may 2013 tax bulletin

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Tax bulletin May 2013

2 Tax Bulletin

HighlightsBIR Rulings

• UndertheRP-JapanTaxTreaty,dividendspaidbyadomesticcorporationtoaJapanesecorporationaresubjecttothe10%preferentialtaxrateiftheJapanesecorporationdirectlyholdsatleast10%ofeitherthevotingsharesof,orthetotalsharesissuedby,thedomesticcorporation,duringtheperiodofsixmonthsimmediatelyprecedingthedateofpaymentofthedividends. (Page 4)

• UndertheRP-JapanTaxTreaty,interestonforeignloansextendedbyaresidentofJapantoaresidentofthePhilippinesmayqualifyforthe10%preferentialtaxrateonthegrossamountofinterestiftherecipientofsuchinterestisalsothebeneficialownerthereof.

Theloanagreementissubjecttodocumentarystamptax(DST)imposedunderSection179oftheTaxCodeattherateofPhp1.00oneachPhp200.00oftheissuepriceofsuchloanagreement. (Page 5)

• DividendspaidbyadomesticcorporationtoaresidentoftheCaymanIslandsaresubjecttothe15%finalwithholdingtax(FWT)underSection28(B)(5)(b)oftheTaxCode. (Page 5)

• Reconveyanceoflandtitlesbyvirtueoftherescissionofacontractofsaleisnotsubjecttocapitalgainstax(CGT)andDST.TheDSTpreviouslypaiduponexecutionofaDeedofAbsoluteSalecannotberefundedbyreasonoftherescissionofthecontractofsale. (Page 6)

• Foranorganizationtobeissuedacertificateoftaxexemption,ithastoprovebyactualoperationforatleastthreeyearsthatitisanorganizationexemptfromincometaxunderSection30(G)oftheTaxCode,subjecttootherrequirements. (Page 6)

BIR Issuances

• RevenueRegulations(RR)No.9-2013amendscertainprovisionsofRRNo.30-2002onthepaymentoftheamountofferedascompromisesettlementpursuanttoSection204oftheTaxCode. (Page 8)

• RRNo.10-2003amendsRRNo.2-98toincludeRealEstateServicePractitioners(i.e.,realestateconsultants,appraisersandbrokers):(1)whopassedthelicensureexaminationgivenbytheRealEstateService,pursuanttoRANo.9646“TheRealEstateServiceActofthePhilippines,”asamongthoseprofessionalsfallingunderSection2.57.2(A)(1)ofRRNo.2-98subjecttothe10%or15%creditable(expanded)withholdingtaxonprofessionals;and(2)thosewhodidnotpassordidnottakethelicensureexaminationgivenbytheRealEstateServiceamongthebrokersandagentsunderSection2.57.2(G)ofRRNo.2-98. (Page 9)

• RRNo.11-2013requiresthefiling/submissionofahardcopyoftheCertificateofCompensationPayment/TaxWithheld(BIRForm2316)coveringemployeeswhoarequalifiedforsubstitutedfiling. (Page 9)

• RevenueMemorandumCircular(RMC)No.34-2013clarifiestheproperaccomplishmentandfilingofestatetaxreturns. (Page 11)

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• RMCNo.35-2013circularizesthefulltextofDepartmentOrder(DO)No.18-2013,datedApril16,2013,oftheDepartmentofFinance(DOF)ontheamendmentofSection12ofDONo.03-08entitled“RulesandRegulationstoImplementRepublicAct9400,AnActAmendingRepublicAct7277,otherwiseknownastheBasesConversionandDevelopmentActof1992”. (Page 12)

• RMCNo.37-2013circularizesthefulltextofDOFDONo.17-2013datedApril11,2013. (Page 13)

• RMCNo.38-2013clarifiestheimplicationoflegalpetitionnotices/declarationsandsimilardocumentsontheaudit/assessmentprocess. (Page 14)

• RMCNo.39-2013prescribestheguidelinesforreceiptofprotestlettersonFinalAssessmentNoticesandothersimilarcorrespondences. (Page 14)

• RMCNo.41-2013publishesthefulltextoftheimplementingrulesandregulations(IRR)ofRepublicAct(RA)No.10165,otherwiseknownastheFosterCareActof2012. (Page 15)

• RevenueMemorandumOrder(RMO)No.12-2013prescribesadditionalpoliciesanduniformguidelinesandproceduresintheprocessingofAuthoritytoPrint(ATP)OfficialReceipts(ORs),SalesInvoices(SIs)andotherCommercialInvoices(CIs)intheinterimperioduntiltheOn-lineATPsystemisavailableforimplementation. (Page 17)

• RMONo.13-2013prescribeswork-aroundprocedurespendingtheavailabilityoftheOnlineSystemforAccreditationofPrinters(OCAP)pursuanttoRRNo.15-2012datedDecember3,2012. (Page 20)

BOC Issuance

• CustomsAdministrativeOrder(CAO)No.2-2013amendsCAONo.1-2007,whichrequiresthesubmissionofInwardForeignManifestandConsolidatedCargoManifest. (Page 21)

PEZA Issuance

• PEZAMemorandumCircular(MC)No.2013-013announcesthesecondextensionofthe50%reductioninallPEZAprocessingfeesforEcozoneImport/ExportFull-ContainerLoadShipmentsviatheBatangasInternationalPort(BIP). (Page 21)

SEC Issuances

• SECMemorandumCircular(MC)No.7prescribestheSingleBorrowerLimit(SBL)andCreditLimitonDirectors,Officers,StockholdersandRelatedInterests(DOSRI)ofalendingcompany. (Page 21)

• SECMCNo.8prescribestheguidelinesforcomplyingwiththeFilipino-foreignownershiprequirementsasprescribedintheConstitutionandexistinglawsbycorporationsengagedinnationalizedandpartlynationalizedactivities. (Page 22)

• SECMCNo.9extendsthedeadlinetosubmittheAnnualCorporateGovernanceReport(ACGR)forlistedcompaniesfromMay30,2103toJune30,2013. (Page 23)

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BSP Issuance

• CircularNo.796amendsAppendix45(NotesonMicrofinance)ofSectionX361oftheManualofRegulationsforBanks(MORB). (Page 23)

Court Decisions

• AstipulationbetweentheBIRandthetaxpayerattheCourtofTaxAppeals(CTA)proceedings,thattaxeshavebeencorrectlyremittedtothegovernmentcannotbindthecourt.Thetaxpayerisstillrequiredtopresentproofthatitcorrectlyremittedthetaxes.

A20%delinquencyinterestisdueonunpaiddeficiencytaxesassessedbytheBIR,computedfromthedateprescribedfortheirpaymentuntilfullpaymentismade. (Page 23)

• WhiletheLocalGovernmentCode(LGC)prohibitsalllocalgovernmentunits(LGUs),includingprovinces,fromlevyingpercentagetaxes,theLGCallowsprovincestolevyandcollectanamusementtax,whichisapercentagetax,fromproprietors,lessees,oroperatorsoftheaters,cinemas,concerthalls,circuses,boxingstadia,andotherplacesofamusement.

Swimmingpools,bathhouses,andhotspringscannotbeconsideredas“otherplacesofamusement”subjecttoamusementtaxesundertheLGC. (Page 25)

• Interestincomefromloansandadvancestoaffiliatesisconsideredasrevenuerealizedfromservicesrenderedinthenormalcourseoftradeorbusinessthatissubjecttovalue-addedtax(VAT). (Page 26)

BIR Rulings

BIR Ruling No. ITAD 133-13 dated May 9, 2013

Facts:

JCo.,anon-residentJapanesecorporation,hasowned60%ofthetotaloutstandingsharesofPCo.,adomesticcorporation,since2009.In2012,PCo.declaredcashdividendsinfavorofJCo.,andpaidthesaiddividendsonMay23,2012.ATaxTreatyReliefApplication(TTRA)foravailingthe10%preferentialtaxondividendsundertheRP-JapanTaxTreatywasfiledwiththeInternationalTaxAffairsDivision(ITAD)oftheBIRonApril2,2012.

Issue:

ArethedividendspaidbyPCo.toJCo.entitledtothe10%preferentialtaxrate?

Ruling:

Yes.UnderArticle10(2)(a)oftheRP-JapanTaxTreaty,dividendspaidbyadomesticcorporationtoaresidentofJapanaresubjecttothe10%preferentialtaxrateonthegrossamountofdividends,ifthebeneficialownerisacompanywhichdirectlyholdsatleast10%ofeitherthevotingsharesofthecompanypayingthedividends,orthetotalsharesissuedbythatcompany,duringtheperiodofsixmonthsimmediatelyprecedingthedateofpaymentofthedividends.

UndertheRP-JapanTaxTreaty,dividendspaidbyadomesticcorporationtoaJapanesecorporationaresubjecttothe10%preferentialtaxrateiftheJapanesecorporationdirectlyholdsatleast10%ofeitherthevotingsharesof,orthetotalsharesissuedby,thedomesticcorporation,duringtheperiodofsixmonthsimmediatelyprecedingthedateofpaymentofthedividends.

