecompany’ssupplychain.
4. Supportingdocumentsincluding:
a. Processmapthatillustratestheflowofgoodsandinformationthroughthecompany’ssupplychain;
b. Siteplanthatshowsthelayoutofthecompany’spremisesandclearlyidentifiesallperimeters,accessareas,buildings,structures,securityandaccesscontrols.
CAONo.1-2012establishestheAuthorizedEconomicOperator(AEO)Programforexporters.
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5. Copyofthecompany’srelevantsecurityaccreditations.
6. Otherrelevantsupportingdocuments.
►►►►►• Thesummaryofthesecuritymanagementsystemshallcontainthefollowing:
1. Company’ssecuritypolicy,securityobjectivesandcommitmenttosecurity;2. Proceduresforensuringthatpertinentsecuritymanagementinformationis
communicatedtoandfromrelevantemployeesandotherstakeholders;3. Proceduresforthereviewofthecompany’ssecurityprofileatplanned
intervals,toensureitscontinuingsustainability,adequacyandeffectiveness;4. Otherrelevantinformation.
►►►►►• Thesummaryofriskassessmentshallcontainthefollowing:
1. Flowcharttoillustratethecompany’sriskassessmentprocess;2. Risksandvulnerabilitiesidentified;3. Countermeasuresputinplacetoreducetheidentifiedrisksand
vulnerabilities;4. Whentheriskassessmentwasconducted;5. Whoconductedtheriskassessment;6. Otherrelevantinformation.
►►►►►• Elementsofthesecuritymeasuresthatneedtobeaddressed:
1. Premisessecurityandaccesscontrols;2. Personnelsecurity;3. Businesspartnersecurity;4. Cargosecurity;5. Conveyancesecurity;6. InformationandInformationTechnology(IT)security;7. Incidentmanagementandinvestigations;8. Crisismanagementandincidentrecovery.
►►►►►• Asidefromincreasedvisibilityofgoodsinthesupplychain,reductioninpilferages,andgreaterefficiencyinsupplychainmanagement,accreditedcompaniesshallbeentitledtothefollowingbenefits:
1. Dedicatedprocessinglanesresultinginreducedprocessingperiod;2. Renewalofexporteraccreditationonalongtermbasis;3. Lastpriorityinpost-entryaudit;4. Recognitionasalowriskcompany;5. ReducedinspectionorexpeditedclearancebyotherCustomsauthorities
shouldcertifiedstatusbealsorecognizedbyothercountriesunderamutualrecognitionprogramestablishedunderabilateralormultilateralarrangement;
6. OthertradefacilitationbenefitsthatmaybeaffordedbytheBOCunderexistinglawsandregulations.
►►►►►• AtrustedpartnerundertheAEOProgramshallhavethefollowingresponsibilities:
1. UpdatetheBOCasandwhentherearesignificantchangestothecompany’ssecurityprofileandotherinformationrequiredtobedisclosed;
2. Submitanannualstatementofcommitment;3. InformtheBOCofanynon-conformitiesbythecompanywithAEO-
PhilippinesGuidelines;4. Renewitsaccreditationasatrustedpartnereverytwo(2)years.
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►►►►►• TheaccreditationundertheAEOProgrammayberevokedforthefollowinggrounds:
1. ViolationofthetermsandconditionsoftheAEOcertification;2. Non-compliancebythecompanywithPhilippinecustomslawsand
regulationsorotherlawsandregulations;3. Supplychainsecurityweaknessesornon-conformitywithCAONo.
1-2012anditsimplementingrulesandregulations;4. CompanyoptstowithdrawfromtheProgram.
►►►►• AcompanymayappealtheBOCdecisiondenyingitsapplicationundertheAEOProgramwiththeCommissionerofCustomswithin15calendardaysfromreceiptofthedecision.
►►►►►• Alldocumentsorinformationprovidedbycompaniesshallremainconfidential,andshallnotbedisclosedtoathirdpartywithoutthecompanies’priorwrittenconsent.
►►►►►• TheCommissionerofCustoms,uponconsultationwithstakeholders,shallissuetherulesandregulationsfortheeffectiveimplementationofCAONo.1-2012.
►►►►►• Allorders,memoranda,circularsorpartsthereofwhichareinconsistentwithCAONo.1-2012aredeemedrevoked,amended,ormodifiedaccordingly.
►►►►►• CAONo.1-2012shalltakeeffectfifteen(15)daysafterpublicationinanewspaperofgeneralcirculation.
[Editor’s Note: CAO No. 1-2012 was published in the ManilaBulletin and the PhilippineStar on August 15, 2012.]
