tax bulletin - july 2016 - ernst & youngfile/ey-philippines-tax-bulletin-july-2016.pdf · tax...
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1Tax bulletin |
Tax BulletinJuly 2016
2 | Tax bulletin
HighlightsBIR Rulings
• ExceptforthefiveentitiesnamedinSection27(C)oftheTaxCode(i.e.,GSIS,SSS,PHIC,LWDsandPCSO),allothercorporations,agenciesorinstrumentalitiesownedorcontrolledbytheGovernmentaresubjecttoincometax. (Page 4)
• TheDocumentaryStampTax(DST)ondeedsofsaleandconveyancesofrealpropertyshallbecomputedbasedontheconsiderationcontractedtobepaidfortherealtyoronitsfairmarketvalue,whicheverishigher. (Page 4)
BIR Issuances
• RevenueMemorandumOrder(RMO)No.40-2016prescribesthattheBIRobservethe“NoGiftPolicy”. (Page 4)
• RMONo.41-2016reiteratestheprovisionsofRevenueMemorandumCircular(RMC)No.39-2015titled“UpdatedBIRCitizensCharterasConsolidated”andRMCNo.80-2012titled“StrictAdherencetotheAnti-RedTapeActProvisiononAccessingFrontlineServices”towarnBIRofficialsandemployeesagainsttheissuanceofCertificatesAuthorizingRegistration(CAR)beyondtheprescribedperiods. (Page 5)
• RMONo.42-2016prescribestheguidelinesandproceduresinimplementingRepublicAct(RA)No.9505orthe“PersonalEquityandRetirementAccount(PERA)Actof2008”. (Page 5)
• RMONo.43-2016amendstheguidelinesforissuingoftheInternationalCarrier’sSpecialCertificate(ICSC)andtheInternationalCarrier’sGeneralCertificate(ICGC). (Page 7)
• RMONo.44-2016excludesnon-stock,non-profiteducationalinstitutionsfromRMONo.20-2013andprescribesnewpoliciesandguidelinesinissuingtaxexemptionrulingstosucheducationalinstitutions. (Page 7)
• RevenueMemorandumCircular(RMC)No.70-2016suspendsalltaxauditseffective1June2016andrequiresallrevenueofficerstosubmitaninventoryofpendingLettersofAuthority(LA)/LetterNotices(LN)asof30June302016. (Page 8)
• RMCNo.71-2016recallsandrevokesallRevenueTravelAssignmentOrders(RTAOs)issuedwithintheperiod1Juneto30June2016. (Page 8)
• RMCNo.72-2016clarifiesRMCNo.71-2016concerningtransfersofpresidentialappointees. (Page 9)
• RMCNo.74-2016streamlinestherequirementsandtheprocessinissuingTaxClearancesunderExecutiveOrder(EO)No.398. (Page 9)
• RMCNo.75-2016clarifiescertainissuesrelativetothesuspensionofallBIRauditsasmandatedunderRMCNo.70-2016. (Page 9)
• RMCNo.80-2016liftsthesuspensionoftheeffectivityofcertainrevenueissuancesprovidedunderRMCNo.69-2016dated1July2016. (Page 11)
3Tax bulletin |
BOC Issuance
• CMONo.17–2016providestheguidelinesandproceduresonimplementingtheelectroniccertificateoforiginsystem(eCOS). (Page 13)
BSP Issuances
• CircularNo.914providesfortheAmendmentstoPrudentialPolicyonLoans,OtherCreditAccommodations,andGuaranteesGrantedtoDirectors,Officers,Stockholders,andtheirRelatedlnterests(DOSRl),SubsidiariesandAffiliates. (Page 14)
• CircularNo.915providesfortheAmendmentontheAccountingGuidelinesforPrudentialReportingtotheBSP. (Page 17)
• CircularNo.916providesfortheRevisionoftheRediscountRatesonRediscountingWindow(RW)I. (Page 18)
• CircularNo.917providesfortheAmendmentstotheManualofRegulationsforBanksandManualofRegulationforNon-BankFinancialInstitutionsasof31December2015. (Page 18)
SEC Opinions and Issuances
• Treasurysharesarestillconsidered“issuedshares”sincetheydonotreverttotheunissuedsharesofacorporationbutareregardedaspropertyacquiredbythecorporation.Therequirementsthatatleast25%oftheamountoftheauthorizedcapitalstockshallbesubscribedandatleast25%ofthetotalsubscriptionshallbepaid,aremandatoryonlyduringthepre-incorporationperiodofacorporation. (Page 21)
• Thebusinessofleasingoutorsub-leasingofadvertisingspacesfallswithinthepurviewofmassmediawhichisanationalizedactivityandissubjecttotheforeignequitylimitationsimposedbythe1987Constitutionandotherrelevantlaws. (Page 22)
• SECMCNo.8providesfortheexemptionfromthe5%liquidityrequirementofmutualfundindextrackers. (Page 23)
PEZA Update
• DTIMemorandumdated20July2016designatesMr.JustoPorfirioLL.YusingcoastheOICofPEZA. (Page 23)
Court Decisions
• Satelliteairtimeservicefeespaidtoanon-residentforeigncorporationareconsideredincomefromsourceswithinthePhilippinesthataresubjecttofinalwithholdingtax. (Page 23)
• AnyalterationtotheVATinvoiceorofficialreceiptmustbecounter-signedbyanauthorizedsignatoryorthecountersignaturemustbeverifiedtocomplywiththeinvoicingrequirementsforVATrefundpurposes. (Page 24)
• MaintenanceservicefeespayabletoaUSresidentunderasoftwarelicenseagreementarenotconsideredroyaltiesbutbusinessprofits,whicharesubjecttofinalwithholdingtaxonlywhenthepayeeisdeemedtohaveapermanentestablishmentinthePhilippines. (Page 25)
4 | Tax bulletin
BIR Rulings
BIR Ruling No. 335-2016 dated 29 June 2016
Facts:
XHospitalisagovernmenthospitalcreatedbyvirtueofRANo.1859,asamended.ItrequestedfortheissuanceofacertificateofexemptionfromincometaxclaimingthatitisaretainedhospitaloftheDepartmentofHealth(DOH),andtherefore,agovernmentagencyentitledtoincometaxexemption.
Issue:
IsXHospitalexemptfromincometax?
Ruling:
No.UnderSection27(C)oftheTaxCode,allcorporations,agenciesorinstrumentalitiesownedorcontrolledbytheGovernment,exceptfortheGovernmentServiceandInsuranceSystem(GSIS),theSocialSecuritySystem(SSS),thePhilippineHealthInsuranceCorporation(PHIC),thelocalwaterdistricts(LWDs)andthePhilippineCharitySweepstakesOffice(PCSO),shallbesubjecttotheregularcorporateincometax.Thesaidprovisionspecificallyexemptedonlyfiveentitiesfromincometax.Hence,allothercorporations,agenciesorinstrumentalitiesownedorcontrolledbytheGovernmentaresubjecttoincometax.
BIR Ruling No. 345-2016 dated 30 June 2016
Facts:
Ms.A,anindividualbuyerofacondominiumunitfromadeveloper,wasmadetopaytheDSTonthetransferofrealpropertycomputedbasedonthecontractprice,inclusiveofVAT.ShefiledaclaimforrefundofallegedoverpaidDSTonthebasisthatthetaxpayablecouldhavebeenlowerifcomputedbasedonthefairmarketvalueoftheproperty.
Issue:
IstherealegalbasistograntMs.A’sclaimforrefund?
Ruling:
No.UnderSection196oftheTaxCode,theDSTondeedsofsaleandconveyancesofrealpropertyshallbecomputedbasedontheconsiderationcontractedtobepaidfortherealtyoronitsfairmarketvalueasdeterminedinaccordancewithSection6(E)oftheTaxCode,whicheverishigher.
BIR Issuances
Revenue Memorandum Order No. 40-2016 dated 5 July 2016
• AllBIRofficialsandemployeesarenotallowedtoacceptorsolicitgiftsfromthepublicorprivatesectorsandareexpectedtoperformtheirdutiesandresponsibilitieswithoutexpectationofanyfavorormaterialreward.
• Thoseconcernedaredirectedtoimmediatelyreturnanygiftthattheyhavereceived.
TheDSTondeedsofsaleandconveyancesofrealpropertyshallbecomputedbasedontheconsiderationcontractedtobepaidfortherealtyoronitsfairmarketvalue,whicheverishigher.
RMONo.40-2016prescribesthattheBIRobservethe“NoGiftPolicy”.
ExceptforthefiveentitiesnamedinSection27(C)oftheTaxCode(i.e.,GSIS,SSS,PHIC,LWDsandPCSO),allothercorporations,agenciesorinstrumentalitiesownedorcontrolledbytheGovernmentaresubjecttoincometax.