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BIR Ruling No. ITAD-136-13 dated May 16, 2013

Facts:

JCo.,anon-residentforeigncorporationcreditorbasedinJapan,extendedaloantoPCo.,adomesticcorporation.PCo.agreedtopayJCo.theprincipalplusinterestattherateof0.54%perannum.Issues:

1. Aretheinterestpaymentsontheloanentitledtothe10%preferentialtaxrateundertheRP-JapanTaxTreaty?

2. Istheloanagreementsubjecttodocumentarystamptax(DST)?

Rulings:

1. Yes.UndertheRP-JapanTaxTreaty,interestonforeignloansmayqualifyforthe10%preferentialtaxrateonthegrossamountoftheinterestiftherecipientofsuchinterestisalsothebeneficialownerthereof.

2. Yes.TheloanagreementissubjecttoDSTimposedunderSection179oftheTaxCodeattherateofPhp1.00oneachPhp200.00oftheissuepriceofsuchloanagreement.

BIR Ruling No. 168-13 dated April 30, 2013

Facts:

CCo.,anon-residentforeigncorporationbasedintheCaymanIslands,owns65%ofthesharesinPCo.,adomesticcorporation.In2009,PCo.declaredcashdividendstoCCo.ACertificateofUndertakingastotheTaxConcessionsLawoftheCaymanIslandswaspresentedtoprovethatnolawimposinganytaxonprofits,income,gainsorappreciationsshallapplytoCCo.oritsoperations.

Issue:

ArethecashdividendsdeclaredbyPCo.infavorofCCo.subjecttothe15%FWTunderSection28(B)(5)(b)oftheTaxCode?

Ruling:

Yes.The15%FWTondividendsdistributedtonon-residentforeigncorporationspursuanttoSection28(B)(5)(b)oftheTaxCodeappliesintwoinstances:(1)whenthecountryofdomicileofthenon-residentforeigncorporationreceivingthedividendsallows,asacreditagainstthetaxdueintherecipient’shomecountry,adeemedpaidtaxcreditequivalentto15%;or(2)whenthecountryofdomicileofthenon-residentforeigncorporationreceivingthedividendsdoesnotimposeanytaxondividends.SincethelawsoftheCaymanIslandsdonotimposeanytaxonprofits,income,gainsorappreciationsofitsresidentcorporations,anydividendstobepaidbyPCo.toCCo.aresubjecttothe15%FWTunderSection28(B)(5)(b)oftheTaxCode.

UndertheRP-JapanTaxTreaty,interestonforeignloansextendedbyaresidentofJapantoaresidentofthePhilippinesmayqualifyforthe10%preferentialtaxrateonthegrossamountofinterestiftherecipientofsuchinterestisalsothebeneficialownerthereof.

TheloanagreementissubjecttoDSTimposedunderSection179oftheTaxCodeattherateofPhp1.00oneachPhp200.00oftheissuepriceofsuchloanagreement.

DividendspaidbyadomesticcorporationtoaresidentoftheCaymanIslandsaresubjecttothe15%FWTunderSection28(B)(5)(b)oftheTaxCode.

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BIR Ruling No. 178-13 dated May 17, 2013

Facts:

ACo.,adomesticcorporation,soldtwoparcelsoflandtoBCo.,anotherdomesticcorporation.TheDSTontheDeedofAbsoluteSalewaspaid.TheTransferCertificatesofTitle(TCTs)inthenameofsellerACo.weresubsequentlycancelledandnewTCTswereissuedinthenameofbuyerBCo.However,forfailureofBCo.tocomplywithcertainobligations,thecontractbetweenACo.andBCo.wasrescindedbyvirtueofacourtorder.Pursuanttothecourtorder,BCo.wasorderedtoreconveytheTCTstoACo.

Issues:

1. IsthereconveyanceofTCTssubjecttocapitalgainstax(CGT)andDST?

2. IstheDSTpaidupontheexecutionofDeedofAbsoluteSalerefundable?

Ruling:

1. No.Therescissionofacontractwouldnotgiverisetoataxableeventfortworeasons:(1)Theresultofrescissionisasiftherewasnosale,transferorexchange.Hence,noincomeisrealized.(2)Thereturnoftheobjectoftherescindedcontractisnotformonetaryconsiderationandismerelyanacknowledgementorconfirmationofthetitleandownershipoftheoriginalowneroftheproperty.Hence,thereconveyanceofTCTsbyvirtueofarescissionofthecontractofsaleisnotsubjecttoCGTandDST.

2. No.IntheSupremeCourtcaseofPhilippine Home Assurance Corporation, et al. vs Court of Appeals, et al.,(G.R.No.119446datedJanuary21,1999),theCourtruledthattheDSTmustbepaidupontheissuanceofinstruments,withoutregardtowhetherthecontractswhichgaverisetothemarerescissible,void,voidable,orunenforceable.Hence,thesubsequentcancellationofthetransactiontowhichtheDSTliabilityattachesdoesnothavetheeffectofcancellingtheDSTliability.

BIR Ruling No. 184-2013 dated May 20, 2013

Facts:

ACo.isadomesticorganizationengagedintheadministrationofactivitiesforthewelfareofthephysical,mental,educationalandspiritualfacultiesofmanthroughpreaching,healthseminarsandservices,andthetrainingofmembersformissionaryactivities.ACo.requestedfortheissuanceofacertificateoftaxexemptionasacivicleagueororganizationnotorganizedforprofitbutoperatedexclusivelyforthepromotionofsocialwelfare,pursuanttoSection30(G)oftheTaxCode.

Issues:

1. CanacertificateoftaxexemptionbeissuedtoACo.?

2. IsACo.subjecttointernalrevenuetaxes?

3. IsACo.subjecttoanytaxreportingobligations?

ReconveyanceoflandtitlesbyvirtueoftherescissionofacontractofsaleisnotsubjecttoCGTandDST.TheDSTpreviouslypaiduponexecutionofaDeedofAbsoluteSalecannotberefundedbyreasonoftherescissionofthecontractofsale.

Foranorganizationtobeissuedacertificateoftaxexemption,ithastoprovebyactualoperationforatleastthreeyearsthatitisanorganizationexemptfromincometaxunderSection30(G)oftheTaxCode,subjecttootherrequirements.

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Rulings:

1. No.AnorganizationhastoprovebyactualoperationforatleastthreeyearsthatitisreallyanorganizationexemptfromincometaxunderSection30(G)oftheTaxCode.Forthispurpose,anorganizationcanfilethenecessaryannualinformationreturn,insteadofanincometaxreturn,onorbeforethe15thdayofthe4thmonthfollowingtheendofitstaxableyear,asrequiredunderSection24ofRRNo.2-40.Basedontheinformationreturn,theBIRwillconductaninvestigationontheactivitiesundertakenbytheorganizationduringthatperiod,andacertificateoftaxexemptionmaybeissueddependingontheresultsoftheinvestigation.

Forpurposesofsecuringapermanentexemptionafterthethree-yearperiod,ACo.isrequiredtosubmitthefollowingpursuanttoRMCNo.14-2001:

a. CertifiedtruecopyoftheCertificateofRegistrationwiththeSEC;

b. CertifiedtruecopyoftheArticlesofIncorporation,whichincludesthefollowingprovisions:

i. ThatACo.isnon-stockandnon-profit;

ii. ThattheprimarypurposeforwhichitwascreatedisoneofthoseenumeratedunderSec.30oftheTaxCode;

iii. Thatnopartofthenetincomeshallinuretothebenefitofanyofitsmembers;

iv. Thatthetrusteesdonotreceiveanycompensation;and

v. Thatincaseofdissolution,assetsofthecorporationshallbetransferredtosimilarinstitutionsortothegovernment;

c. CertifiedtruecopyoftheBy-Laws;

d. CertifiedtruecopyoftheAnnualInformationReturnsandFinancialStatementsforthelastthreeyearsofoperation;

e. CertificationunderoaththattherehasnotbeenanychangeintheBy-Laws,ArticlesofIncorporation,mannerofactivitiesaswellasthesourcesanddispositionofincome;and

f. BIRCertificateofRegistration.

2. Yes.ACo.issubjecttothefollowinginternalrevenuetaxes:

a. Taxonincomederivedfromitsproperties,realorpersonal,oranyactivityconductedforprofitregardlessofthedispositionthereof;

b. 20%FWToninterestincomefromcurrencybankdepositsandyieldoranymonetarybenefitsderivedfromdepositsubstitutesandfromtrustfundsandsimilararrangements,androyaltiesderivedfromsourceswithinthePhilippines;and

c. 7.5%FWToninterestincomederivedfromadepositorybankundertheexpandedforeigncurrencydepositsystem.

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3. Yes.ACo.issubjecttothefollowingreportingobligations:

a. Filingonorbeforethe15thdayofthe4thmonthfollowingtheendoftheaccountingperiodaProfitandLossStatementandBalanceSheetwiththeAnnualInformationReturnunderoath,statingitsgrossincomeandexpensesincurredduringtheprecedingperiodandacertificateshowingthattherehasnotbeenanychangeinitsBy-Laws,ArticlesofIncorporation,mannerofoperationandactivitiesaswellassourcesofdispositionofincome;

b. Actingasawithholdingagentofthegovernmentifitactsasanemployeranditsemployeesreceivecompensationincomesubjecttowithholdingtax,orifitmakesincomepaymentstoindividualsorcorporationssubjecttoexpandedwithholdingtax(EWT);

c. Maintenanceofbooksofaccountandotherpertinentrecordsoftax-exemptorganizationsorgranteesoftaxincentives,whichshallbesubjecttoBIRexamination;

d. PaymentofannualregistrationfeeofPhp500.00;and

e. Issuanceofdulyregisteredreceiptsorsalesorcommercialinvoicesforeachsaleortransferofmerchandiseorforservicesrendered,whicharenotdirectlyrelatedtotheactivitiesforwhichtheassociationisregistered.