Customs Memorandum Order No. 9-2012 dated July 26, 2012
►►►►►• ExistingBOCrulesandregulationsallowforthemanualprocessingofimportentriesinthefollowingcases:
1. Computersystemsbreakdown;2. Powerfailurewhichrendersthecomputersystemnon-operational;3. Theauthorizedagentbankisoffline;4. UponauthorizationbytheBOCDeputyCommissionerforMISTG.
►►►►►►• Formanualprocessingofimportentries,priorauthorizationfromtheCommissionerofCustomsorinhisabsence,theDeputyCommissionerforMISTG,shallbeobtained.
►►►►►►• TheDistrictorPortCollectorshallbeheldaccountableforimportentriesprocessedmanuallywithoutpriorapprovaloftheCommissionerofCustomsortheDeputyCommissionerforMISTG.ErringBOCofficialsandemployeesshallbeimposedappropriateadministrative,civil,and/orcriminalsanctions,subjecttoexistinglawsandCivilServicerulesandregulations.
CMONo.9-2012requirespriorapprovalfromtheCommissionerofCustomsortheDeputyCommissionerfortheMISTGforthemanualprocessingofimportentriesinordertoeffecttheclearanceandreleaseofimportedgoods.
►
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PSE Issuance
PSE Memorandum CN No. 2012-0046 dated August 22, 2012
►• UndertheAmendedRuleonminimumpublicownership(MPO),listedcompaniesthatarenotcompliantwiththeMPOrequirementaregivenagraceperiodofuptoDecember31,2012withinwhichtocomplywiththeMPO.
• Immediatelyafterthegraceperiod,thePSEwillimposeatradingsuspensiononsaidsharesforaperiodofnotmorethan6months.
►• Consequently,thesaleofsaidsharesduringthesuspensionperiodmayonlybeeffectedoutsidethePSE’stradingsystem,andshallbesubjecttothefollowingtaxes:
Applicable Tax Tax Rate and Base
CapitalGainsTax OnnetcapitalgainsamountingtonotoverP100,000.00–5%
OnanyamountinexcessofP100,000.00–10%
DocumentaryStampTax P0.75oneachP200.00oftheparvalueofthestock
►• Furthermore,ifthefairmarketvalue(FMV)ofthesharesofstocksoldisgreaterthantheconsiderationorthesellingprice,theamountbywhichtheFMVofthesharesexceedsthesellingpriceshallbedeemedagiftsubjecttodonor’staxunderSection100oftheTaxCode.IntheabsenceofanyissuancebytheBIRtothecontrary,therulesprescribedinRRNo.06-08fordeterminingthevalueoflistedsharesofstockwhichweresold,transferredorexchangedoutsideofthetradingsystemand/orfacilitiesofthePSEshallapply.
►• TheforegoingarebasedonthePSE’sunderstandingoftheexistingprovisionsoftheTaxCodeandrelevantBIRissuances.Incaseofconflictorambiguity,theBIR’sinterpretationshallprevail.
SEC Issuances
SEC Memorandum Circular No. 6 dated August 15, 2012
►►• ConsistentwiththeobjectivesoftheAntiRedTapeActof2007(RANo.9485),theSECresolvedtodispensewiththefollowingrequirementsintheregistrationactivitiesbelow:
1. BankCertificateofDeposit–fortheregistrationoftheArticlesofIncorporationofnewcorporationswherethesubscriptiontotheauthorizedcapitalstockispaidincash;ifaportionofthesubscriptionisotherthancash,thenon-cashsubscriptionshallbeprovenbytheappropriatesupportingdocuments;
PSEMemorandumCNNo.2012-0046remindstheinvestingpublicoftheeffectsofthefailureoflistedcompaniestocomplywiththeMPOrequirementbyDecember31,2012.
SECMCNo.6dispenseswithsomerequirementsinsomeregistrationactivities.
20 Tax Bulletin
2. SpecialAuditReport–forapplicationsforincreaseintheauthorizedcapitalstockofcorporationswherethesubscriptiontotheincreaseispaidincashexcept(a)listedcompanies,(b)publiccompaniesasdefinedintheSecuritiesRegulationCode,(c)companiesthatofferorsellsecuritiestothepublic,and(d)wherethepaymentforthesubscriptiontotheincreaseismorethanP10million;
Inlieuofsuchreport,anotarizedSubscriptionContractbetweenthestockholder/sandtreasurerstatingthenumberofadditionalsharessubscribedtoandpaidforshallbesubmittedbythecorporation.
3. PrimaryEntry–forDeedofAssignmentintheregistrationofnewcorporationsorincreaseintheauthorizedcapitalstockwherelandorrealestatepropertyisofferedasconsiderationforsubscriptiontosharesofstock.
►►• SECMCNo.6shalltakeeffectimmediately.
(Editor’s Note: SEC MC No. 6 was published in the ManilaTimes on August 23, 2012.)