5Tax bulletin |
Revenue Memorandum Order No. 41-2016 dated 14 July 2016
• CARscoveringthefollowingtransactionsshallbeissuedwithinfivedaysfromthesubmissionofcompletedocumentaryrequirements:
1. Saleofrealproperty;2. Transferorassignmentofstocksnottradedinthestockexchange;and3. Transferssubjecttodonor’stax,estatetax,anddocumentarystamptax
relatedtothesaleortransferofproperties
• BIRofficialsandemployeesviolatingthisRMOshallbesubjecttoadministrativeandcriminalpenaltiesenumeratedundertheAnti-RedTapeActof2007.
Revenue Memorandum Order No. 42-2016 dated 21 July 2016
• ThePERAActof2008establishestheframeworkofretirementplansforpersons,comprisedofvoluntarypersonalsavingsandinvestmentswhileprovidingvarioustaxincentivesandprivileges.
• TheRMOsetstheguidelinesandproceduresfortheproperadministrativereportingofPERAtransactions,involvingcontributions,income,withdrawals,and/orterminations.
• TheBIR’sPERAProcessingOffice(i.e.theAuditInformation,TaxExemptionandIncentivesDivision(AITEID)undertheAssessmentService)shallonlyacceptApplicationsforAccreditationwhicharefiledbypre-qualifiedPERAAdministratorsbasedona“QualificationCertificate”issuedbyeithertheBangko Sentral ng Pilipinas(BSP),SEC,ortheInsuranceCommission(IC).
• ACertificateofAccreditationshallbeissuedbytheAIETEIDtothePERAAdministrator,whichwillbevaliduntilsuspendedorrevokedduetoviolationsofRA9505oranyofthegroundsenumeratedbylaw.
• AcopyoftheCertificateshallbetransmittedtotheconcernedRevenueDistrictOffice(RDO)toensurethatthePERAadministratormaintainsseparatebooksofaccountstorecordallPERAcontributionsandrelatedtransactions.
• ContributionstoPERAmustnotexceedthefollowingamountspercalendaryear:
1. Byemployeesand/oremployersorself-employedindividuals–P100,000.00
2. ByOverseasFilipinoWorkers–P200,000.00
• APERAContributormaydesignatethePERAAdministratorwhowillhandlethePERAestablishedbyitsemployees.
• Theemployees’PERAcontribution,togetherwiththecontributionmadebytheemployer,mustnotexceedtheemployee’squalifiedPERAcontribution.
• ThePERAAdministratormustvalidateinthePERAContributor’sdatabaseprovidedbytheBSPthatthecontributionsareunderhisexclusiveadministration.
• AContributormaycreateandmaintainamaximumoffivePERAsatanyonetime,andeachPERAmustbeconfinedtoonlyonecategoryofPERAInvestmentProduct.
RMONo.41-2016reiteratestheprovisionsofRMCNo.39-2015titled“UpdatedBIRCitizensCharterasConsolidated”andRMCNo.80-2012titled“StrictAdherencetotheAnti-RedTapeActProvisiononAccessingFrontlineServices”towarnBIRofficialsandemployeesagainsttheissuanceofCARsbeyondtheprescribedperiods.
RMONo.42-2016prescribestheguidelinesandproceduresinimplementingRANo.9505orthe“PERAActof2008”.
6 | Tax bulletin
• Anemployeeorself-employedqualifiedContributorisentitledtoa5%taxcreditofhistotalPERAcontributionsinacalendaryear.
1. ThetaxcreditsarisingfromPERAcontributionsmaybeusedaspaymentfordelinquentaccounts,butarenon-refundable,non-transferrableandnon-convertibletocash.
2. IncaseofanOverseasFilipinoContributor,the5%taxcreditmaybeclaimedagainstanyinternalrevenuetaxliabilitiesexceptforwithholdingtaxliabilities.However,ifhedoesnothavetaxableincomeinthePhilippines,the5%taxcreditwilleventuallybeforfeitedinfavorofthegovernment.
• Aqualifiedemployershallnotbeentitledtothe5%taxcredit.However,theemployer’scontributiontotheemployee’sPERA:
1. isexemptfromwithholdingtaxoncompensationandfinalwithholdingtaxonfringebenefits;
2. maybeclaimedasadeductionfromgrossincometotheextentthatsuchcontributionwouldcompletethemaximumallowablePERAcontribution.
• Anyincomeearnedfromtheinvestmentandre-investmentofPERAassetsinPERAInvestmentProductsarenotincludedinthemaximumallowablecontributions.
• Inaddition,suchincomeshallbeexemptfromincometaxesbutwillbesubjecttoothertaxes,suchaspercentagetax,VAT,stocktransactiontax,anddocumentarystamptax.
• ThefollowingQualifiedPERADistributions(QPD)areexcludedfromthegrossincomeoftheContributorandshallnotbesubjecttoestatetaxinthehandsoftheheirsorbeneficiariesoftheContributor:
1. QPDreceivedbytheContributoraftermakingcontributionsforatleastfiveyearsanduponreachingtheageof55;
2. QPDreceivedbytheheirsorbeneficiariesoftheContributor,regardlessofageandnumberofcontributionsmadebytheContributor;
3. WhentheContributorishospitalizedformorethan30days,asevidencedbyanotarizeddoctor’scertificate;
4. WhentheContributorbecomespermanentlydisabledasevidencedbyacertificateissuedbytheconcernedgovernmentagency;or
5. ImmediatetransferofproceedstoanotherPERAInvestmentProductand/orAdministratorwithintwoworkingdaysfromthewithdrawalofthesame.
• TheRDOsorOfficesundertheLTSshallissuethefollowingasmaybenecessary:
1. CertificationofEntitlementtothe5%TaxCredit;or
2. PERA-TaxCreditCertificate(TCC)tobeissuedinthenameoftheOverseasFilipinoorself-employedContributorforreleasetothePERAAdministrator.
7Tax bulletin |
Revenue Memorandum Order No. 43-2016 dated 21 July 2016
• TheOfficeoftheCommissionershallissuetheInternationalCarrier’sSpecialCertificate(ICSC)(BIRFormNo.ICC-3)andtheInternationalCarrier’sGeneralCertificate(ICGC)(BIRFormNo.ICC-4),afterverifyingthatpaymentofthe2½%grossPhilippinebillingstaxandthe3%carrier’staxhasbeenmadebytheinternationalcarrierpriortodeparture.
• TheCommissionerorhisdulyauthorizedrepresentativeshallsignthecertificateswhichshallbesubmittedbytheinternationalcarriertotheBureauofCustoms.
Revenue Memorandum Order No. 44-2016 dated 25 July 2016
• ThePhilippineConstitutiondirectlyconfersataxexemptiononnon-stock,non-profiteducationalinstitutionsforallrevenuesandassetsusedactually,directly,andexclusivelyforeducationalpurposes.
• Onlytworequisiteshavetobemetinordertoavailoftheconstitutionalexemption:1)theschoolmustbeanon-stockandnon-profitinstitution;and2)theincomeisactually,directly,andexclusivelyusedbytheschoolforeducationalpurposes.
• Therearenootherconditionsandlimitationsimposedinordertoavailoftheexemption.
• Non-stock,non-profiteducationalinstitutionsarenowdirectedtofiletheirapplicationsfortaxexemptionwiththeOfficeoftheAssistantCommissioner,LegalService,Attention:LawDivision,andshallsubmitthefollowingdocuments:
1. Originalcopyoftheapplicationletter;
2. CertifiedtruecopyoftheCertificateofGoodStandingissuedbytheSEC;
3. OriginalcopyoftheCertificationunderOathoftheTreasurerastotheamountoftheincome,compensation,salaries,oranyemolumentspaidtotrusteesandofficers;
4. CertifiedtruecopyofitsFinancialStatementsforthelast3years;
5. CertifiedtruecopyofthepermittooperateissuedbyeithertheCommissiononHigherEducation(CHED),DepartmentofEducation(DepEd),orTechnicalEducationandSkillsDevelopmentAuthority(TESDA)andifthepermittooperatewasissuedfiveyearsbeforetheapplicationfortaxexemption,aCertificateofOperation/GoodStandingissuedbytheCHED,DepEd,orTESDA;
6. OriginalcopyoftheCertificationofUtilizationofAnnualRevenuesandAssetsissuedbytheTreasurer.
• UnlessrecalledbytheBIRonvalidgrounds,taxexemptionrulingsissuedinfavorofnon-stock,non-profiteducationalinstitutionsshallremainvalidandeffective,andneednotberenewedorrevalidated.