BIR Issuances

Revenue Regulations No. 9-2013 dated May 10, 2013

• Section6ofRRNo.30-2002isamendedtoreadasfollows:

“SECTION6.APPROVALOFOFFEROFCOMPROMISE–ExceptforoffersofcompromisewheretheapprovalisdelegatedtotheREBpursuanttothesucceedingparagraph,allcompromisesettlementswithinthejurisdictionoftheNationalOffice(NO)shallbeapprovedbyamajorityofallthemembersoftheNEBcomposedoftheCommissionerandthefourDeputyCommissioners.AlldecisionsoftheNEB,grantingtherequestofthetaxpayerorfavorabletothetaxpayer,shallhavetheconcurrenceoftheCommissioner.

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Thecompromiseoffershallbepaidbythetaxpayeruponfilingoftheapplicationforcompromisesettlement.Noapplicationforcompromisesettlementshallbeprocessedwithoutthefullsettlementoftheofferedamount.Incaseofdisapprovaloftheapplicationforcompromisesettlement,theamountpaiduponfilingoftheaforesaidapplicationshallbedeductedfromthetotaloutstandingtaxliabilities.”

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• TheseRegulationsshalltakeeffect15daysafterpublicationinanynewspaperofgeneralcirculation.

[Editor’s Note: RR No. 9-2013 was published in the ManilaBulletin on May 11, 2013.]

RRNo.9-2013amendscertainprovisionsofRRNo.30-2002onthepaymentoftheamountofferedascompromisesettlementpursuanttoSection204oftheTaxCode.

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• Section2.57.2(A)(1)ofRRNo.2-98,aslastamendedbyRRNo.30-2003,isfurtheramendedtoreadasfollows:

“Section 2.57.2. Income payments subject to creditable withholding tax and rates prescribed thereon. - xxx xxx

(A) Professional fees, talent fees, etc., for services rendered by individuals.–Onthegrossprofessional,promotionalandtalentfeesoranyotherformofremunerationfortheservicesofthefollowingindividuals–15%ifthegrossincomeforthecurrentyearexceedsPhp720,000.00,and10%ifotherwise:

(1) Thoseindividuallyengagedinthepracticeofprofessionorcallings:xxxdesigners,realestateservicepractitioners(RESPs),(i.e.,realestateconsultants,realestateappraisersandrealestatebrokers)requiringagovernmentlicensureexaminationgivenbytheRealEstateService,pursuanttoRepublicActNo.9646,andallotherprofessionsrequiringgovernmentlicensureexaminationsregulatedbytheProfessionalRegulationsCommission,SupremeCourt,etc.xxx”

• Section2.57.2(G)ofRR2-98,aslastamendedbyRR14-2002,isfurtheramendedtoreadasfollows:

“(G) Income payments to certain brokers and agents.-Ongrosscommissionsofcustoms,insurance,stock,immigrationandcommercialbrokers,feesofagentsofprofessionalentertainersandrealestateservicepractitioners(RESPs),(i.e.,realestateconsultants,realestateappraisersandrealestatebrokers)whofailedordidnottakeupthelicensureexaminationgivenbyandnotregisteredwiththeRealEstateServiceundertheProfessionalRegulationsCommission–10%.”

• TheseregulationsshalltakeeffectonJune1,2013andshallcoverincomepaymentstobepaidorpayablestartingJune1,2013,whicharerequiredtoberemittedwithinthemonthofJuly,2013.

[Editor’s Note: RR No. 10-2013 was published in the ManilaBulletin on June 8, 2013.]


• Section2.83ofRRNo.2-98isfurtheramendedtoreadasfollows:

“Sec.2.83.StatementsandReturns.—

Section2.83.1.Employees Withholding Statements (BIR Form No. 2316).—Ingeneral,everyemployerorotherpersonwhoisrequiredtodeductandwithholdthetaxoncompensation,includingfringebenefitsgiventorankandfileemployees,shallfurnisheveryemployeefromwhosecompensationtaxeshavebeenwithheldtheCertificateofCompensationPayment/TaxWithheld(BIRFormNo.2316)onorbeforeJanuary31ofthesucceedingcalendaryear,orifemploymentisterminatedbeforethecloseofsuchcalendaryear,onthedayonwhichthelastpaymentofcompensationismade.Failuretofurnishthesameshallbeagroundforthemandatoryauditofpayor’sincometaxliabilities(includingwithholdingtax)uponverifiedcomplaintofthepayee.

RRNo.10-2003amendsRRNo.2-98toincludeRealEstateServicePractitioners(i.e.,realestateconsultants,appraisersandbrokers):(1)whopassedthelicensureexaminationgivenbytheRealEstateService,pursuanttoRANo.9646“TheRealEstateServiceActofthePhilippines,”asamongthoseprofessionalsfallingunderSection2.57.2(A)(1)ofRRNo.2-98subjecttothe10%or15%EWTonprofessionals;and(2)thosewhodidnotpassordidnottakethelicensureexaminationgivenbytheRealEstateServiceamongthebrokersandagentsunderSection2.57.2(G)ofRRNo.2-98.

RRNo.11-2013requiresthefiling/submissionofhardcopyoftheCertificateofCompensationPayment/TaxWithheld(BIRForm2316)coveringemployeeswhoarequalifiedforsubstitutedfiling.

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EmployersofMinimumWageEarners(MWEs)arestillrequiredtoissueBIRFormNo.2316(June2008Encsversion)totheMWEsonorbeforeJanuary31ofthefollowingyear.

Asarule,theemployershallfurnisheachemployeewiththeoriginalandduplicatecopiesofBIRFormNo.2316showingthenameandaddressoftheemployer;employer’sTIN;nameandaddressoftheemployee;employee’sTIN;amountofexemptionsclaimed,amountofpremiumpaymentsonhealthand/orhospitalizationinsurancenotexceedingPhp2,400.00,ifany;thesumofcompensationpaidincludingthenon-taxablebenefits;theamountofstatutoryminimumwagereceivedbyMWEs;Overtimepay,holidaypay,nightshiftdifferentialpayandhazardpayreceivedbyMWEs;theamountoftaxdue;theamountoftaxwithheldduringthecalendaryearandsuchotherinformationasmayberequired.Thestatementmustbesignedbyboththeemployerorotherauthorizedofficerandtheemployee,andshallcontainawrittendeclarationthatitismadeunderthepenaltiesofperjury.IftheemployeristheGovernmentofthePhilippines,itspoliticalsubdivision,agencyorinstrumentalityorgovernment-ownedorcontrolledcorporation,thestatementshallbesignedbythedulydesignatedofficeroremployee.

However,incasescoveredbysubstitutedfiling,theemployershallfurnisheachemployeewiththeoriginalcopyofBIRFormNo.2316andfile/submittotheBIRtheduplicatecopynotlaterthanFebruary28followingthecloseofthecalendaryear.

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• Anyemployer/withholdingagent,includingthegovernmentoranyofitspoliticalsubdivisionsandgovernmentownedandcontrolledcorporations,who/whichfailstocomplywiththeabovefiling/submissionofBIRFormNo.2316withinthetimerequiredbyRRNo.11-2013,maybeheldliableunderSection250oftheTaxCodewhichprovides:

“Inthecaseofeachfailuretofileaninformationreturn,statementorlist,orkeepanyrecord,orsupplyanyinformationrequiredbythisCodeorbytheCommissioneronthedateprescribedtherefor,unlessitisshownthatsuchfailureisduetoreasonablecauseandnottowillfulneglect,thereshall,uponnoticeanddemandbytheCommissioner,bepaidbythepersonfailingtofile,keeporsupplythesame,Php1,000.00foreachsuchfailure:Provided,however,ThattheaggregateamounttobeimposedforallsuchfailuresduringacalendaryearshallnotexceedPhp25,000.00.”

• However,anyemployer/withholdingagent,includingthegovernmentoranyofitspoliticalsubdivisionsandgovernmentownedandcontrolledcorporations,who/whichfailstocomplywiththeabovefiling/submissionofBIRForm2316withinthetimerequiredbyRRNo.11-2013fortwoconsecutiveyearsmaybedealtwithinaccordancewithSection255whichprovidesinpart:

“AnypersonrequiredunderthisCode,orbyrulesandregulationspromulgatedthereunder,topayanytax,makeanyreturn,keepanyrecord,orsupplycorrectandaccurateinformation,whowilfullyfailstopaysuchtax,makesuchreturn,keepsuchrecord,orsupplysuchcorrectandaccurateinformation,orwithholdorremittaxeswithheld,orrefundexcesstaxeswithheldoncompensation,atthetimeortimesrequiredbylaworrulesandregulationsshall,inadditiontootherpenaltiesprovidedbylaw,uponconvictionthereof,bepunishedbyafineofnotlessthanPhp10,000.00andsufferimprisonmentofnotlessthanoneyearbutnotmorethan10years.”

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• Insettlementunderthissituation,thecompromisefeeshallbePhp1,000.00foreachBIRFormNo.2316notfiledwithoutanymaximumthreshold.

• RRNo.11-2013shalltakeeffectbeginningwiththecalendaryear2013.

[Editor’s Note: RR No. 10-2013 was published in the ManilaBulletin on June 8, 2013.]