SEC-OGC Opinion No. 12-11 dated August 8, 2012
Facts:ACo.isprivatecorporationwhichis99.995%ownedbyforeignindividuals.Issue:
CanACo.acquirerealpropertyinthePhilippines?
Ruling:
No.ACo.cannotownlandinthePhilippines.Foracorporationtopurchase,acquireorownlandinthePhilippines,atleast60%ofthetotalcapitalstockofthecorporationmustbewholly-ownedbyFilipinocitizens.
Astoownershipofrealpropertyotherthanland,foreignerscangenerallypurchasehousesorbuildingsunlessspecificallyprohibitedbylaw.Oneexampleofaprohibitiononownershipofinterestinabuildingisinthecaseofacondominiumproject.Interestinacondominiummaybeintheformofownership,leaseoranyrealrights.Ifthecondominiumprojectissetuponleasedland,thecorrespondingcondominiumcorporationmaybeestablishedbyacorporation100%foreign-owned.Ifthecondominiumprojectissituatedonalandownedbythecondominiumcorporation,whichisaFilipinocorporation,anyinterestinthecondominiumcannotbetransferredtoaliensorforeigncorporationswhosecapitalstockismorethan40%ownedbyaliens.Ifthecommonareasareheldbyacondominiumcorporation,thetransfertoaliensofunitsinaprojectmaybemadeonlyuptothepointwheretheconcomitanttransferofstockholdingsinthecondominiumcorporationwouldnotcausethealieninterestinsuchcorporationtoexceed40%ofitsentirestock.
Foracorporationtopurchase,acquireorownlandinthePhilippines,atleast60%ofthetotalcapitalstockofthecorporationmustbewholly-ownedbyFilipinocitizens.
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SEC-OGC Opinion No. 12-12 dated August 9, 2012
Facts:CCo.isaholdingcompany.Ittransferreditsprincipalofficetoanewaddresssituatedinthesamecitywhereitspreviousofficewaslocated.IthasapendingapplicationforanamendmentofitsArticlesofIncorporation(AOI).Issue:
DoesCCo.needtoamenditsAOItoreflectthechangeinitsofficeaddress?
Ruling:
Yes.CCo.needstoamenditsAOItoreflectthechangeofaddressfromonebuildingtoanotherevenifthesecondbuildingiswithinthesamecityormunicipality.ItisnotenoughtoreflectthechangeintheGeneralInformationSheet(GIS).However,ifthetransferismerelytoanotherfloorofthesamebuilding,thereisnoneedtoamendtheAOI.
Asforanypenaltytobeimposed,sincethereisapendingapplicationforamendmentofAOI,nopenaltywillbeimposediftheboardresolutioneffectingthechangeinaddresshasthesameorearlierdatethantheGIS.However,iftheGISisdatedearlierthantheboardresolution,afineofP5,000.00willbeimposedonastockcorporation.
SEC-OGC Opinion No. 12-13 dated August 9, 2012
Facts:XCo.isaholdingcompanythatowns11%shareholdingsinYCo.,anairlinecompanywhichis40%foreign-owned.
Atpresent,XCo.is100%Filipino-owned.However,itwishestorestructureitsshareholdingsbyallowing51%ofitssharestobesubscribedbyAtty.Z,aFilipinocitizen.Atty.ZholdsthesharesintrustforMs.A,a14-year-oldbeneficiarywhowasbornoutoflawfulwedlockbetweenMr.G,aGermannational,andhisFilipinawife;hence,Ms.AislikewiseaFilipinocitizen.
Mr.Gholds30%outofthe40%foreignownershipinYCo.Mr.G,Ms.A’sfatherandlegalguardian,executedadeedoftrustinfavorofAtty.ZtoconcludetheshareholdingsofMs.AinXCo.Issues:
1. IsthetrustagreementbetweenMr.GandAtty.Zvalid?2. IftheproposedrestructuringisadoptedbyXCo.,isXCo.stillconsidered
100%Filipino-owned?3. IftheproposedrestructuringisadoptedbyXCo.,willYCo.beinexcessof
the40%foreignownershiplimitation?
AcorporationneedstoamenditsAOItoreflectthechangeofaddressfromonebuildingtoanother,evenifthesecondbuildingiswithinthesamecityormunicipality.
Indeterminingthecitizenshipofsharesbeingheldintrust,thenationalityofboththetrusteeandthebeneficiaryshouldbeconsidered.
22 Tax Bulletin
Ruling:
1. TheSECcannotrenderanopiniononthevalidityofcontracts,suchasatrustagreement.
2. Yes.XCo.willstillbeconsidered100%Filipino-ownediftheproposedstructuringisadopted.Forpublicutilitycompaniessuchasanairlinecompany,atleast60%ofitscapitalmustbeownedbyFilipinocitizens.Indeterminingthecitizenshipofsharesbeingheldintrust,thenationalityofboththetrusteeandthebeneficiaryshouldbeconsidered.