• Taxexemptionrulingsmayberevokediftherearematerialchangesinthecharacter,purpose,ormethodofoperationoftheeducationalinstitutionwhichareinconsistentwiththebasisofitsincometaxexemption.
RMONo.43-2016amendstheguidelinesforissuingtheICSCandtheICGC.
RMONo.44-2016excludesnon-stock,non-profiteducationalinstitutionsfromRMONo.20-2013andprescribesnewpoliciesandguidelinesinissuingtaxexemptionrulingstosucheducationalinstitutions.
8 | Tax bulletin
• Non-stock,non-profiteducationalinstitutions,whichwereissuedtaxexemptionrulingspriortoJune30,2012,arerequiredtoapplyanewfortaxexemptionwiththeBIR.
Revenue Memorandum Circular No. 70-2016 dated 1 July 2016
• TheRMCsuspendsallBIRfieldauditandfieldoperationsinrelationtoexaminationsandverificationsoftaxpayers’booksofaccounts,recordsandothertransactions.
1. Assuch,allLAs/LNs,orMissionOrdersshallnotbeexecuted;
2. Nowrittenorderstoauditandinvestigatetaxpayersforinternalrevenuetaxesshallbeissuedorserved,exceptinthefollowingcases:
• InvestigationofcasesprescribingonorbeforeOctober31,2016;
• Processingandverificationofestatetax,donor’stax,capitalgainstaxandwithholdingtaxreturnsonthesaleofrealpropertiesorsharesofstocksandthecorrespondingdocumentarystamptaxreturns;
• Examinationorverificationofinternalrevenuetaxliabilitiesoftaxpayersretiringfrombusiness;
• AuditofNationalGovernmentAgencies(NGAs),LocalGovernmentUnits(LGUs)andGovernment-OwnedandControlledCorporations(GOCCs),includingitssubsidiariesandaffiliates;and
• Othermatters/concernswithimpendingdeadlines,ormattersupontheordersoftheCommissionerofInternalRevenue.
3. AssessmentNotices,WarrantsandSeizureNoticesshallstillbeserved.Taxpayersmayvoluntarilypaytheirdeficiencytaxeswithouttheneedtosecureauthorityfromrevenueofficers.
4. RevenueOfficersarerequiredtosubmittotheCommissioner’sOfficeonorbefore16July2016,aninventoryofalloutstandingLAsandLNsasof30June2016.
Revenue Memorandum Circular No. 71-2016 dated 5 July 2016
• TheRMCrecallsandrevokesallRTAOsissuedandpublishedinBIROutlook/InternalCommunicationsfrom1Juneto30June2016.
• Allaffectedrevenuepersonnelaredirectedtoreturntotheirpreviousofficesandpositions.
• RTAOscoveringthetransferanddesignationofRevenueCollectionOfficersandRevenueSpecialOrders(RSOs)onlocalandinternationaltrainingarenotcoveredbytherevocation.
RMCNo.71-2016recallsandrevokesallRTAOsissuedwithintheperiodfrom1Juneto30June2016.
RMCNo.70-2016suspendsalltaxauditseffective1June2016andrequiresallrevenueofficerstosubmitaninventoryofpendingLAs/LNsasof30June2016.
9Tax bulletin |
Revenue Memorandum Circular No. 72-2016 dated 8 July 2016
►• On21October2010,theDepartmentofFinanceissuedaMemorandumrequiringaclearancefromtheSecretaryofFinanceontransfersinvolvingPresidentialAppointees.
• Inlinewiththis,RTAOsinvolvingPresidentialAppointeesissuedwithin1Juneto30June2016,havingbeenapprovedbytheSecretaryofFinance,areexcludedfromthegeneralrevocationofRTAOsasprescribedunderRMONo.71-2016.
Revenue Memorandum Circular No. 74-2016 dated 14 July 2016
• EONo.398requiresindividualsandcorporationsthatwishtoenterintocontractswiththeGovernment,tosubmitataxclearancefromtheBIRtoprovefullandtimelypaymentoftaxes.
• TheTaxClearanceshallbeprocessedandreleasedwithintwoworkingdaysfromthesubmissionofthefollowingdocumentaryrequirements:
1. Duly-accomplishedandnotarizedapplicationformwithtwopieceslooseDocumentaryStampTax;
2. Print-outofCertificationfeepaidthroughtheBIR’selectronicFilingandPaymentSystem(eFPS),withpaymentconfirmation;and
3. DelinquencyVerificationwithavalidityperiodofonemonthfromthedateofissue,whichshallbeissuedbytheconcernedBIROfficeswithin24hoursfromfilingoftheapplicationbythetaxpayer.
Revenue Memorandum Circular No. 75-2016 dated 18 July 2016
• Theinvestigationofthecasesprescribingonthefollowingdatesisnotcoveredbythesuspension:
TAXABLE PERIOD PRESCRIPTIVE PERIOD
Income Tax
CalendarYear2012 15April2016
FiscalYearEnding30June2013 15October2016
CalendarYear2013 15April2017
Value-Added Tax (VAT)
Calendar Year 2013
FirstQuarter(Q1) 25April2016
SecondQuarter(Q2) 25July2016
ThirdQuarter(Q3) 25October2016
FourthQuarter(Q4) 25January2017
Fiscal Year Ending 31 October 2013
1stQuarter(1Nov.2012to31Jan.2013) 25February2016
2ndQuarter(1Feb.2013to30April2013) 25May2016
3rdQuarter(1May2013to31July2013) 25August2016
4thQuarter(1August2013to31Oct.2013) 25November2016
RMCNo.72-2016clarifiesRMCNo.71-2016concerningtransfersofpresidentialappointees.
RMCNo.74-2016streamlinestherequirementsandtheprocessinissuingTaxClearancesunderEONo.398.
RMCNo.75-2016clarifiescertainissuesrelativetothesuspensionofallBIRauditsasmandatedunderRMCNo.70-2016
10 | Tax bulletin
TAXABLE PERIOD PRESCRIPTIVE PERIOD
Withholding Taxes
January2013 10-15February2016
February2013 10-15March2016
March2013 10-15April2016
April2013 10-15May2016
May2013 10-15June2016
June2013 10-15July2016
July2013 10-15August2016
August2013 10-15September2016
September2013 10-15October2016
October2013 10-15November2016
November2013 10-15December2016
December2013 15January2017
• Inaddition,thefollowingcasesarenotcoveredbythesuspension:
1. AllcaseswithLettersofAuthority(LOAs)coveringtaxableyear2013andprioryears;
2. Processingofapplicationsfortaxrefundandtaxcreditcertificate(TCC)isnotcoveredbythesuspension.
• ThefollowingAssessmentNoticescanbeserveddespitethesuspension:
1. AssessmentNoticescoveringtaxableyear2013andprioryears,whichincludePreliminaryAssessmentNotices(PANs),FormalLetterofDemand/FinalAssessmentNotices(FANs)andFinalDecisiononDisputedAssessment(FDDA);and
2. AssessmentNoticesissuedandsignedbytheCommissionerofInternalRevenue(CIR)orhisauthorizedrepresentativeasof30June2016,coveringtaxableyear2014onwards,providedthattheauditfieldworkhasbeencompleted.
• Theprocessingoftaxpayers’complaintswillstillcontinuedespitethesuspension,butwillbelimitedtoapreliminaryevaluationwherethe“NoContactwithTaxpayer”policyisenforced.
• NoMissionOrdershallbeissuedduringtheperiodofsuspensionofauditorinvestigation.
• Duringthesuspensionperiod,theBIRmaystillsendreminderletterstotaxpayerswithopenstop-filercases,andfollow-uplettersforcomplianceinthesubmissionofrequiredschedules(e.g.,summarylistofsales,summarylistofpurchases)totheBIR.
• TheBIR,duringthesuspensionperiod,maystillissueandserveCollectionLetters,SeizureNotices,NoticesofLevyorTaxLien,andothersimilarcorrespondencesforenforcementofcollection.
• However,allactivitiesconnectedwiththeimplementationofMissionOrdersissuedpriorto1July2016,includingtheserviceofnoticesorcommunicationsrelatingtosaidMissionorders,aresuspended.
11Tax bulletin |
Revenue Memorandum Circular No. 80-2016 issued on 22 July 2016
• Thesuspensionofthefollowingrevenueissuancesisliftedandshallbeeffectiveimmediately:
ISSUANCE NO. TITLE/DESCRIPTION OF ISSUANCE
REVENUE MEMORANDUM ORDERS (RMO)
RMONo.22-2016 PrescribingthePoliciesandProceduresfortheIssuanceofElectronicCertificateAuthorizingRegistration(eCAR).