Revenue Memorandum Circular No. 34-2013 dated April 22, 2013

• Responsibilities of the Heir/Executor/Administrator

1. Estatetaxreturnshallbefiledunderanyofthefollowingsituations:

a. Inallcasesoftransferssubjecttoestatetax;or

b. Where,thoughexemptfromestatetax,thegrossvalueoftheestateexceedsPhp200,000.00;or

c. Where,regardlessofthegrossvalue,theestateconsistsofregisteredorregistrablepropertysuchasrealproperty,motorvehicles,sharesofstockorothersimilarproperty,forwhichaclearancefromtheBIRisrequiredasaprerequisiteforthetransferofitsownershipinthenameofthetransferee.

2. Theheirs/authorizedrepresentative/administrator/executorshallfiletheestatetaxreturnwith,andpaythecorrespondingestatetaxto,theAuthorizedAgentBank(AAB),RevenueCollectionOfficer(RCO)ordulyauthorizedtreasurerofthecityormunicipalityintheRevenueDistrictOffice(RDO)havingjurisdictionovertheplaceofdomicileofthedecedentatthetimeofhisdeath.

3. Incaseofanon-residentdecedentwithanexecutororadministratorinthePhilippines,theestatetaxreturnshallbefiledwiththeAABoftheRDOwheresuchexecutor/administratorisregisteredorisdomiciled,ifnotyetregisteredwiththeBIR.

4. Fornon-residentdecedentwithnoexecutororadministratorinthePhilippines,theestatetaxreturnshallbefiledwiththeAABunderthejurisdictionofRDONo.39–SouthQuezonCity.

5. Infillingoutthereturn,theexecutor,administratororanyofthelegalheirsshallexerciseduediligenceinaccomplishingthesameproperly,fillingoutcompletelyitemswithvaluesandentering“0”intheboxtoindicatenoneornil,ifthereisnoapplicablevalue.

6. Theheir/authorizedrepresentative/administrator/executorshallsubmitalltheapplicabledocumentaryrequirementsasprescribedinAnnexesA-6andA-6.1ofRevenueMemorandumOrder(RMO)No.15-2003andproofofpaymenttotheRDOwhichhasjurisdictionovertheplaceofresidenceofthedecedent,ortotheRDOwheretheexecutororadministratorisregistered,ortoRDONo.39–SouthQuezonCity,whicheverisapplicable.

RMCNo.34-2013clarifiestheproperaccomplishmentandfilingofestatetaxreturns.

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• Responsibilities of the RDO and Document Processing Division (DPD)

1. TheRDOshallprocesstheestatetaxreturninaccordancewiththeprocedureindicatedinRMONo.15-2003.

2. ExemptestatetaxreturnswhichhavetobefileddirectlywiththeRDO,andestatetaxreturnswithpayment,whichshallbereceivedbytheRCO,shallnotbereceivedbytheRDO/RCOiftheyarenotproperlyaccomplished.

3. TheRDOorDPD(forRegionalOfficeswithDPD)shallscrutinizetheentriesinthereturnsanddetermineanymissing/incompleteinformationforthetaxreturnswithpaymentfileddirectlywiththeAABs.

4. Withinfivedaysfromdiscovery,theDPDheadshalltransmitalistofestatetaxreturnswithmissing/incompleteinformation.

5. Withinfivedaysfromreceiptofthelist,theRDOshallviewandprintthereturnsandshallnotifyinwritingtheheir/authorizedrepresentative/administrator/executoroftheestateofsuchfactandrequiretheamendmentofthereturnwithinfivedaysfromreceiptofthewrittennotice.

6. TheRDOshallalsoimposethecompromisepenaltyforviolationofSection255oftheTaxCode,asprescribedunderRMONo.19-2007.Incaseoflatefiling,theapplicablepenaltiesundertheTaxCodeshallbeimposed.


“DEPARTMENT ORDER NO. 18-2013

AMENDMENTOFSECTION12OFDEPARTMENTORDERNO.03-08ENTITLED‘RULESANDREGULATIONSTOIMPLEMENTREPUBLICACT9400,ANACT

AMENDINGREPUBLICACT7227,OTHERWISEKNOWNASTHEBASESCONVERSIONANDDEVELOPMENTACTOF1992,ANDFOROTHERPURPOSES.’

SECTION1.Section12ofDOFDepartmentOrderNo.03-08isherebyamendedtoreadasfollows:

Section12.Availment of Incentives-Itisunderstoodthathenceforth,registeredEcozoneandFreeportEnterprisesalreadyavailingoftheincentivesandbenefitsunderRA9400inaccordancewiththeserules,shallbeexpresslydisqualifiedfromavailingoftheincentivesandbenefitsdefinedand/orgrantedunderotherlaws,rulesandregulations.QualifiedenterprisesalreadyenjoyingincentivesunderotherpreferentialregimesshouldhavetheirregistrationsthereundercancelledbeforetheymaysubsequentlyavailofthebenefitsprovidedunderRA9400.

SECTION2.RepealingClause-Allorders,circulars,memoranda,andotherissuances,orpartsthereof,whichareinconsistentwiththisDepartmentOrder,areherebyrepealedormodifiedaccordingly.SECTION3.Effectivity-ThisDepartmentOrdershalltakeeffect15daysafteritspublicationintheOfficialGazetteorintwonewspapersofgeneralcirculation.”

[Editor’s Note: DO No. 18-2013 was published in the PhilippineDailyInquirer on April 29, 2013.]

RMCNo.35-2013circularizesthefulltextofDONo.18-2013datedApril16,2013oftheDOFontheamendmentofSection12ofDONo.03-08entitled“RulesandRegulationstoImplementRepublicAct9400,AnActAmendingRepublicAct7277,otherwiseknownastheBasesConversionandDevelopmentActof1992”.

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• Salient Features of DOF DO No. 17-2013:

1. Port Accreditation–Onlyparticularportswillbeaccreditedforsensitivecommoditiessuchasoil,steel,grains,tiles,goldandvehicles,subjecttostandards,technicalrequirementsandapplicablelaws,rulesandregulations.AccreditedportsaretosubmittotheDOFmonthlytradestatisticalreportsthatwillbecross-checkedwithdatafromtheDepartmentofEnergy(DOE),PhilippinePortsAuthority(PPA),andotherrelevantagencies,onaper-volumeandper-vesselbasistoeliminatediscrepanciesinimportandconsumptiondata.

2. Submission of a Rolling Import Plan-Inordertobetteranticipateimports,theBOCshallrequireallimportersofsensitivecommoditiestosubmittheirannualrollingimportplanindicatingquantity,type,sourceandlocationofintendedportarrival.TheCommissionerofCustomsshallpre-authorizeimportationofsensitivecommoditiesinaccordancewiththeannualimportplan.

3. Trade Statistics Reconciliation–PortsshallsubmittotheBOCandtheDOFamonthlylistofimportationsarrivingperport,whetherseaorairport,internationalordomestic,andshallincludedetails,suchasdateofarrival,nameofcountry/portoforigin,capacityofvessel/aircraft,typeofcommodities,andconsigneedetails.

Collecteddatafromtheportsshallbecross-checkedwithdatafromtheDOE,PPA,andotherrelevantagencies,onaper-volumeandper-vesselbasis.

MonthlylistofimportationsfromJanuary2013shouldbesubmittedwithin10daysfromthedateofthisOrder.

4. Other measures

a. StrictimplementationofRRNo.2-2012,whichrequiresimporterstopayvalue-addedtax(VAT)andexcisetaxonalloilimportsuponarrivalinthePhilippines.

b. SubmissionofIncomeTaxReturnasreceivedbytheBIRasoneoftherequirementsforaccreditationofimporterswiththeBOC.

c. Conductofpost-auditexaminationsonimportationofsensitivecommodities.

d. BOCshallworkcloselywiththeBIRandtherespectivelocalgovernmentunits,subjecttoexistinglawsonexchangeofinformationwithregardtoimportersofsensitivecommodities.

e. ImprovereportingformsandadministrativesupporttotheBOCStatisticsOfficeandtheManagementInformationSystemandTechnologyGrouptocapturedatarequired.

5. Regular monitoring of cases filed against oil smugglers

a. Casesinvolvingoilsmugglingshallbeestablishedandpursued.

b. AsidefromthemonthlyRunAfterTheSmugglers(RATS)report,BOCshallsubmittotheDOFabimonthlystatusreportofoilsmugglingcases.

RMCNo.37-2013circularizesthefulltextofDOFDONo.17-2013datedApril11,2013.

14 Tax Bulletin

Revenue Memorandum Circular No. 38-2013 dated May 2, 2013

• On the audit/investigation pursuant to issued Letters of Authority (LOAs)

1. Thenormalprocessand/orproceduresrelatedtoaudit/investigationarisingfromelectronicLettersofAuthority(eLAs)issuedwillnotbesuspendednotwithstandingthereceiptofLegalPetitionNotices(LPNs)questioningthevalidityandenforceabilityoftheeLAs.

2. TheNationalOfficeshallnolongerentertainanyLPNquestioningthevalidityandenforceabilityoftheeLAdulyissuedbytheconcernedRegionalDirectorfortheauditofataxpayerwithintheregion,inasmuchastheissuehasalreadybeenclarifiedunderRMCNo.6-2013.

3. Thereshallbenoimpedimenttotheinvestigationofthetaxpayer’sinternalrevenuetaxliabilitiesandtheeventualrecommendationfortheissuanceofaSubpoena Duces Tecum(SDT),ifwarranted,inaccordancewithRMONos.45-2010and88-2010.