Intheproposedrestructure,51%ofthesharesinXCo.willbesubscribedbyAtty.Z,whoisaFilipinotrustee,intrustforMs.A,whoisaFilipinobeneficiary.Thus,XCo.willstillbe100%Filipino-owned.
3. No.YCo.willnotbeinexcessofthe40%foreignownershiplimitationiftheproposedstructuringisadopted.
Atpresent,40%ofYCo.isforeign-owned.Iftherestructuringisadopted,11%,whichisownedbyXCo.willstillbeconsideredFilipino-owned.Astotheremaining49%,weassumethatthisisownedbyFilipinos.Thus,YCo.satisfiesthe60%Filipinoownershiprequirement.
BSP Issuance
BSP Circular No. 762 dated July 25, 2012
►►►• SectionX128/4137QandrelatedsubsectionsoftheManualofRegulationsforBanks(MORB)/ManualofRegulationsforNon-BankFinancialInstitutions(MORNBFI)shallbeaddedtoread,asfollows:
“SectionX128/4137Q–Deposits for stock subscription.Depositsforstocksubscriptionrefertopaymentsmadebyexistingstockholdersornewsubscribersofthebank/quasi-bank(QB)onsubscriptiontotheincreaseintheauthorizedcapital,whichmayberecognizedeitherasaliabilityorequity.
Depositsforstocksubscriptionshallberecognizedaspartoftheequityforprudentialreportingpurposeswhenallofthefollowingconditionsaremet:
1. ThedepositforstocksubscriptionmeetsthedefinitionofanequityinstrumentunderPhilippineAccountingStandards(PAS)32Financial Instruments: Presentationsuchthatthedepositforstocksubscriptionshallnotbeinterest-bearingnorwithdrawablebythesubscriber.
2. Thebank/QB’sexistingauthorizedcapitalisalreadyfullysubscribed;
3. Thebank/QB’sstockholdersandboardofdirectorshaveapprovedtheproposedincreaseinauthorizedcapital;
CircularNo.762amendstheregulationsonDepositsforStockSubscriptionsofbanks/quasi-banks.
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4. Thebank/QBhasfiledanapplicationfortheamendmentofitsArticlesofIncorporationfortheincreaseinauthorizedcapitalwiththeappropriatedepartmentoftheSES,BSP,dulysupportedbycompletedocumentsaslistedinCircularLetterNo.2009-042datedMay14,2009;
ApplicationsfortheamendmentofArticlesofIncorporationfortheincreaseinauthorizedcapital,whichhavebeenreturnedduetoinsufficiencyofsupportingdocuments,shallnotqualifyforrecognitionasanequityinstrument;and
5. ThebankmusthaveobtainedapprovaloftheMonetaryBoardontransactionsinvolvingsignificantownershipofvotingsharesofstockbyanyperson,naturalorjuridical,orbyonegroupofpersons,asprovidedinSubsec.X126.2.b,ifapplicable.
Depositsforstocksubscription,whichdonotmeettheabovementionedconditionsshallbeclassifiedasaliability.
Depositsforstocksubscription,whichmeettheconditionstoberecognizedasequity,shallformpartofabank’squalifyingcapitalforpurposesofcomputingtherisk-basedcapitaladequacyratiounderSectionsX115foruniversalandcommercialbanks,aswellastheirsubsidiarybanksandQBs,andX118forstand-alonethriftbanks,ruralbanksandcooperativebanks.”
• PartIIofAppendix63b/AppendixQ-46oftheMORB/MORNBFIonthequalifyingcapitalundertherisk-basedcapitaladequacyframeworkforthePhilippinebankingsystemwereamended,asfollows:
1. “Depositforcommonstocksubscription”and“Depositforperpetualandnon-cumulativepreferredstocksubscription”wereaddedascomponentsofCoreTier1capitalandremovedfromUpperTier2capital;
2. “Depositforperpetualandcumulativepreferredstocksubscription”and“Depositforlimitedliferedeemablepreferredstocksubscriptionwiththereplacementrequirementuponredemption”wereaddedascomponentsofUpperTier2capitalandremovedfromLowerTier2capital;
3. “Depositforlimitedliferedeemablepreferredstocksubscriptionwithoutthereplacementrequirementuponredemption”wasaddedasacomponentofLowerTier2capital;
►• PartIIofAppendix63coftheMORBonqualifyingcapitalundertherisk-basedcapitaladequacyframeworkforstand-alonethriftbanks,ruralbanksandcooperativebankswasamended,asfollows:
1. “Depositforcommonstocksubscription”and“Depositforperpetualandnon-cumulativepreferredstocksubscription”wereaddedascomponentsofCoreTier1capitalandremovedfromUpperTier2capital;
2. “Depositforperpetualandcumulativepreferredstocksubscription”and“Depositforlimitedliferedeemablepreferredstocksubscriptionwiththereplacementrequirementuponredemption”wereaddedascomponentsofUpperTier2capitalandremovedfromLowerTier2capital;
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3. “Depositforlimitedliferedeemablepreferredstocksubscriptionwithoutthereplacementrequirementuponredemption”wasaddedasacomponentofLowerTier2capital;
►• PartVIofAppendix63coftheMORBondefinitionsundertherisk-basedcapitaladequacyframeworkforstand-alonethriftbanks,ruralbanksandcooperativebankswasamended,asfollows:
“PartVI.Definitions
xxx
8. Depositforstocksubscription–ThisreferstothefundsreceivedasdepositsforstocksubscriptionthatmeettheconditionsforrecognitionasequityprovidedinSec.X128.