RMONo.28-2016 Prescribesthepolicies,guidelinesandproceduresinimplementingtheMemorandumofUnderstandingbetweentheHomeDevelopmentMutualFundandtheBIRinelectronicfilingoftaxreturnsthrougheBIRFormsandIssuanceofeCAR.
RMONo.29-2016 RevisedUniformGuidelinesandProceduresintheDesignation,AssignmentofRCOCodesandIssuanceofFidelityBondsforRCOsAuthorizedtoAcceptTaxReturnsandCollectTaxPayments.
RMONo.30-2016 PrescribingGuidelines,PoliciesandProceduresforreplacementofspoiled/badorderandfactorydefectedInternalRevenueStampsundertheInternalRevenueStampsIntegratedSystem(IRSIS).
RMONo.31-2016 AmendsthePertinentProvisionsofRMONo.13-2014,moreparticularlyonthePublicAuctionSaleofAbsolutelyForfeitedandSeizedProperties.
RMONo.32-2016 FurtherClarifyingandAmendingCertainPolicies,GuidelinesandProceduresintheIssuanceofImporter/BrokerClearanceCertificatesRelativetotheAccreditationasImporter/CustomsBrokersPrescribedundertheRMONo.10-2014,asamendedbyRMONos.33-2014and1-2015.
RMONo.33-2016 PrescribinguniformproceduresfortheimplementationofInternalRevenueStampsIntegratedSystem(IRSIS).
RMONo.34-2016 AmendingthePrescribedFormatfortheNoticeofDenialthatShallbePreparedbyConcernedRegionalOfficesRelativetoApplicationsforCompromiseSettlementand/orAbatement.
RMONo.35-2016 RevisedConsolidatedWarrantofDistraintand/orLevy(WDL)StatusReportwithMonthlyConsolidatedListofSeizedPropertiesasanAdditionalAnnexReport.
RMONo.36-2016 PrescribingPoliciesandProceduresintheDecentralizationofRecordingandReportingofInternalRevenueTaxestoAllRegionalFinanceandCollectionDivisions.
RMCNo.80-2016liftsthesuspensionoftheeffectivityofcertainrevenueissuancesprovidedunderRMCNo.69-2016dated1July2016.
12 | Tax bulletin
ISSUANCE NO. TITLE/DESCRIPTION OF ISSUANCE
REVENUE MEMORANDUM CIRCULARS (RMC)
RMCNo.59-2016 PublishingtheDailyMinimumWageRatesinARMMPursuanttoWageOrderNo.ARMM-16.
RMCNo.60-2016 Non-AcceptanceofChecks/DrawnCheckfromSUMITOMOMITSUIBANKINGCORPORATION-ManilaRepresentativeOffice(SMBC-ManilaRepresentativeOffice)byRCO.
RMCNo.63-2016 ConsolidatedPriceofSugaratMillsitefortheMonthofMay2016
RMCNo.66-2016 ClarificationsontheProvisionsofRMCNo.60-2016
RMCNo.67-2016 Non-AcceptanceofChecks/DrawnChecksfromCOMSAVINGSBANKwithtradenameGSISFAMILYBANK(ATHRIFTBANK),(AClosedBank)byRCO.
OPERATIONS MEMORANDA (OM)
OMNo.2016-06-01 PriceofSugaratMIllsitefortheweekending22May2016bytheLicensingandMonitoringDivision,RegulationDepartment,SugarRegulatoryAdministration.
OMNo.2016-06-03 PriceofSugaratMillsitefortheweekending29May2016bytheLicensingandMonitoringDivision,RegulationDepartment,SugarRegulatoryAdministration.
OMNo.2016-06-04 PriceofSugaratMillsitefortheweekending5June2016bytheLicensingandMonitoringDivision,RegulationDepartment,SugarRegulatoryAdministration.
OMNo.2016-06-05 PriceofSugaratMIllsitefortheweekending12June2016bytheLicensingandMonitoringDivision,RegulationDepartment,SugarRegulatoryAdministration.
OMNo.2016-06-07 PriceofSugaratMIllsitefortheweekending19June2016bytheLicensingandMonitoringDivision,RegulationDepartment,SugarRegulatoryAdministration.
BANK BULLETINS
BankBulletinNo.2016-19 COMSAVINGSBANKwithtradenameGSISFAMILYBANK(ATHRIFTBANK)
BankBulletinNo.2016-20 ElectronicSubmissionoftheDishonoredCheckDetailsinCommaSeparatedValueFormatandtheEncodingofPaymentsDetailsintheLimitedBankDataEntrySystem(LBDES)
REVENUE SPECIAL ORDERS (RSO)
RSONo.328-2016 CreationofTechnicalWorkingGroup(TWG)undertheArrearsManagementProject
RSONo.329-2016 TaskForceforthePreparationoftheTermsofReference(TOR)oftheForfeitedAssetsManagementProject
RSONo.366-2016 GlennB.Alde
RSONo.375-2016 KimCharlieN.Orpiada
13Tax bulletin |
BOC Issuance
Customs Memorandum Order No. 17-2016 dated 10 June 2016
• ThisCMOisissuedtofacilitateexportsbyimplementinganelectronicsystemforsubmittingandissuinganelectronicCertificateofOrigin(“eCO”),aswellastoprovideinputsinformulatingpoliciesandprocedurestotheASEANTradeinGoodsAgreement(“ATIGA”)exchangeoftheeCO,andothereCOexchangepursuanttothevariousFreeTradeAgreements(“FTAs”)asmayapply.
• ValueAddedServiceProviders(“VASPs”)accreditedtoprovideE2MCustomsservicesshallsubmittheirrespectiveeCOSystems(“eCOS”)foraccreditationtotheDeputyCommissioner,MISTG.Accreditationshallbegivenonthebasisofcapabilitytosupporttheelectronicprocess.TheuseoftheeCOSisprescribedinlieuofmanualandpaper-basedapplications.
• Detailedproceduresforthesubmission,approvalandissuanceoftheRequestsforOriginRuling(“RFOR”)areprovided,whichinclude:
1. Verificationofthesupportingdocuments2. Completenessandcorrectnessofinformationanddocuments3. FactoryvisitandexaminationofbooksofrecordsoftheCompanyas
recorded4. Determinationoforigincomplianceoftheproduct(s)5. PreparationofReportincludingproposedOriginRuling
• Onceapproved,theChiefECD/EDissuesthewrittenRFORrulingand,atthesametime,updatesthestatusoftheapplicationineCOSasapproved,andsendsanemailnotificationoftheapprovaltotheexporterorhisagentwithaninvitationtopickupahardcopyofthesame.
• ProceduresforsubmissionandapprovaloftheeCO
1. OncetheVASPeCOShasbeenapproved,anexportercanthenapplyforaneCOthroughthissystem.
2. PrintingoftheapprovedeCOmaybemadeonlyuponpaymentoftheDocumentaryStampTax(DST)throughthepre-paymentfacility.However,exportersdulyregisteredwithPEZAandBOIareexemptfromprepaymentofDST.
3. TheexportercanthenprinttheeCO,whichheshallsignandsubmittotheECD/EDforthesignatureoftheauthorizedcustomsofficer.
4. Customsofficerscanperformpost–verificationoftheeCOintheeCOS,asmaybenecessary.Afterverification,theeCOFormshallbesignedandstampedwiththeapprovedBOCseal.
• AllotherrulesandregulationsinconsistentwiththisCMOareherebyconsideredrepealed,supersededormodifiedaccordingly.
• ExistingCOformsmaybeuseduntilsuchtimethattheinventoryoftheBOCisexhausted.
• CMONo.17-2016shalltakeeffectonJune27,2016forpreferentialtreatmentgivenundertheATIGA.Thedateofimplementationforotherpreferentialtreatmentshallbeindicatedinaseparateorder.
CMONo.17–2016providestheguidelinesandproceduresonimplementingtheeCOS.
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• TheBOCshalladvisetherespectivecustomsauthoritiesoftheFTAswherethePhilippinesisaContractingPartyontheimplementationoftheeCOSandsubmitand/orupdatethespecimensignaturesoftheauthorizedcustomsofficersattheECD.
BSP Issuances
BSP Circular No. 914 dated 23 June 2016
• TheMonetaryBoard,initsResolutionNo.974dated2June2O16,approvedtherevisionstoprudentialpolicyonloans,othercreditaccommodations,andguaranteesgrantedtoDOSRI,subsidiariesandaffiliates,amendingtherelevantprovisionsoftheManualofRegulationsforBanks/ManualofRegulationsforNon-BankFinancialInstitutions(MORB/MORNBFI).
• ChapterEofPartThreeoftheMORBonLoans/OtherCreditAccommodationstoDOSRIisamendedbytheCircular.