• On the issuance of Preliminary Assessment Notice (PAN), Formal Letter of Demand (FLD) and Final Assessment Notice (FAN)

1. UponreceiptofthePANorFLDandFAN,thetaxpayerisgiven15or30days,asthecasemaybe,torebuttheassessmentuponcompliancewiththerequirementsoffilingaprotestpursuanttoRRNo.12-99.

2. AnyLPN,declarationoranysimilardocumentprotestingtheassessmentaddressedtotheCommissioneroranyofficialintheNationalOffice,withouttheissuanceofaFinalDecisiononDisputedAssessment(FDDA)fromtheregionaloffice,shallbeconsideredprematureandinvalid.

• Responsibility of Taxpayers on their LPN

1. TheBIRcanrefusetotransactofficialbusinesswithtaxagents/practitionerswhoarenotaccreditedbeforeit,asstatedinSection9ofRRNo.11-2006,asamendedandclarifiedinRMCNo.6-2013;

2. Theresponsibilityisonthetaxpayerstoensurethatthetaxagents/practitionerswhomtheychoosetoengageareaccreditedwiththeBIR.


• Allprotestletters,requestsforreinvestigation/reconsiderationandsimilarcorrespondencesshallonlybefiledbythetaxpayersortheirdulyauthorizedrepresentatives,inpersonorthroughregisteredmailwithreturncard,withtheOfficeoftheconcernedRegionalDirector(RD),AssistantCommissioner-LargeTaxpayersService(ACIR-LTS)andAssistantCommissioner-EnforcementService(ACIR-ES),whosignedthePANs,FANsandFLDs,forproperrecordingoftheprotestsandevaluationofthesameinaccordancewithSection228oftheTaxCode.

• Iftheaforesaidproceduresarenotfollowed,thenthelettersofprotest,requestsforreinvestigation/reconsiderationandsimilarcorrespondencesshallbeconsideredvoidandwithoutforceandeffect.

RMCNo.38-2013clarifiestheimplicationoflegalpetitionnotices/declarationsandsimilardocumentsontheaudit/assessmentprocess.

RMCNo.39-2013prescribestheguidelinesforreceiptofprotestlettersonFANsandothersimilarcorrespondences.

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• Theaboverevenueofficialsshallbeprimarilyresponsibleinensuringthepreparationofacomplete/accuratereportonallproteststhatwerefiledintheirrespectiveofficesanditspromptsubmissiontotheCommissionerofInternalRevenue(CIR)everyMondayofeachweekinhardandsoftcopies.

• Basedontheweeklyreport,theOfficeoftheCIRshallcreateadatabaseof

alllettersofprotest,requestsforreinvestigation/reconsiderationandsimilarcorrespondencesreceivedbythedifferentofficesoftheBIR.

• Anyprotestletter,requestforreinvestigation/reconsideration,orothersimilarcommunicationallegedlyfiledbyanytaxpayer,butnotincludedinthedatabase,shallbedeemedasnotofficiallyfiledwiththeBIRandshallnotbeusedasbasisforthegrantofanyrequestforreinvestigation/reconsiderationofanyFANorFDDAissuedagainstthetaxpayer.

• Allprotestletters,requestsforreinvestigation/reconsiderationorsimilar

correspondencesthatwillbeacceptedfromtaxpayersbeginningApril29,2013shallbeguidedbythisCircular.


• Definition of Terms

1. Childreferstoapersonbelow18yearsofage,oronewhoisover18butisunabletofullytakecareof,orprotect,himselforherselffromabuse,neglect,cruelty,exploitationordiscriminationbecauseofaphysicalormentaldisabilityorcondition.

2. Foster ChildreferstoachildplacedunderFosterCare.

3. Foster ParentreferstoapersondulylicensedbytheDSWDtoprovideFosterCare.

4. Agencyreferstoanychild-caringorchild-placinginstitutionlicensedandaccreditedbytheDSWDtoimplementtheFosterCareProgram.

• Who may be placed under Foster Care

1. Achildwhoisabandoned,surrendered,neglected,dependentororphaned;

2. Achildwhoisavictimofsexual,physical,oranyotherformofabuseorexploitation*;

3. Achildwithspecialneeds*;

4. Achildwhosefamilymembersaretemporarilyorpermanentlyunableorunwillingtoprovidethechildwithadequatecare;

5. Achildawaitingadoptiveplacementandwhowouldhavetobepreparedforfamilylife,includingachildwhohasalreadybeenmatchedforadoptionbutcontinuestoreceiveinstitutionalcare;

6. Achildwhoneedslong-termcareandclosefamilytiesbutwhocannotbeplacedfordomesticadoption*;

7. Achildwhoseadoptionhasbeendisrupted;

RMCNo.41-2013publishesofthefulltextoftheimplementingrulesandregulations(IRR)ofRepublicAct(RA)No.10165,otherwiseknownastheFosterCareActof2012.

16 Tax Bulletin

8. Achildwhoisundersociallydifficultcircumstancessuchas,butnotlimitedto,astreetchild,achildinarmedconflictoravictimofchildlaborortrafficking*;

9. Achildwhocommittedaminoroffensebuthasbeenreleasedonrecognizance,orwhoisincustodysupervision,orwhosecasehasbeendismissed*;and

10. Achildwhoisinneedofspecialprotectionasassessedbyasocialworker,anagency,ortheDSWD*.

* Inthesecases,thechildmusthavenofamilywillingandcapableofcaringandprovidingforhim/her.

• Qualifications of a Foster Parent

1. Mustbeoflegalage;

2. Mustbeatleast16yearsolderthantheFosterChild,unlesstheapplicantisarelativeoftheFosterChild;

3. Musthaveagenuineinterest,capacityandcommitmentinparentingtheFosterChildandabletoprovidetheFosterChildwithafamilialatmosphere;

4. Musthaveahealthyandharmoniousrelationshipwitheachfamilymemberlivingwithhim/her;

5. Mustbeofgoodmoralcharacter;

6. Mustbephysicallyandmentallycapableandemotionallymature;

7. Musthavesufficientresourcestobeabletoprovideforthefamily’sneeds;and

8. Mustbewillingtobetrainedorreceiveadviceforthepurposeofincreasingorimprovinghisorherknowledge,attitudesandskillsincaringforachild.

9. ForanalientoqualifyasaFosterParent,he/shemust:(a)belegallydocumented;(b)possessallthequalificationsabove-stated;(c)haveresidedinthePhilippinesforatleast12continuousmonthsatthetimeoftheapplication;and(d)undertaketomaintainsuchresidenceuntiltheterminationofplacementbytheDSWDorexpirationoftheFosterFamilyCareLicense.

10. Forpurposesofdeterminingcontinuousresidence,thealienmustnothavespentmorethan60daysofthelast12-monthperiodpriortothefilingoftheapplicationoutsideofthePhilippines,andthenonlyformeritoriousreasons.

• Additional Exemption for Dependents

1. Thedefinitionoftheterm“dependent”underSection35(B)oftheTaxCodeshallbeamendedtoincludea“FosterChild”;

2. AFosterParentshallbeallowedanadditionalexemptionofPhp25,000.00foreachqualifieddependentprovided,however,thatthetotalnumberofdependents,includingaFosterChildqualifiedtobeclaimedasadependent

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forwhichadditionalexemptionsmaybeclaimed,shallnotexceedfour,asprovidedunderRANo.9504;

3. ThePhp25,000.00additionalexemptionforaFosterChildshallbeallowedonlyiftheperiodoffostercareisatleastacontinuousperiodofonetaxableyear;

4. OnlyoneFosterParentcantreattheFosterChildasadependentforaparticulartaxableyear.Assuch,nootherparentorFosterParentcanclaimsaidchildasadependentforthatperiod.

• Incentives to Agencies

1. ExemptionfromIncomeTax–AgenciesshallbeexemptfromincometaxonincomederivedbythemassuchorganizationspursuanttoSection30oftheTaxCode,asimplementedbyRRNo.13-98.

2. QualificationasaDoneeInstitution–Agenciescanalsoapplyforqualificationasdoneeinstitutions.

• Incentives to Donors

1. AllowableDeductions–DonorsshallbegrantedallowabledeductionsfromtheirgrossincometotheextentoftheamountdonatedtoAgenciesinaccordancewithSection34(H)oftheTaxCode.

2. ExemptionfromDonor’sTax–DonorsshallbeexemptedfromDonor’sTaxunderSection101oftheTaxCode,providedthatnotmorethan30%oftheamountofdonationsshallbespentforadministrativeexpenses.

Revenue Memorandum Order No. 12-2013 dated May 2, 2013

• OnlyBIRAccreditedPrintersshallbeauthorizedtoprintPrincipalandSupplementaryReceiptsandInvoicespursuanttoRRNo.15-2012.

• Printersthatwereissuedaprovisionalaccreditationnumbershallalsobeallowedtoprintprincipalandsupplementaryreceipts/invoices.Sub-contractingtonon-accreditedprinter/sisstrictlyprohibited.

• Taxpayersengagedinbusiness,whethergovernmentorprivate,thatusemanually-issuedreceipts/invoicesshallabidebytheguidelinesandproceduresprescribedinthisRMO.

• Taxpayersengagedinbusiness,whethergovernmentorprivate,thatusereceipts/invoicesissuedthroughCashRegisterMachine/Point-Of-SaleMachines(CRM/POS)and/orComputerizedAccountingSystem(CAS)arenotcoveredbythisRMO,butshallbecoveredbyaseparaterevenueissuance.