xxx”
►• Subsection4116Q.2oftheMORNBFIonqualifyingcapitalwasamendedasfollows:
1. “Depositforcommonstocksubscription”and“Depositforperpetualandnon-cumulativepreferredstocksubscription”wereaddedascomponentsofTier1(core)capitalandremovedfromUpperTier2capital;
2. “Depositforperpetualandcumulativepreferredstocksubscription”wasaddedasacomponentofUpperTier2capitalandremovedfromLowerTier2capital;
3. “Depositforlimitedliferedeemablepreferredstocksubscription”wasaddedasacomponentofLowerTier2capital;
►• TheFinancialReportingPackage(FRP),issuedunderCircularNo.512datedFebruary3,2006,asamended,wasfurtheramendedasfollows:
1. Revisionofthedefinitionof“Depositforstocksubscription”accountunder“OtherLiabilities”oftheManualofAccounts;
2. Creationof“Depositforstocksubscription”accountunder“EquityAccounts”oftheManualofAccounts;and
3. RevisionofthereportingtemplatesoftheBalanceSheetoftheFRP/SimplifiedFRP.
►• TheguidelinegoverningthemodeandsubmissionofthereportorialtemplatesofFRP,SimplifiedFRPandRisk-BasedCapitalAdequacyFrameworksshallbecoveredbyaseparateissuance.
►• ThisCircularshalltakeeffect15daysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 762 was published in the MalayaBusinessInsight on July 30, 2012.]
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BSP Circular No. 763 dated August 3, 2012
►• SubsectionX302.3isaddedtotheMORB,toreadasfollows:
“SubsectionX302.3.RegulatoryReliefforBanksunderRehabilitationProgramApprovedbytheBSP-
Banksmaybeallowedtochargetheiroutstandingunbookedallowanceforprobablelossesdirectlytoretainedearnings,onaone-timebasis,subjecttothefollowingconditions:
a. ThatthisisinconnectionwithacomprehensiverehabilitationprogramapprovedbytheBSP;and
b. Theeffectthereof,ifthesehadbeenchargedtoprofitandloss,shallbefullydisclosedintheauditedfinancialstatements,annualreportsandpublishedstatementofcondition.”
►• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 763 was published in the ManilaStandardToday on August 11, 2012.]
BSP Circular No. 764 dated August 3, 2012
►• ThefollowingsectionsoftheMORNBFIareamendedtoprovidethattherulesonoutsourcingofbankingfunctionsasshowninAppendixQ-37shallbeadopted:
1. Section4162Q(2008–4190Q),insofarastheyareapplicabletoquasi-banks(QB);
2. Subsection4406Q.9,insofarastheyareapplicabletotrustdepartmentsofQBsperformingtrustandotherfiduciarybusinessandinvestmentmanagementactivities;
3. Subsection4701Q.13,insofarastheyareapplicabletoQBs’outsourcingofinternetandmobileelectronicservices;
4. Section4190S,insofarastheyareapplicabletonon-stocksavingsandloanassociations;
5. Section4190P,insofarastheyareapplicabletopawnshops;and
6. Section4190N,insofarastheyareapplicabletofinancialinstitutions.
►• Appendix37oftheMORNBFIisamendedandre-titledasRevisedOutsourcingFrameworkforBanks.
CircularNo.763providesforregulatoryrelieftobanksunderrehabilitationprogram.
CircularNo.764prescribestheRevisedOutsourcingFrameworkforNBFIs.
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►• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 764 was published in the BusinessMirror on August 13, 2012.]
BSP Circular No. 765 dated August 3, 2012
►►• SectionX162oftheMORBisre-titledandamendedtoreflectastatementofprinciplewhichshallreadasfollows:
“Section162Statement of Principle on Outsourcing.Aninstitutionmayoutsourcebankingsupportandmarketingactivitiessubjecttotheprovisionssetforthbelow.Accordingly,aninstitutionisexposedtooperationalrisksasaresultofoutsourcing.Assuch,aninstitutionthatavailsofoutsourcingshouldhaveinplaceappropriatemechanismstoensureeffectivemanagementofattendantrisks.”