• ChapterEofPartThreeoftheMORNBFIonLoans/CreditAccommodationstoDOSRIisalsoamendedbytheCircular,toreadasfollows:
• SectionsX311/4311Qto4311NoftheMORB/MORNBFIonsecuredloansandothercreditaccommodationsareamendedtoreadasfollows:
“Sec. X311/4311Q/4311N Secured Loans and Other Credit Accommodations.Aloanmaybeconsideredsecuredbycollateraltotheextenttheestimatedvalueofnetproceedsatdispositionofsuchcollateralcanbeusedwithoutlegalimpedimenttosettletheprincipalandaccruedinterestofsuchloan:xxx
Aloanmayalsobeconsideredassecuredtotheextentcoveredbyathirdpartyfinancialguaranteeorsuretyarrangementwherethecreditenhancementproviderisitselfconsideredtobeofhighcreditquality(creditratingofatleastAAorequivalent)orisrecognizedbytheBangkoSentralaseligibleguarantorunderexistingregulations.
xxx”
• SubsectionX192.12oftheMORBonreportsrequiredofforeignsubsidiaries/affiliates/bankingofficesornon-bankentitiesofdomesticbanksisamendedtoreadasfollows:
“xxx
f. ForpurposesofthisSubsection,affiliateshallrefertoanentitylinkeddirectlyorindirectlytoabankbymeansof:
(1) Ownership,controlasdefinedunderSubsec.XI46.L,orpowertovoteofatleasttwentypercent(12%)oftheoutstandingvotingstockoftheborrowingentity,orvice-versa;
(2) lnterlockingdirectorshiporofficership,wheretheconcerneddirectororofficerowns;controls,asdefinedunderSubsec.X146.L;orhasthepowertovoteofatleasttwentypercent(20%)oftheoutstandingvotingstockoftheborrowingentity;
CircularNo.914providesfortheAmendmentstoPrudentialPolicyonLoans,OtherCreditAccommodations,andGuaranteesGrantedtoDOSRl,SubsidiariesandAffiliates
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(3) Commonstockholdersowningatleasttenpercent(10%)oftheoutstandingvotingstockofthebankandatleasttwentypercent(20%)oftheoutstandingvotingstockoftheborrowingentity;
(4) Managementcontractoranyarrangementgrantingpowertothebanktodirectorcausethedirectionofmanagementandpoliciesoftheborrowingentity;or
(5) Permanentproxyorvotingtrustsinfavorofthebankconstitutingatleasttwentypercent(20%)oftheoutstandingvotingstockoftheborrowingentity,orviceversa.
ForpurposesofthisManual,theabovedefinitionofaffiliateshallbeadoptedexceptwheretheprovisionoftheregulationexpresslystatesotherwise.”
• Section4002QoftheMORNBFIondefinitionsoftermsisamendedwithrespecttothedefinitionofanaffiliate.
• SubsectionX146.1oftheMORBondefinitionoftermsisamendedwithrespecttothedefinitionofrelatedparties.
• SubsectionX146.5oftheMORBonsupervisoryenforcementactionsisamendedtoreadasfollows:
“Subsec. X146.5. Supervisory Enforcement Actions.TheBangkoSentralreservestherighttodeployitsrangeofsupervisorytoolstopromoteadherencetotherequirementssetforthintheguidelinesunderthisSectionandbringabouttimelycorrectiveactionsandcompliancewithBangkoSentraldirectives.TheBangkoSentralconsidersabusesincredittorelatedpartiesasseriousoffensesandshallbedealtwithseverely.Inthisregard,abuseshallbeinterpretedtoincludeextendingcredittorelatedpartieswithoutadoptingappropriateinternalpolicies.Forthispurpose,theBangkoSentralmay,amongothers,issuedirectivesorsanctionsontheBankandresponsiblepersons,whichmayincluderestrictionsorprohibitionsoflendingtorelatedpartiesorfromcertainauthorities/activities,restrictionsorprohibitionsondividenddeclarations;andwarning,reprimand,suspension,removalanddisqualificationofbankdirectors,officersand/oremployeesconcerned.”
• SectionX111/4111QoftheMORB/MORNBFIonminimumrequiredcapitalisherebyamendedtoreadasfollows:
“Sec. X111 (2008 - X1O6) Minimum Required Capital.Thefollowingprovisionsshallgovernthecapitalrequirementsforbanks.
Thetermcapitalshallbesynonymoustounimpairedcapitalandsurplus,combinedcapitalaccountsandnetworth,andshallrefertothetotaloftheunimpairedpaid-incapital,surplusandundividedprofits,less:
xxx
b. Totaloutstandingunsecuredcreditaccommodations,bothdirectandindirect,todirectors,officers,stockholders,andtheirrelatedinterests(DOSRI)grantedbythebankproper;
c. Totaloutstandingunsecuredloans,othercreditaccommodationsandguaranteesgrantedtosubsidiaries;
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d. Totaloutstandingloans,othercreditaccommodationsandguaranteesgrantedtorelatedpartiesthatarenotatarm’slengthtermsasdeterminedbytheappropriatesupervisingdepartmentoftheBangkoSentral;
e. Deferredincometax;
f. Appraisalincrementreserve(revaluationreserve)asaresultofappreciationoranincreaseinthebookvalueofbankassets;
g. Equityinvestmentofabankinanotherbankorenterprise,whetherforeignordomestic,iftheotherbankorenterprisehasareciprocalequityinvestmentintheinvestingbank,inwhichcase,theinvestmentofthebankorthereciprocalinvestmentoftheotherbankorenterprises,whicheverislower;and
h. InthecaseofRBs/CoopBanks,thegovernmentcounterpartequity,exceptthosearisingfromconversionofarrearagesundertheBangkoSentralrehabilitationprogram.
xxx”
“Sec. 4111Q (2008 - 4106Q) Minimum Required Capitalization.AQBshallhaveaminimumcombinedcapitalaccountsofP300.0million.
Combinedcapitalaccountsshallmeanthetotalcapitalstock,retainedearningsandprofitandlosssummary,netof(a)suchunbookedvaluationreservesandothercapitaladjustmentsasmayberequiredbytheBangkoSentral,(b)totaloutstandingunsecuredcreditaccommodations,bothdirectandindirect,todirectors,officers,allstockholdersandtheirrelatedinterests(DOSRI),(c)totaloutstandingunsecuredloans,othercreditaccommodationsandguaranteesgrantedtosubsidiaries,and(d)totaloutstandingloans,othercreditaccommodationsandguaranteesgrantedtorelatedpartiesthatarenotatarm’slengthtermsasdeterminedbytheappropriatesupervisingdepartmentoftheBangkoSentral.xxx
xxx”
• Paragraph4ofPartllofAppendix63b/Q-46oftheMORB/MORNBFIonQualifyingCapitalunderBasellllRisk-BasedCapital(sectionX115/4115QoftheMORB/MORNBFI)isamendedbytheCircular.
• PartsllandlllofAppendix63coftheMORBonQualifyingCapitalandCreditRisk-WeightedAssets,respectively,undertheRevisedRisk-BasedCapitalAdequacyFrameworkforStand-AloneThriftBanks,RuralBanks,andCooperativeBanks(SectionX118oftheMORB)isamendedbytheCircular.
• Subsections4116Q.2and4115Q.3oftheMORNBFIonqualifyingcapitalandrisk-weightedassetsarealsoamendedbytheCircular.
• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 914 was published in Malaya on 29 June 2016.]
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BSP Circular No. 915 dated 5 July 2016
• TheMonetaryBoard,initsResolutionNo.1107dated16June2O16,approvedthefollowingamendmentstotheMORBandMORNBFIontheguidelinesforprudentialreportingbyBSPsupervisedfinancialinstitutions.
• SubsectionX191.3oftheMORBandSubsection4191Q.3oftheMORNBFIareherebyamended,wheretheBSPnowadoptsthePhilippineFinancialReportingStandards(PFRS)andthePhilippineAccountingStandards(PAS)issuedbytheFinancialReportingStandardsCouncil(FRSC)(previouslyAccountingStandardsCouncil[ASC]),andtheprovisiononthepreparationofseparatefinancialstatementsisamendedasfollows:
“Guidelines on the preparation of solo/separate financial statements.
Forpurposesofpreparingsolo/separatefinancialstatements,financialallied,non-financialalliedandnon-alliedsubsidiaries/associates/jointventures,includinginsurancesubsidiaries/associates,shallbeaccountedforusingtheequitymethod,inaccordancewithPAS27,asamended.
TherulesonthepreparationofsolofinancialstatementsarealsoprovidedunderAppendix77ontheFinancialReportingpackage.”