• AlltheinformationrequiredunderthisRMOintheprintingofORs/SIs/CIsshallbepreprintedonthefaceoftheloose-leafreceipts/invoicesusingcomputer-aidedmachines(e.g.,MSExcel).

• Nationalgovernmentagencies,governmentownedandcontrolledcorporationsandlocalgovernmentunitsreferredtohereasGovernmentInstrumentalities(GIs),shallbeguidedbythefollowingpolicies:

RMONo.12-2013prescribesadditionalpoliciesanduniformguidelinesandproceduresintheprocessingofATPORs,SIsandotherCIsintheinterimperioduntiltheOn-lineATPsystemisavailableforimplementation.

18 Tax Bulletin

1. ForGIsengagedingovernmentalfunctions:

a. ApplyforregistrationwiththeBIRforunregisteredgovernmentalfunctions.

b. NotrequiredtosecureATPinprintingofGovernmentAccountableFormNo.51,RevenueOfficialReceipts(RORs),TaxReceiptsandotherreceiptsinwhatevernameorformbeingissuedforgovernmentalfunctions.

2. ForGIsengagedinproprietaryfunctions:

a. Forunregisteredproprietaryfunctions

Iftheregisteredaddressofthebusinessactivityissimilarorco-locatedwiththeGIwhosegovernmentalfunctionisalreadyregistered,theGIshallfilearegistrationinformationupdatebyfilingBIRFormNo.1905forthefollowing:

i. BusinessActivity/ies

ii. AdditionalTaxType/sDetails

iii. TradeName(ifapplicable)

iv. BooksofAccounts

v. IftheregisteredaddressofthebusinessactivityisotherthantheregisteredaddressoftheGI,theGIshallfileanApplicationforRegistrationasBranchusingBIRformNo.1903.

b. Forregisteredproprietaryfunctions,theGIisrequiredtosecureATPpriortotheprintingofitsprincipalandsupplementaryreceipts/invoicesindicatingallinformationrequiredunderthisRMO.

• TheapplicationforATP(BIRFormNo.1906,asrevised),togetherwiththe

necessarydocumentaryrequirements,shallbesubmittedtotheRevenueDistrictOffice(RDO)/LargeTaxpayerOffice(LTOffice)havingjurisdictionovertheHeadOffice(HO)ofthetaxpayer-applicant.

• TheoldBIRFormNo.1906shallstillbeuseduntiltherevisedformbecomesavailable.

• Intheinterim,allapplicationsforATPshallbeprocessedusingtheRegistrationSystemoftheIntegratedTaxSystem(ITS),whichshallgeneratetheprescribedATPunderRMONo.83-99,asamendedbyRMONo.28-2002.

• ThefollowinginformationshallbetypedorprintedontheATPthatwillserveasguide/referenceforaccreditedprintersinprintingprincipalandsupplementaryreceiptsandinvoices:

1. DateofATP

2. ValidityperiodoftheATP

3. Printer’sAccreditationNumber

4. DateofAccreditation

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• TheprincipalandsupplementaryreceiptsandinvoicesoftheHOandeachofthebranchesshallhaveitsownindependentseriesofserialnumbers.

• Ataxpayerwithexpiringprincipalandsupplementaryreceipts/invoicesshallapplyforanewATPnotlaterthan60dayspriortotheactualexpirydate.

• Procedurefortaxpayerapplicant:

1. Submitinventorylisting/sandsurrenderthehardcopiesoftheunused/expiredreceipts/invoices,togetherwithphotocopiesoftheoldandnewATPsandcorrespondingPrinter’sCertificateofDeliverytotheRDOwhereitisregistered.Branchoffice/sshallsubmitandsurrenderthesametotheRDO/LTOfficewherethebranchisregistered;

2. ChoosetheBIRAccreditedPrinterfromtheupdatedlistofdulyaccreditedprintersavailableintheBIRwebsite;

3. FiletheapplicationforATPwiththesupportingdocumentslistedbelow(attheRDO/LTOfficeconcernedwheretheHOisregisteredusingtheprescribedBIRForm):

a. Originalcopyofsamplelayout/templateofOR/SI/CI

b. OriginalPrinter’sJobOrder

c. PhotocopyofpreviousATP.Ifnotavailable,thelastseriesoftheprintedOR/SI/CI.Thenewsetofreceipts/invoicesshallcontinuewiththelastserialnumberindicatedinthepreviousATPissued.However,forprintingmachineswithlimitedcapacityastothemaximumrangeofserialnumbers,theserialnumbermaystartfromoneandprefixedwithaspecial/alphacodetoavoidduplication(e.g.,A0001)

d. PhotocopyofLoose-leafPermit,ifapplicable;

4. Anauthorizedrepresentativeisaduly-designatedresponsibleofficer/employeeofthecompanywithawrittenauthorizationdulysignedbythetaxpayer-applicantoraresponsibleofficer/employeeoftheaccreditedprinterasindicatedintheATPApplicationForm;

5. SignintheofficelogbookasproofofactualreceiptoftheapprovedATP;

6. BIRAccreditedPrintersshallsubmitthefollowingtotheRDO/LTOfficeconcerned:

a. QuarterlyReportofPrinter(BIRFormNo.1932,asrevised),onorbeforethe20thdayofthemonthfollowingtheendofeachcalendarquarter

b. Printer’sCertificateofDeliveryofReceipts/InvoicesandtheSwornStatementofthetaxpayerpursuanttoSection4ofRRNo.26-2003.

• Allunused/unissuedprincipalandsupplementaryreceipts/invoicesprintedpriortoJanuary19,2013(effectivityofRRNo.18-2012)andthoseprintedbyprinters,whicharenotcompliantwiththisRMO,shallbevaliduntilJune30,2013.

20 Tax Bulletin

• Thetaxpayershallsubmitaninventorylistofprincipalandsupplementaryreceipts/invoices,andsurrenderthehardcopiesofthereceipts/invoicestotheRDO/LTOfficewherethetaxpayerisregisteredonorbeforeJuly10,2013.

• BranchOffice/sshallsubmitandsurrenderthesametotheRDO/LTOfficewherethebranchisregistered.

• Allnewset/sofprincipalandsupplementaryreceipts/invoicestobeprinted,whicharecompliantwiththerequirementsprescribedunderthisRMO,shallhaveavalidityperiodoffiveyears.

• Allunused/expired/expiringORs/SIs/CIsshallbesurrenderedtogetherwithaninventorylistingtotheBIROfficehavingjurisdictionoverthetaxpayerfordestructiononorbeforethe10thdayafterthevalidityperiodoftheexpiredreceipts/invoices.

• PendingtheavailabilityoftheOn-lineATPSystem,thescannedcopyoftheissuedATPshallbeprintedattheinsidebackportionofthecardboardcoverofeachbooklet/padofprincipalandsupplementaryreceipts/invoicesprinted.

• ATPsgeneratedthroughtheITSpursuanttothisRMOshallbemigratedtotheOn-lineATPSystemuponitsavailability,thenecessaryguidelinesandproceduresofwhichshallbeprescribedinaseparaterevenueissuance.

Revenue Memorandum Order No. 13-2013 dated May 2, 2013

• AllregisteredprintersintheITSwhoappliedforaccreditation,andwereinitiallyevaluatedbytheRDOs/officesunderLargeTaxpayersService(LTS)astothecompletenessofthedocumentaryrequirementsperOperationsMemorandumdatedJanuary24,2013shallbepublishedorpostedintheBIRwebsiteas‘deemedAccreditedPrinters’.

• AProvisionalAccreditationNumbershallbeissuedtoall‘deemedAccreditedPrinters’.

• TheProvisionalAccreditationshallbegivenavalidityperiodofsixmonthsfrompostingintheBIRwebsite.

• ACertificateofAccreditationwithPermanentAccreditationNumbershallbeissuedtotheprinteronlyafterevaluationandapprovalbytheNational/RegionalAccreditationBoard(N/RAB)withtheexclusionofthoseundertheInformationSystemsGroup(ISG).

• TheAccreditedPrinterswithCertificateofAccreditationshallceaseusingtheassignedProvisionalAccreditationNumber.

• ThePermanentAccreditationNumbershallbeusedinprintingORs,SIsand/orinvoices.

• The‘deemedAccreditedPrinters’,whichwereissuedRevocationNoticesshallnotbeallowedtoapplyforAuthoritytoPrint(ATP)ReceiptandInvoices.However,allreceiptsandinvoicesprintedbytheseprintersshallremainvaliduntilexpirationoruntilfullutilization,whichevercomesfirst.

• AllprintersissuedtheLetterofDenial/RevocationNoticewhointendtobeaccreditedwillobservethesameprocedureasanewapplicantforaccreditation,andshallundergothesameaccreditationprocess.

RMONo.13-2013prescribeswork-aroundprocedurespendingtheavailabilityoftheOnlineSystemforAccreditationofPrinters(OCAP)pursuanttoRRNo.15-2012datedDecember3,2012.

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• AlistofregisteredprintersintheITSandtaggedasTPENGAGEDINPRTGforatleastthreeyearsasofDecember31,2012shallbetheinitialcandidatesforaccreditation.