►• ThepreviousSectionX162oftheMORBshallberenumberedasSubsectionX162.1,Governance in All Cases of Outsourcing of Banking Functions,andamendedtoprovidetheresponsibilitiesofabankwhenoutsourcingisallowedbylaw.
►►• ThepreviousSubsectionX162.1oftheMORB(2008–X169.1),Prohibition against outsourcing certain banking functions,isrenumberedasSubsectionX162.2andamendedtoprovideinherentbankfunctionsthatnobankshalloutsource.ThepreviousSubsectionX162.2(2008–X169.2)onOutsourcing of Information Technology Systems/ProcessesisamendedandtransferredtotheAppendixofSectionX162oftheMORBinrelevantdocumentations.
►• ThepreviousSubsectionX162.3(2008–X169.3),Outsourcing of Other Banking Functions,isdeleted.ThenewSubsectionX162.3oftheMORBreadsasfollows:
“SubsectionX162.3Definition.Outsourcingshallrefertoanycontractualagreementbetweenabankandaqualifiedserviceproviderforthelattertoperformdesignatedactivitiesonacontinuingbasisonbehalfofthebank.”
►• ThenewSubsectionX162.4,Managing Outsourcing-Related Risks,oftheMORBfocusesontheresponsibilityofthebanktomanagetheoperationalrisksthatarisefromoutsourcing.
►• ThenewSubsectionX162.5readsasfollows:
“SubsectionX162.5Authority to Outsource.OnlythosebankswithaCAMELScompositeratingofatleast“3”andaManagementRatingofnotlowerthan“3”shallbeallowedtooutsourcedesignatedactivitieswithoutpriorBSPapproval.Otherwise,thebankmustsecurepriorapprovalfromtheappropriatesupervisingdepartmentoftheBSPwhoseevaluationwillbebasedonthebank’sabilitytomanagerisksattendanttooutsourcing.”
►• ThenewSubsectionX162.6,Documentation,requiresbankstokeepthenecessarydocumentationtoshowthatoutsourcingarrangementsareproperlyreviewedandtheappropriateduediligencehasbeenundertakenpriortoimplementation.
CircularNo.765prescribestheRevisedOutsourcingFrameworkforBanks.
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►►• SubsectionsX162.11(2008–X169.11)andX162.12(2008–169.12)oftheMORBareconsolidated,re-titledandrenumberedasSubsectionX162.7,Intra-group Outsourcing,andamendedtoprovidetheconditionsincaseabankisactingasaserviceproviderwithinitsbusinessgroup.
►• ThenewSubsectionX162.8,Offshore Outsourcing,providesfortheconditionsincasesofoutsourcingwheretheserviceproviderislocatedoutsidethecountry.
►►• ThepreviousSubsectionX162.4(2008–X169.4)isrenumberedasthenewSubsectionX162.9andamendedtoreadasfollows:
“SubsectionX162.9Service Providers.Thebankshallcarryoutduediligenceinselectingserviceproviders.Itmustensuretheintegrity,technicalexpertise,operationalcapability,financialcapacityandsuitabilityoftheserviceprovidertoperformtheoutsourcedactivity.Incaseswheretheclientsareprejudicedduetoerrors,omissionsandfraudsbytheserviceprovider,thebankshallbeliableinprovidingtheappropriateremediesasmaybeallowedbylawsorregulations,withoutprejudicetorecoursebythebanktotheserviceprovider.”
►• ThepreviousSubsectionX162.5isrenumberedasSubsectionX162.10,re-titledandamendedtoreadasfollows:
“SubsectionX162.10Transitory Provision.AlloutsourcingagreementsmustbealignedwiththeprovisionsofSectionX162oftheMORB.Existingoutsourcingagreementswhicharenotinaccordancewiththiscircularwillnotbeunwound.However,itmustcomplywiththerequirementsprovidedhereinuponrenewaloftheagreements.”
►►• ThepreviousSubsectionX162.19,Penalties,isre-numberedasSubsectionX162.11.
►►• SubsectionsX406.9,Outsourcing Services in Trust Departments,andX701.13(2008–X621.13),Outsourcing of interment and Mobile Banking Services,oftheMORBaredeleted.
►►• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 765 was published in TheManilaTimes on August 13, 2012.]
BSP Circular No. 766 dated August 17, 2012
►►• SectionX401/4401Q,Statement of Principles,oftheMORB/MORNBFIareamendedtoprovidethatpoliciespredicateduponthecardinalprincipleoffidelityshallbedirectedtowardstheobservanceofprudentadministration,undividedloyaltyandutmostcare,non-delegationofresponsibilities,preservingandprotectingproperty,andkeepingandrenderingaccounts.