• Subsection4161S.2andSection4161NoftheMORNBFIarealsoamendedtochangeASCtoFRCSandtheprovisiononthepreparationofseparatefinancialstatementsisamendedfollows:
“Forpurposesofpreparingsolo/separatefinancialstatements,financialallied,non-financialalliedandnon-alliedsubsidiaries/associates/jointventures,includinginsurancesubsidiaries/associates,shallbeaccountedforusingtheequitymethod,inaccordancewithPAS27,asamended.
Non-stocksavingsandloanassociations/NBFlsshalladoptthefullprovisionsofPFRS9FinancialInstrumentsonlyuponitsmandatoryeffectivitydateof01January2018.Priortosaidmandatoryeffectivitydate,financialinstrumentsofnon-stocksavingsandloanassociations/NBFlsshallcontinuetobeaccountedforinaccordancewiththeprovisionsofPAS39.”
• Subsection4161P.2oftheMORNBFIisalsoamendedtochangeASCtoFRCSandtheprovisiononthepreparationofseparatefinancialstatementsisamendedfollows
“Forpurposesofpreparingsolo/separatefinancialstatements,financialallied,non-financialalliedandnon-alliedsubsidiaries/associates/jointventures,includinginsurancesubsidiaries/associates,shallbeaccountedforusingtheequitymethod,inaccordancewithPAS27,asamended.
PawnshopsshalladoptthefullprovisionsofPFRS9Financiallnstrumentsonlyuponitsmandatoryeffectivitydateof01January2018.Priortosaidmandatoryeffectivitydate,financialinstrumentsofpawnshopsshallcontinuetobeaccountedforinaccordancewiththeprovisionsofPAS39.”
• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 915 was published in TheStandard on 9 July 2016.]
CircularNo.915providesfortheAmendmentontheAccountingGuidelinesforPrudentialReportingtotheBSP.
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BSP Circular No. 916 dated 8 July 2016
• PursuanttoMonetaryBoardResolutionNo.1067dated15June2016,thefollowingprovisionsofSubsectionX269.6oftheMORB,coveringtheguidelinesoftheBangkoSentralngPilipinasRediscountingFacility,areherebyamendedasfollows:
Subsection X269.6 Rediscount/Lending Rates and Liquidated Damages.Therediscountratesforpeso,dollarandyenloansshallbeasfollows:
a. PesoRediscounts
RW I RW II
Interest Rate BSPovernight(O/Nlendingrateplustermpremium:
BSPovernightreverserepurchase(O/NRRP)rateplustermpremium:
90days BSPO/Nlendingrate+0.0625
BSPO/NRRPrate
180days BSPO/Nlendingrate+0.1250
BSPO/NRRPrate+0.0625
360days n/a BSPO/NRRPrate+o.1250
xxx
• ThisCircularshalltakeeffecton25July2016.
[Editor’s Note: Circular No. 916 was published in TheManilaTimes on 13 and 14 July 2016.]
BSP Circular No. 917 dated 8 July 2016
• TheMonetaryBoard,initsResolutionNo.1043dated9June201.6,approvedthefollowingadditions/revisionstotheMORBandMORNBFIasof31December2015.
• SubsectionX108.4[SPRBPlusandStrengtheningProgramforCooperativeBank(SPCB)Plus]isamendedtoreflecttherevivaloftheexpiredSPCBPlus.
• NewappendicesshallbeaddedtotheMORBandMORNBFItoincorporatethefollowingguidelines:
1. Appendix113a(ConsolidatedProgramforRuralBanks)oftheMORBtoincludethelmplementingGuidelinesfortheConsolidatedProgramforRuralBanksprovidedunderMemorandumNo.M-2015-043dated11December2015;and
2. AppendixQ-67(RegulatoryReliefforNon-BankFinancialInstitutionswithQuasi-BankingFunctions[NBQBs]AffectedbyCalamities1)oftheMORNBFItosummarizetheRegulatoryReliefforQuasi-Banksaffectedbytyphoons2 (AnnexA).
CircularNo.917providestheAmendmentstotheMORBandMORNBFIasof31December2015
CircularNo.916providestheRevisionoftheRediscountRatesonRWI.
____________________________________________________________
1 ToalignwiththesummaryofregulatoryreliefsofbankswhichwasincorporatedintheManuals.
2 TyphoonLandoM-2015-039dated4November2015;TyphoonsLuisandMario-M-2014-039dated1October2014;TyphoonRuby-M-2015-005dated20January2015;TyphoonSeniang-M-2015-009dated28January2015.
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____________________________________________________________
3 GuidelinesonRelatedPartyTransactions4 GuidelinesontheSubmissionofBankQuarterlyReportonResidentialRealEstate
Loans(RRELs)fortheGenerationoftheResidentialRealEstatePriceIndex(RREPI)
• Appendix89(RegulatoryReliefforBanksaffectedbyCalamities)oftheMORBisamendedtoaddthegrantofregulatoryrelieftocoveredregionsaffectedbytyphoon“Lando”pursuanttoMemorandumNo.M-2015-039dated4November2015(AnnexB).
• ThefollowingSections/AppendicesoftheMORB/MORNBFIareamendedtochange“CentralizedApplicationsandLicensingGroup(CALG)”to“appropriatedepartmentoftheSES”:
1. ItemcofSec.2404/3404(GrantofAuthoritytoEngageinLimitedTrustBusinesstoThrift/RuralBanks)
2. Item(3)ofSec.X611/Sec4611Q(Derivatives)3. Section3.ltem2ofApp.38(RulesandRegulationsforCooperativeBanks)4. LastparagraphofApp.93(ProcessingGuidelinesforMicrofinanceOther
BankingOfficesorMicrobankingOffices)
• Appendix6(ReportsRequiredofBanks)oftheMORBisamendedtochangecertaintitlesofreportandaddrelevante-mailaddressinlinewiththeprovisionsofCircularNo.895dated14December20153andMemorandumNo.M-20L5-042dated2December20154.TheaffectedreportsarelistedinAnnexC.
• SectionsX661/4661QandX146oftheMORB/MORNBFIareherebyamendedtoreflectasfootnotestheTransitoryProvisionsofCircularNos.891dated9November2015and895dated14December2015,respectively.
a. “Section X661/4661Q Sales and Marketing Guidelines for Financial Products1.
GeneralPrinciples.xxx
xxx” _______________
1 BSFIsshallbegiventhreemonthsfrom28November2015tomakeappropriatechangesintheirsalesandmarketingpolicies,processesandmaterialsinordertocomplywiththerequirementsofSec.X661/4661QaswellasSubsecs.X661.1/4661Q.1toX661.8/4661Q.8.
b. “Sec. X1461 (2014 - Profit Sharing Program) Policy Statement.
xxx”_______________1 BanksincludingtheirFlsubsidiariesandaffiliateshallbegivensix(6)months
from06January2016tocomplywiththeRelatedpartytransaction(RPT)requirementsprescribedinSec.X146aswellasSubsecs.X146.1toX146.5.
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____________________________________________________________
5 ItemH1.(b)AppendixQ-30providesthatexternalauditorsoftrustentitiesmustreporttoBSP,amongothers,anypotentiallossestheaggregateofwhichamountstoatleastonepercent(1%)ofthecapitaltoenabletheBSPtotaketimelyandappropriateremedialaction.
6 InsuranceCommission(IC)issuedCircularLetterNo.2015-54dated16October2015requiringtheadoptionandImplementationoftheEnhancedMicroinsuranceRegulatoryFramework
xxx
• Subsec.X156.1oftheMORBandAppendixT-2aoftheMORNBFIareamendedtocorrectthecross-referencestoreflectappropriateSubsection/AppendixoftheMORB:
a. “Subsection X156.1 Banking hours beyond the minimum; banking services during holidays.Banksmay,attheirdiscretion,remainopenbeyondtheminimumsixhoursand,foraslongastheyfinditnecessary,evenbefore8:00AMorafter8:00PM,subjecttothesubmissionofpriorwrittennoticerequiredunderSubsec.X156.2onreportof,andchangesin,bankingdaysandhours,andcompliancewiththeprovisionsofSubsecs.X156.3onpostingofscheduleofbankingdaysandhours,andX181.5onminimumsecuritymeasures.
xxx”
b. App. T-2a of the MORNBFI
“Aggravating and Mitigating Factors to be Consideredin the lmposition of Penalty
1. AggravatingFactors:
xxx
(1) Substantialactualloss–xxx
(2) Minimalactuallossorsubstantialriskofloss-xxx.Whilealosswasincurred,thetrustcorporationcouldabsorbthelossinthenormalcourseofbusiness.Substantialriskoflossincludesanypotentiallossestheaggregateofwhichamountstoatleastonepercent(1%)ofthecapitalofthetrustcorporation5.