BOC Issuance

Customs Administrative Order No. 2-2013 dated May 2, 2013

• Immediatelyuponarrivalofthecarryingvessel,themasteroragentthereofmustsubmittothePiersandInspectionDivision(PID)oritsequivalentunitfoursetsoftheInwardForeignManifest,tobedistributedasfollows:

1. PIDorequivalentoffice;

2. IntelligenceEnforcementGroup;

3. AssessmentandOperationsCoordinatingGroup;

4. COAResidentAuditor.

• TheCommissionerofCustoms,uponconsultationwithprivatestakeholders,shallissuetherulesandregulationstoimplementCAONo.2-2013.

• Allorders,memoranda,circularsorpartsthereof,whichareinconsistentwithCAONo.2-2013aredeemedrevoked,amended,ormodifiedaccordingly.

• CAONo.2-2013shalltakeeffect15daysafterpublicationinanewspaperofgeneralcirculation.

[Editor’s Note: CAO No. 2-2013 was published in the ManilaTimes and ManilaStandardToday on May 9, 2013.]

PEZA Issuance

Memorandum Circular No. 2013-013 dated April 30, 2013

• The50%reductioninallPEZAprocessingfeesforecozoneimport/exportfullcontainerloadshipmentsattheBatangasInternationalPort(BIP)isextendedforanotheryear(January-December2013).

• ThePhilippinePortsAuthorityhasalsoreduceditsportcharges(portduesanddockageforvessels)by50%foraperiodofoneyear(January-December2013).

SEC Issuances

SEC Memorandum Circular No. 7 dated April 8, 2013.

• DuringitsmeetingonApril8,2013,theSECEn BancapprovedtheamendmentofRule3oftheImplementingRulesandRegulationsoftheLendingCompanyActof2007(RANo.9474)byrequiringlendingcompaniestocomplywiththeSingleBorrower’sLimit(SBL)andcreditlimitonDirectors,Officers,StockholdersandRelatedInterests(DOSRI).

• Thetotalcreditthatalendingcompanymayextendtoitsdirectors,officersandstockholdersshallnotexceed15%ofitsnetworth.

CustomsAdministrativeOrder(CAO)No.2-2013amendsCAONo.1-2007,whichrequiresthesubmissionofInwardForeignManifestandConsolidatedCargoManifest.

PEZAMCNo.2013-013announcesthesecondextensionofthe50%reductioninallPEZAprocessingfeesforEcozoneImport/ExportFull-ContainerLoadShipmentsviatheBIP.

SECMCNo.7prescribestheSBLandCreditLimitonDOSRIofalendingcompany.

22 Tax Bulletin

• Forthispurpose,loansandothercreditextendedbyalendingcompanytothefollowingrelatedinterestsshallbedeemed“extendedtoitsdirectors,officersandstockholders”:

1. Spouseorrelativeswithinthefirstdegreeofconsanguinityoraffinity,orrelativesbylegaladoption,oftheofficer,directororstockholderofthelendingcompany;

2. Partnershipinwhichadirectororofficerorstockholderofthelendingcompany,ortheirspouseorrelativesreferredtointheprecedingitem1isageneralpartner;

3. Corporationswhereadirectororofficerorstockholderofthelendingcompanyortheirspouseorrelativesreferredtoinitem1aboveisalsoadirectororofficerofthecorporation;

4. Corporationswheremorethan20%ofitssubscribedcapitalstockisownedbyadirectororofficerorstockholderofthelendingcompanyortheirspouseorrelativesreferredtoinitem1above;

5. Corporationswhollyormajority-ownedorcontrolledbyentitiesmentionedinitems2,3and4above.

• Thetotalcreditthatalendingcompanymayextendtoanyperson,company,corporationorfirmshallnotexceed30%ofitsnetworth.

[Editor’s Note: SEC MC No. 7 was published in ManilaStandardToday on May 9, 2013.]

SEC Memorandum Circular No. 8 dated May 20, 2013.

• Allcoveredcorporationsshall,atalltimes,observetheConstitutionalorstatutoryownershiprequirement.

• TherequiredpercentageofFilipinoownershipshallbeappliedtoBOTH:

1. Thetotalnumberofoutstandingsharesofstockentitledtovoteintheelectionofdirectors;AND

2. Thetotalnumberofoutstandingsharesofstock,whetherornotentitledtovoteintheelectionofdirectors.

• AllCorporateSecretariesofcoveredcorporationsaredirectedtomonitorandobservecompliancewiththeownershiprequirements.TheCorporateSecretarycannotdelegatethisresponsibilitywithouttheexpressauthorityfromtheBoardofDirectorsorTrustees.

• Allcoveredcorporationswhicharenon-compliantshallbegivenaperiodofoneyearfromthedateofeffectivityofthisMCwithinwhichtocomplywithsaidownershiprequirement.

[Editor’s Note: SEC MC No. 8 was published in the BusinessMirror on May 22, 2013.]

SECMCNo.8prescribestheguidelinesforcomplyingwiththeFilipino-foreignownershiprequirementsasprescribedintheConstitutionandexistinglawsbycorporationsengagedinnationalizedandpartlynationalizedactivities.

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SEC Memorandum Circular No. 9 dated May 20, 2013

• OnMarch20,2013,theSECissuedMCNo.5,requiringalllistedcompaniestosubmitonMay30,2013theirAnnualCorporateGovernanceReport(ACGR)inaccordancewiththeguidelinessetforththerein.

• However,duetothenumberofrequestsreceivedandconsideringfurtherthatthisisthefirsttimesaidcompaniesshallbefilingthesaidreport,theSECinitsmeetingonMay20,2013approvedthegrantingofa30-dayextension(i.e.,untilJune30,2013)togiveampletimetoalllistedcompaniesincludingtheirrespectivesignatoriestocomplywithMCNo.5.

[Editor’s Note: SEC MC No. 9 was published in the PhilippineStar on May 23, 2013.]

BSP Issuance

BSP Circular No. 796 dated May 3, 2013

• TheprovisionsoftheManualofRegulationsforBanks(MORB)onthegeneralfeaturesofamicrofinancesavingsdepositaccountareamendedasfollows:

“G.GeneralFeaturesofaMicrofinanceSavingsDepositAccount

1. MinimummaintainingbalancenotexceedingPhp100.00

2. Notsubjecttodormancycharges

3. OnlyforindividualmicrofinanceclientswhoseaveragedailysavingsaccountbalancedoesnotexceedPhp40,000.00

xxx”

• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.

[Editor’s Note: Circular No. 796 was published in the ManilaTimes on May 10, 2013.]

Court Decisions

First Lepanto Taisho Insurance Corporation vs. Commissioner of Internal RevenueSupremeCourt(ThirdDivision)G.R.No.197117promulgatedApril10,2013

Facts:

TheBIRassessedPetitionerFirstLepantoTaishoInsuranceCorporation(FirstLepanto),anon-lifeinsurancecorporationandalargetaxpayer,variousdeficiencytaxesfortheyear2007.

BecauseofinactionbytheBIRonitsprotest,FirstLepantoappealedtotheCourtofTaxAppeals(CTA)whichupheldthedeficiencytaxassessmentsforwithholdingtaxoncompensation(WTC),expandedwithholdingtax(EWT)andfinalwithholdingtax(FWT).TheCTAalsoorderedthepaymentofa20%delinquencyinterestfromthedateFirstLepantoreceivedtheFormalLetterofDemand(FLD)untilactualpaymentismade.

SECMCNo.9extendsthedeadlinetosubmittheACGRforlistedcompaniesfromMay30,2103toJune30,2013.

CircularNo.796amendsAppendix45(NotesonMicrofinance)ofSectionX361oftheMORB.

AstipulationbetweentheBIRandthetaxpayerattheCTAproceedingsthattaxeshavebeencorrectlyremittedtothegovernmentcannotbindthecourt.Thetaxpayerisstillrequiredtopresentproofthatitcorrectlyremittedthetaxes.

A20%delinquencyinterestisdueonunpaiddeficiencytaxesassessedbytheBIRcomputedfromthedateprescribedfortheirpaymentuntilfullpaymentismade.

24 Tax Bulletin

FirstLepantoappealedtotheSupremeCourt.FirstLepantocontendedthat:(i)paymentstodirectors,notbeingemployees,shouldnotbesubjecttoWTC;and(ii)itnolongerneedstopresentevidenceontheEWTonitspaymentsforcontractorsandpurchases,sinceithadalreadystipulatedwiththeBIRattheCTAproceedingsthattheCompanywithheldthecorrectEWTonitspaymentsforcontractorsandpurchases.Issue:

IsFirstLepantoliableforthedeficiencytaxesandfordelinquencyinterest?

Ruling:

Yes.FirstLepantoisliablefordeficiencyWTC,EWTandFWTandfordelinquencyinterest.

OntheWTCassessment,adirectorwasconsideredanemployeeundertheWithholdingTaxRegulationstheninforce.TheCompanyfailedtoprovewithdocumentsthatthedirectorswerenotitsemployees.Hence,thepaymentsareproperlysubjecttoWTC.

TheCompanyalsofailedtoprovewithrelevantsourcedocuments(suchasreimbursementforms/voucherswithattachedSIs/ORs,withappropriatetracingtospecificgeneralledgerentries)thatthepaymentsoffixedtransportation,subsistenceandlodgingallowances,andfixedrepresentationexpensestoemployeesweremerereimbursementsofactualexpenses.Becauseofthis,theallowancesaretreatedasemployees’compensationsubjecttoWTC.

OntheEWTassessment,FirstLepantofailedtopresentdocuments(likereinsuranceagreements/contracts)toshowthatthecommissionswerepaidtoinsurancecompanies,whicharenotagentsorbrokers,andtherefore,shouldnotbesubjecttoEWT.Therewasalsounder-withholdingofEWTontheCompany’soccupancycosts.