►►• SectionsX403/4403Q,Definitions,oftheMORB/MORNBFIareamendedbyre-assigningitems“a”to“u”as“b”to“v”andaddinganewitem“a”asfollows:
CircularNo.766prescribestheGuidelinesinStrengtheningCorporateGovernanceandRiskManagementPracticesonTrust,OtherFiduciaryBusiness,andInvestmentManagementActivities.
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“A.TrustEntityshallrefertoa(a)bankornon-bankfinancialinstitution,throughitsspecificallydesignatedbusinessunittoperformtrustfunctions,or(b)trustcorporation,authorizedbytheBangkoSentralngPilipinas(BSP)toengageintrustandotherfiduciarybusinessunderSection79ofR.A.No.8791(TheGeneralBankingLawof2000)ortoperforminvestmentmanagementservicesunderSection53ofR.A.No.8791.”
►►• SubsectionsX406.2/4406Q.2,Composition of trust committee,oftheMORB/MORNBFIareamendedtoprovidethattheTrustCommitteeshallhaveatleastfivemembersasfollows:
1. Thepresidentoranyseniorofficerofthebank/non-bankfinancialinstitution(NBFI);
2. Thetrustofficer;
3. Theremainingmembers,includingthechairperson,maybeanyofthefollowing:
i. Non-executivedirectorsorindependentdirectorswhoarebothnotpartoftheauditcommittee;or
ii. Thoseconsideredasqualified“IndependentProfessionals.”
Iftherearemorethan5members,amajorityshallbecomposedofqualifiednon-executivemembers.
►►• SubsectionX406.3/4406Q.3,Qualifications of committee members, officers and staff,oftheMORB/MORNBFIareamendedtoprovidethatdirectors,committeemembersandofficerschargedwiththeadministrationoftrustandotherfiduciaryactivitiesshallhavetheadditionalrequirementofrelevantexperienceinsuchbusiness.
Atrustofficer,inadditiontopossessingatleast3yearsofactualexperienceintrustoperationsoratleast5yearsofactualexperienceasanofficerofabank/NBFI,musthave:
1. Completedatleast90traininghoursintrust,otherfiduciarybusinessorinvestmentmanagementactivitiesacceptabletotheBSP;or
2. Completedarelevantglobalorlocalprofessionalcertificationprogram.
►►• ItemfofSections2404/3404oftheMORBontheauthoritytoengageinlimitedtrustbusinesstothriftbanksandruralbanks,respectively,shallberevisedtoprovidethatatrustofficer,inadditiontopossessingatleast1yearof
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actualexperienceintrustoperationsoratleast2yearsofactualexperienceasanofficerofabank/NBFI,musthave:
1. Completedatrainingprogramintrust,otherfiduciarybusinessorinvestmentmanagementactivitiesacceptabletotheBSP;or
2. Completedarelevantglobalorlocalprofessionalcertificationprogram.
►►• SubsectionsX406.a/4406Q.4,Responsibilities of Administration,oftheMORB/MORNBFIareamendedtoprovidethespecificresponsibilitiesofthefollowing:
1. TheBoardofDirectors(BOD)inrelationtotrustactivitiesofabank/NBFI;
2. TheTrustCommittee,whichisaspecialcommitteethatreportsdirectlytotheBODandisprimarilyresponsibleforoverseeingthefiduciaryactivitiesofthebank/NBFI;and
3. TheTrustOfficer,whoisvestedwiththemanagementoftheday-to-dayfiduciaryofficer.
►►• SubsectionsX406.10/4406Q.10,Confirmation of the appointment/ designation of trust officer and independent professional,oftheMORB/MORNBFIareamendedtoprovidethatanindependentprofessionalandtrustofficermustbefitandpropertodischargetheirrespectivefunctions.Theirappointment/designationshallbesubjecttoconfirmationbytheMonetaryBoardwhichshallinformtheconcernedbank/NBFIif,afterevaluation,itfindsgroundsforthedisqualificationoftheindependentprofessionalandtrustofficer.
• Trustentitiesofbanks/NFBIsthatdonotmeettherequirementsofthisCircularshallbegiventwelve(12)monthsfromthedateofeffectivitytocomply.
• Non-compliancewiththeprovisionsofthisCircularshallsubjectthebank/NBFIanditsBODtosanctionsprovidedunderSections36and37ofR.A.7653withoutprejudicetotheimpositionofothersanctionsastheMonetaryBoardmayconsiderwarrantedunderthecircumstancesthatmayincludebutnotlimitedtocurtailmentoffiduciaryactivities,and/orintroductionofnewbusiness,andsuchothersanctionsasmaybeprovidedbylaw.
• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 766 was published in the ManilaBulletin on August 24, 2012.]
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Court Decision
Team Pacific Corporation vs. Josephine Daza, in her capacity as Municipal Treasurer of TaguigSecondDivision,G.R.No.167732,promulgatedJuly11,2012
Facts:
PetitionerTeamPacificCorporation(TPC),adomesticcorporationengagedinthebusinessofassemblingandexportingsemiconductordevices,conductsitsbusinessattheFTIComplexinTaguig.Sincethestartofitsoperations,TPChadbeenpayinglocalbusinesstaxes(LBT)at1/2oftheratesimposedon“exportersandonmanufacturers,millers,producers,wholesalers,distributors,dealersorretailersofessentialcommodities”pursuanttotheTaguigRevenueCode.
WhenTPCreneweditsbusinesslicensein2004,however,RespondentJosephineDaza,thenMunicipalTreasurerofTaguig,assessedLBTatthefullrateonthegroundthatTPCisnotanexporterofessentialcommodities.
TPCpaidtheassessedLBTandfiledawrittenprotestonJanuary19,2004.OnApril15,2004,TPCfiledapetitionforcertiorariunderRule65ofthe1997RulesofCivilProcedurebeforetheRegionalTrialCourt(RTC).TPCallegedthatDazadidnotactonitsprotestwithin60days,asprescribedunderArticle195oftheLocalGovernmentCode(LGC),andthatDazaactedwithgraveabuseofdiscretioninnotapplyingthe1/2rateprovidedundertheTaguigRevenueCode.
DazaarguedthatTPCerredinfilingapetitionforcertiorariandthatTPCshouldhave,instead,filedanappealincourtwithin30daysfromreceiptofthedenial.
TheRTCdismissedthepetition.ItfoundthattherewasnoproofofdenialofTPC’sprotest.Hence,TPChad30daysfromthelapseofthe60daysallowedforthetreasurertomakeitsdecision,withinwhichtoperfectanordinaryappeal.TheRTCruledthatthespecialcivilactionofcertiorariisnottheproperremedyofTPC.
TPCappealedtotheSupremeCourtandarguedthattheremedyofappealisnotspecifiedunderArticle195oftheLGC,andtherefore,aRule65petitionforcertiorariistheproperandlogicalremedy,giventhatDazaactedwithgraveabuseofdiscretioninassessingitsLBTatthefullrate.
Afterreceivinganoticeofassessment,ataxpayermayfilewithin60daysawrittenprotestwiththelocaltreasurer,whichshalldecideonitwithin60days.ThetaxpayercanmakeanappealtotheRegionalTimeCourt(RTC)within30daysfromreceivingthedenialoftheprotest,orfromthelapseofthe60-dayperiodtodecideontheprotest.Thereafter,thetaxpayercanappealthedecisionoftheRTCtotheCourtofTaxAppeals(CTA)within30daysafterreceivingthedecision.
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Issue:
DidTPCavailofthecorrectremedyagainsttheassessmentwhenitfiledapetitionforcertioraribeforetheRTC?
Ruling:
No.TPCdidnotavailofthecorrectremedy.TPCshouldhavefiledanordinaryappealwiththeRTC.
Within60daysfromreceiptofanoticeofassessment,ataxpayermayfileawrittenprotestwiththelocaltreasurer,whichshalldecidethesamewithin60days.Thetaxpayershallhave30daysfromreceiptofthedenialoftheprotest,orfromthelapseofthe60-dayperiodgiventothelocaltreasurertodecidetheprotest,withinwhichtoappealtotheRTC.
Withoutanyformaldenialoftheprotest,TPC’sfilingofitspetitionbeforetheRTConApril19,2004wasdoneinatimelymanner.ReckonedfromthefilingoftheprotestonJanuary19,2004,Dazahad60daysoruntilMarch19,2004withinwhichtoresolvetheprotest.
Fromthelapseofthis60-dayperiod,TPChad30daysoruntilApril18,2004withinwhichtofileitsappealtotheRTC.SincethelatterdatefellonaSunday,theRTCcorrectlyruledthatTPC’sfilingofitspetitiononApril19,2004wasstillwithintheprescribedperiod.
However,aRule65petitionforcertiorariisnottheappropriateremedyfromDaza’sinactiononTPC’sprotest.Instead,TPCshouldhavefiledanordinaryappealwiththeRTC.Thereafter,anappealfromthejudgment,resolutionororderoftheRTCshallbemadewithin30daysafterreceiptofthedecision,byfilingapetitionforreviewwiththeCTA.
Theperfectionofanappealinthemannerandwithintheperiodfixedbylawisnotonlymandatorybutjurisdictional,andnon-compliancewiththeselegalrequirementsisfataltoaparty’scause.
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