• Sections2172and3172oftheMORBareupdatedtoreflectthelnsuranceCommissionCircular-LetterNo.2OL5-54requiringtheadoptionandimplementationoftheEnhancedMicroinsuranceRegulatoryFramework.
a. “Sec.2172Marketing,SaleandServicingofMicroinsuranceProductsbyThriftBanks6.xxx
xxx”
b. “Sec.3172Marketing,SaleandServicingofMicroinsuranceProductsbyRuralandCooperativeBanks1.xxx
xxx”
[Editor’s Note: Circular No. 917 was published in BusinessMirror on 14 July 2016.]
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SEC Opinions and Issuances
SEC – OGC Opinion No. 16-16 dated 17 June 2016
Facts:
CompanyAhasanauthorizedcapitalstockofP2,750,000.00dividedinto27,500sharesofstockwithparvalueofP100.00pershare,ofwhichP7,810,764shares(or28.4028%)aresubscribed.
CompanyAboughtbackthesharesofstockheldbythreeofitsshareholders.Ineffect,thesesharesofstockwereconvertedintotreasuryshares.Further,thisbuy-backeffectivelyreducedthesubscribedcapitalstockofCompanyAto15.8127%,whichislessthanthe25%minimumcapitalstockthatisrequiredtobesubscribedpursuanttoSection13oftheCorporationCode.
Issues:
1. Underthecircumstances,mayCompanyAtreatthetreasurysharesaspartoftheissuedshares?
2. Becauseofitsbuy-backprogram,didCompanyAviolateSection13oftheCorporationCodeonminimumstocksubscription?
Held:
1. Yes.CompanyAmaytreatthetreasurysharesaspartoftheissuedsharesaslongastheyarenotcancelledorretired.TreasurysharesdonotreverttotheunissuedsharesofacorporationbutareregardedaspropertyacquiredbythecorporationwhichmaybereissuedorresoldbythecorporationatapricetobefixedbytheBoardofDirectors.Thus,sincetreasurysharesdonotrevertbacktounissuedshares,theydonotlosetheirstatusas“issuedshares.”Thesearestillpartoftheissuedcapitalstockalthoughnolongeroutstanding.Thisissobecausetheamountpaidfortheacquisitionoftreasurysharesdoesnotrepresentreturnofcapitaltothestockholdersbutaninvestmentoutofretainedearningsonasalablepropertyknownastreasuryshares.
2. No.Section13oftheCorporationCodemandatesthatatthetimeofincorporation,atleast25%oftheamountoftheauthorizedcapitalstockshallbesubscribedandatleast25%ofthetotalsubscriptionmustbepaid(exceptwherethecapitalstockconsistsofnoparvalueshares,inwhichcase,thesubscriptionmustbefullypaid).This“25%and25%”requirementismandatoryonlyduringthe:(1)preincorporationperiodand(2)whenthecorporationundertakestoincreaseitsauthorizedcapitalstock.
Theacquisitionoftreasurysharesdoesnotreducethenumberofissuedsharesortheamountofstatedcapital,andtheir“sale”doesnotincreasethenumberofissuedsharesortheamountofthestatedcapital.Thus,theredeemedshares(treasuryshares)arestillpartofthetotalsharesofstocksissuedtosubscribersorstockholderswhetherornotfullypaidorpartiallypaidbutnolongeroutstanding.
Treasurysharesarestillconsideredas“issuedshares”sincetheydonotreverttotheunissuedsharesofacorporationbutareregardedaspropertyacquiredbythecorporation.
Therequirementsthatatleast25%oftheamountoftheauthorizedcapitalstockshallbesubscribedandatleast25%ofthetotalsubscriptionshallbepaid,aremandatoryonlyduringthepre-incorporationperiodofacorporation.
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SEC – OGC Opinion No. 16-17 dated 11 July 2016
Facts:
HCo.isengagedinthebusinessofleasingoutorsubleasingadvertisingspaces,suchaswaitingsheds,billboardstructures,electronicLEDdisplaysandotherfixedormovablestructureswhereadvertisementscanbedisplayed.
Inthisregard,HCo.soughtforanopiniononwhetheritsbusinessactivitiesmaybeclassifiedunderadvertisingormassmediawhicharenationalizedactivitiessubjecttoforeignequityrequirementunderthe1987Constitution,theForeignInvestmentsAct,andotherrelevantlaws.
Issue:
IsHCo.’sbusinessofleasingoutorsubleasingofadvertisingspacessubjecttotheforeignequitylimitationunderthe1987Constitution,theForeignInvestmentsAct,andotherrelevantlaws?
Held:
Yes.TheSECruledthatHCo.isamassmediaentitysubjecttotherequirementofparagraph1,Section11,ArticleXVIofthe1987Constitution.
MassmediaintheConstitutionreferstoanymediumofcommunicationdesignedtoreachthemassesandthattendstosetthestandards,idealsandaimsofthemasses,thedistinctivefeatureofwhichisthedisseminationofinformationandideastothepublic,oraportionthereof.Massmediaisdividedintotwogroups:PrintMediaandBroadcastMedia.“PrintMedia”includesallnewspapers,periodicals,magazines,journals,andpublicationsandalladvertisingtherein,andbillboards,neonsignsandthelike.“BroadcastMedia”includesradioandtelevisionbroadcastinginallaspects,includingallformsofaudio,visual,oraudio-visualcommunicationssuchasvideotapes,citizensbands,andotherelectronicdevices,andcinematography,totheextentthattheseformsareutilizedasmassmediathroughradioortelevisionbroadcastingtransmission.
Ontheotherhand,advertisingisthe“businessofconceptualizing,presentingormakingavailabletothepublic,throughanyformofmassmedia,fact,dataorinformationabouttheattributes,features,qualityoravailabilityofconsumerproducts,servicesorcredit.”Assuch,advertisingagenciesdonotactuallydisseminatethematerialstheyprepareastheyhavetoutilizeoravailofthefacilitiesofmassmedia,andthus,donotfallwithintheconceptofmassmedia.However,whereadvertisingagenciesactuallydisseminateinformation,oroperates,controlsorotherwiseengagesinthebusinessofmassmedia,aspecificexampleofwhichisanoutdooradvertisingfirmwhichsellsbillboardspacetoadvertisers,thensuchadvertisingagencieswouldfallwithinthepurviewoftheconstitutionallimitation.
Byleasingoutorsubleasingadvertisingspaces,suchaswaitingsheds,billboardstructures,electronicLEDdisplaysandotherfixedormovablestructureswhereadvertisementscanbedisplayed,HCo.actuallyprovidesamediumtodisseminateorconveyadvertisingmessagestothepublic.Thus,beingamassmediaentity,itisengagedinanationalizedactivitysubjecttotheforeignequitylimitationsimposedbythe1987Constitutionandotherpertinentlaws.
Thebusinessofleasingoutorsubleasingofadvertisingspacesfallswithinthepurviewofmassmediawhichisanationalizedactivityandissubjecttotheforeignequitylimitationsimposedbythe1987Constitutionandotherrelevantlaws.
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SEC Memorandum Circular No. 8 dated 28 June 2016
Thisreferstothe5%minimumliquidityrequirementimposedonanopen-endcompanyfund.
TheSECapprovedtheamendmentsofInvestmentsCompanyAct(ICA)Rule35-1(d)(4),asamended,whichnowprovides:
• AMutualFundIndexTrackermaybeexemptedfromcomplyingwiththe5%liquidityrequirementprovidedthatitsubmitsanotarizedcontingencyplansignedbythePresidentoftheFundanditsFundManager.
• Thesaidcontingencyplanmustincludethisstatement:“Inmakinganyredemptiontomeetaclientobligation,thefundmanagerwillexercisetherequisiteprudenceanddiligencenecessaryunderthecircumstancesandtakingintoaccountallrelevantfactorsthatwillensuremarketstability.”
[Published in TheManilaTimes on 9 July 2016, page B3 and the PhilippineStar on 9 July 2016, page B-8]
PEZA Update
DTI Memorandum dated 20 July 2016
EffectiveupontheretirementofDirectorGeneralLiliaB.deLimaon30June2016,DeputyDirectorGeneralJustoPorfirioLL.YusingcoisdesignatedasOfficer-in-ChargeofPEZA.Heshallbeauthorizedtoassumethepowers,duties,andresponsibilitiesoftheDirectorGeneraluntilaDirectorGeneralhasbeenappointedbythePresident.