OntheargumentthattheBIRandtheCompanyhavejointlystipulatedattheCTAproceedingsthattheCompanyhadcorrectlywithheldtheEWTdueonpaymentsforcontractorsandpurchases,and,therefore,isnolongerrequiredtopresentevidenceontherelatedEWTremittance,stipulationscannotdefeattherightoftheStatetocollectthecorrecttaxesduebecausetaxesarethelifebloodofournationanditscollectionshouldbeactivelypursued.

OntheFWTassessment,FirstLepantofailedtopresentproofofFWTremittanceonpaymentsofdividendsandcomputerizationexpensestonon-residentforeigncorporations.

Finally,theCompanyfailedtopaythedeficiencytaxassessedwithinthetimeprescribedforitspayment.Hence,the20%delinquencyinterestiscorrectlyimposedontheunpaiddeficiencytaxesassessed,reckonedfromthedateprescribedforitspaymentuntilfullpaymentismade.

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Pelizloy Realty Corporation vs. The Province of BenguetSupremeCourt(ThirdDivision)G.R.No.183137promulgatedApril10,2013

Facts:

PetitionerPelizloyRealtyCorporation(Pelizloy)ownsPalmGroveResort,whichhasfacilitieslikeswimmingpools,spa,andfunctionhallslocatedinTuba,Benguet.

TheProvinceofBenguetenactedtheBenguetRevenueCodeof2005,whichlevieda10%amusementtaxongrossreceiptsfromadmissionsto“resorts,swimmingpools,bathhouses,hotspringsandtouristspots.”

PelizloyquestionedthevalidityoftheprovisionbeforetheSecretaryofJustice.UponfailureoftheSecretarytodecidewithinthe60day-periodprovidedundertheLGC,PelizloyfiledaPetitionforDeclaratoryReliefwiththeRegionalTrialCourt(RTC)inLaTrinidad,Benguet.

PelizloyarguedthattheBenguetRevenueCodeimposedapercentagetax,whichprovincesarenotallowedtolevyunderthecommonlimitationsonthetaxingpowersofLGUs.Section133(i)oftheLGCprohibitsLGUsfromimposingpercentagetaxorVATonsales,barters,exchangesorsimilartransactionsongoodsorservices,exceptwhenotherwiseprovidedbytheLGC.

TheRTCdismissedthepetition.PelizloyappealedtotheSupremeCourt.

Issues:

1. IstheamusementtaxapercentagetaxwhichtheProvinceofBenguetisnotallowedtolevy?

2. Canprovincesimposeamusementtaxesonadmissionfeestoresorts,swimmingpools,bathhouses,hotspringsandtouristspots?

Ruling:

1. Yes.TheamusementtaxleviedundertheBenguetRevenueCodeisapercentagetax.However,aprovinceisallowedtolevyamusementtaxesundertheLGC.

Apercentagetaxisataxmeasuredbyacertainpercentageofthegrosssellingpriceorgrossvalueinmoneyofgoodssold,barteredorimported;orofthegrossreceiptsorearningsderivedbyanypersonengagedinthesaleofservices.TheTaxCodelistsamusementtaxesasamongthepercentagetaxes,whichareleviedregardlessofwhetherornotataxpayerisalreadyliabletopayVAT.

Amusementtaxesarefixedatacertainpercentageofthegrossreceiptsincurredbyspecifiedestablishments.Hence,theamusementtaxleviedundertheBenguetRevenueCodeisapercentagetax.

WhiletheLGCprohibitsallLGUs,includingprovinces,fromlevyingpercentagetaxes,theLGCallowsprovincestolevyandcollectanamusementtax,whichisapercentagetax,fromproprietors,lessees,oroperatorsoftheaters,cinemas,concerthalls,circuses,boxingstadia,andotherplacesofamusement.

Swimmingpools,bathhouses,andhotspringscannotbeconsideredas“otherplacesofamusement”subjecttoamusementtaxesundertheLGC.

26 Tax Bulletin

However,provincesarenotbarredfromlevyingamusementtaxesbecauseSection133(i)oftheLGCspecificallyprovidesthattheprohibitionissubjecttoexceptionswhichmaybeprovidedundertheLGC.Section140oftheLGCexpresslyallowstheimpositionbyprovincesofamusementtaxes“tobecollectedfromtheproprietors,lessees,oroperatorsoftheaters,cinemas,concerthalls,circuses,boxingstadia,andotherplacesofamusement.”

2. No.Provincesmaynotimposeanamusementtaxonadmissionfeestoswimmingpools,resorts,bathhouses,hotsprings,andtouristspots,asthesefacilitiesdonotqualifyas“otherplacesofamusement”undertheLGC.

Section131(c)oftheLGCdefines“amusementplaces”as“theaters,cinemas,concerthalls,circusesandotherplacesofamusementwhereoneseeksadmissiontoentertainoneselfbyseeingorviewingtheshoworperformances.”Accordingly,“otherplacesofamusement”mustbeinterpretedasvenueswhereoneseeksadmissiontoentertainoneselfbyseeingorviewingtheshoworperformancesorasvenuesprimarilyusedtostagespectaclesorholdpublicshows,exhibitions,performances,andothereventsmeanttobeviewedbyanaudience.

Waterfront Philippines, Inc. vs. Commissioner of Internal RevenueCourtofTaxAppeals(SpecialFirstDivision)CaseNo.8024promulgatedApril24,2013

Facts:

RespondentCommissionerofInternalRevenue(CIR)assessedPetitionerWaterfrontPhilippines,Inc.(Waterfront)forallegeddeficiencytaxesfortaxableyear2006,includingVAToninterestincomederivedfromloansgrantedtoaffiliatesMetroAllianceHoldingsandEquitiesCorporationandWellexGroup,Inc.

TheCIRclaimsthatintheordinarycourseofbusiness,Waterfrontextendsandobtainscashadvancesandloanstoandfromrelatedpartiestomeetworkingcapitalrequirementsandtofinancetheconstructionandoperationofitshotelprojects,infurtheranceoftheprimarypurposestatedintheArticlesofIncorporation.TheCIRallegesthatsaidinterestincomeissubjecttoVAT.Waterfrontprotestedtheassessment.

UpondenialofitsprotestbytheCIR,WaterfrontfiledaPetitionforReviewwiththeCTA.TheCTAFirstDivisionruledthattheinterestincomefromloansoradvancesgrantedtoaffiliatesbyWaterfront,whichisnotengagedinthebusinessoflendingmoney,isnotsubjecttoVAT.TheCIRfiledaMotionforReconsiderationandarguedthatWaterfrontwasassessedfordeficiencyVATnotasalendinginvestorbutforinterestincomerealizedfromloansandadvancesgrantedtorelatedpartiesintheordinarycourseoftradeorbusiness.

InterestincomefromloansandadvancestoaffiliatesisconsideredasrevenuerealizedfromservicesrenderedinthenormalcourseoftradeorbusinessthatissubjecttoVAT.

27

Issue:

IstheinterestincomederivedbyWaterfrontfromloansandadvancesgrantedtoaffiliatessubjecttoVAT?

Ruling:

Yes.TheinterestincomefromloansandadvancesextendedbyWaterfronttoitsaffiliatesissubjecttoVAT.

TheCIRassessedWaterfrontfordeficiencyVATnotasalendinginvestorbutbecausetheinterestincomereceivedisrevenuerealizedfromservicesrenderedinitsnormalcourseoftradeorbusiness.

Section105oftheTaxCodedefines‘inthecourseoftradeorbusiness’astheregularconductorpursuitbyanypersonofacommercialoraneconomicactivity,includingtransactionsincidentalthereto.Section108oftheTaxCodealsoprovidesthatVATisdueonthe‘saleorexchangeofservices’ortheperformanceofallkindsofservicesinthePhilippinesforothersforafeeorconsiderationregardlessofwhethertheperformanceofsuchservicescallsfortheexerciseoruseofphysicalormentalfaculties.

TheCTAcitedDiaz, et al. vs. Secretary of Finance, et al. promulgated on July 19, 2011,wheretheSupremeCourtheldthatVATisimposedonallkindsofservicesinthePhilippinesforafee.TheenumerationofservicessubjecttoVATinSection108oftheTaxCodeisnotexclusive.ThelistingofspecificservicesillustrateshowbroadtheVATcoverageis.Everyactivitythatcanbeimaginedasaformofservicerenderedforafeeshouldbedeemedincludedunlessaspecificprovisionoflawexcludesit.Thus,whetherWaterfrontisalendinginvestorwouldnotbematerialasitisonlyoneoftheactivitiessubjecttoVATenumeratedinSection108oftheTaxCode.

Waterfrontextendedcashadvancestoitsaffiliates,whichisclearlyaperformanceofserviceforafee(withinterestasthefeeorconsideration)thatiscoveredbytheVATprovisionsoftheTaxCode.Whiletheactofextendingcashadvanceswithinteresttoaffiliatesmaybeanisolatedtransaction,itdoesnotfollowthatthesamecannotbetreatedasanincidentaltransactionsubjecttoVAT.

[Editor’s Note: This is an ‘Amended Decision’ of the CTA Special First Division reversing the ruling of the CTA First Division in its ‘Decision’ promulgated on November 13, 2012, which was published in the November 2012 Tax Bulletin.]

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may 2013 tax bulletin

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