Court Decisions
Aces Philippines Cellular Satellite Corporation vs. Commissioner of Internal RevenueCTA(En Banc)CaseNo.1242promulgated8June2016
Facts:
RespondentCIRassessedPetitionerAcesPhilippinesCellularSatelliteCorporation(Aces)for,amongothers,deficiencyfinalwithholdingtax(FWT)fortaxableyear2006.TheCIRallegedthatAcesisliablefor35%FWTonthesatelliteairtimefeespaidtoAcesInternationalLimited(AIL),anon-residentforeigncorporation.
AcesprotestedtheassessmentandarguedthatitisnotliablefordeficiencyFWTbecausethepaymentstoAILarisefromsatelliteairtimeservicesrenderedoutsidethePhilippines.AcesfurtherarguedthatevenassumingthatservicesarerenderedwithinthePhilippines,itshouldonlybesubjectto7.5%FWTfortheuseofAIL’sequipment.TheCIRdeniedtheprotest.AcesfiledaPetitionforReviewwiththeCTA.
TheCTA2ndDivisionruledthatsatelliteairtimeservicefeespaidbyAcestoAILareconsideredincomefromsourceswithinthePhilippinesthataresubjectto35%(now30%).UpondenialofitsMotionforReconsideration,AceselevatedthecasetotheCTAEn Banc.AcesinsistedthatpaymentsforsatelliteairtransmissionarederivedfromsourcesoutsideofthePhilippines,hencenotsubjecttoFWT.
SECMCNo.8providesfortheexemptionfromthe5%liquidityrequirementofmutualfundindextrackers.
DTIMemorandumdated20July2016designatesMr.JustoPorfirioLL.YusingcoastheOICofPEZA.
Satelliteairtimeservicefeespaidtoanon-residentforeigncorporationareconsideredincomefromsourceswithinthePhilippinesthataresubjecttofinalwithholdingtax.
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Issue:
ArethesatelliteairtimeservicefeespaidbyAcestoAILconsideredincomefromsourceswithinthePhilippinesthataresubjectto35%(now30%)FWT?
Ruling:
Yes.Thesourceofincomerelatestotheproperty,activityorservicethatproducedtheincome.UnderPhilippinetaxlaw,itissufficientthattheincomederivedfromanactivityiswithinthePhilippines.Theplaceofactivity,notplaceofbusiness,iscontrolling.
Section28(B)(1)oftheTaxCodeprovidesthatincomeofanon-residentforeigncorporationfrom all sources within the Philippinesissubjectto35%(now30%)incometax.
TheservicesforsatelliteairtimefeesdonotonlycovertheuseoftheGarudasatellite(locatedinouterspace)andtheNetworkControlCenter(locatedinIndonesia),butalsorequirethatsatellitecommunicationtimebeavailableanddeliveredinthePhilippines.ThereiscontinuousandveryrealconnectionstartingfromthePhilippines(i.e.agreementtosellsatellitecommunicationstimefortheACESSysteminthePhilippines),GarudaSatellite,NetworkControlCenter,andagainthePhilippines,throughAces’gatewayfacilities.AIL’scontractwithAcesextendeditsactivitieswithinthePhilippineboundaries,whicharisesfromtheactivityandservicesthatproducetheincomewithinthePhilippines.
Coral Bay Nickel Corporation vs. Commissioner of Internal Revenue CTA(En Banc)CaseNo.1269promulgated29June2016
Facts:
PetitionerCoralBayNickelCorporation(CBNC)filedaclaimforrefundofunutilizedinputVATattributabletoVATzero-ratedsalesfor2007.CBNCsimultaneouslyfiledaPetitionforReviewwiththeCTAcoveringtherefundclaim.TheBIRarguedthattherefundclaimmustbedeniedfor,amongothers,failureofCBNCtocomplywiththeVATrefundrequirementsunderRevenueMemorandumOrderNo.53-98.
Aftertrial,theCTAThirdDivisionpartiallygrantedtheclaim.ItdisallowedinputVATcoveredbyofficialreceiptsandinvoicesthatwerealteredwithoutpropercounter-signatures.
UpondenialofitsMotionforReconsideration,CBNCappealedtotheCTAEn Banc.ItarguedthattheinputVATdisallowancesarenotproperastheTaxCodeandregulationsdonotrequirecounter-signaturesforanyalterationoradditiontotheVATinvoiceorofficialreceipt.
Issue:
Isacounter-signaturerequiredforanyalterationtotheVATinvoiceorofficialreceiptinordertocomplywiththeVATinvoicingrequirements?
AnyalterationtotheVATinvoiceorofficialreceiptmustbecounter-signedbyanauthorizedsignatoryorthecountersignaturemustbeverifiedtocomplywiththeinvoicingrequirementsforVATrefundpurposes.
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Ruling:
Yes.ForfailuretohavethealterationsinthesupportingVATinvoicesorofficialreceiptscountersignedortohavethecounter-signatureverified,CBNCdidnotcomplywiththeinvoicingrequirementsundertheTaxCodeandrelatedBIRissuances.
CBNCwasawareoftheinsertions/alterationsontheVATofficialreceiptsissuedbyitssupplier.WhileCBNChadtherighttorequestitssuppliertoissueacompliantreceipt/invoice,ithadthecorrespondingobligationtocheckwhethertheinsertions/alterationswereproperlyvalidatedorcountersignedbytheauthorizedsignatory.
Byfailingtohavetheinsertions/alterationsontheofficialreceiptscountersignedbytheauthorizedsignatory,CBNCdidnotactwithordinaryprudenceinconnectionwithitsclaimforrefund.
Well-settledistherulethattaxrefunds,whenbasedonstatutesgrantingtaxexemptionortaxrefund,partakethenatureoftaxexemptions.Theruleofstrictinterpretationagainstthetaxpayer-claimantapplies.CBNChastheburdenofprooftoestablishthefactualbasisofitsclaimfortaxrefund.
Fluor Daniel, Inc. - Philippines vs. Commissioner of Internal Revenue CTA(ThirdDivision)CaseNo.8444,promulgated11July2016
Facts:
RespondentCIRassessedPetitionerFluorDaniel,Inc.–Philippines(FDIP)for,amongothers,allegeddeficiencyfinalwithholdingtaxonsoftwaremaintenanceservicefeespaidtoFluorIntercontinental,Inc.(FII).TheCIRclaimsthatthepaymentsconstituteroyaltieswithinthedefinitionofRevenueMemorandumCircular(RMC)No.77-2003,asamendedbyRMC44-2005.
FDIPprotestedtheassessment.UponreceiptoftheFinalDecisiononDisputedAssessmentdenyingitsprotest,FDIPfiledaPetitionforReviewwiththeCTA.
FDIParguedthatitisnotliablefordeficiencyFWTasitspaymentstoFIIconstitutebusinessincome.Undertheiragreement,FDIPwasgrantedfreeauthoritytoaccessanduseasuiteofsoftwarehelpfulandnecessarytoitsoperationsandactivities.FDIP,however,isrequiredtopayitsshareinthesoftwaremaintenance(atcost,withnomarkup)computedbasedonprojecthoursfortroubleshooting,periodicsystemcheckingandrelatedservicestoensureproperoperationofthesoftware.
FDIPfurtherarguedthatthecontractisinthenatureofcompensationforservicesrenderedabroad,hencebeyondthejurisdictionofthePhilippinetaxingauthority.AssumingthatthefeesarePhilippinesourced,FDIPinsistedthatthepaymentsarenottaxablepursuanttothePhilippines-USTaxTreatyasFIIhasnopermanentestablishmentinthePhilippines.
MaintenanceservicefeespayabletoaUSresidentunderasoftwarelicenseagreementarenotconsideredroyaltiesbutbusinessprofits,whicharesubjecttoFWTonlywhenthepayeeisdeemedtohaveapermanentestablishmentinthePhilippines.
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Issue:
ArethesoftwaremaintenancefeespaidbyFDIPtoFIIconsideredroyaltiessubjecttoFWT?
Ruling:
No.ThenatureofthepaymentsbyFDIPtoFIIisfor“businesssupportservices.”AplainreadingoftheLicensingContractshowsthattheuseofthesoftwareisfreeandthatFDIPwillonlypayFIIafeetoshoulderitsshareinthemaintenanceofthesoftware.ThecontractalsoshowsthatFIIdoesnottransferallitssubstantialrightsinthesoftware.
Thecontractdealswithboth“know-how”fortheuseofthesuiteofsoftware,forwhichFIIdidnotreceiveincomepayment,andservicesformaintenanceofthesoftware.
Astotheservicecontract,thebusinessprofitsofFIIshallbetaxableonlyintheUSunlessithasaPEinthePhilippines.SinceFIIhasnoPEinthePhilippinespursuanttoArticle5ofthePhilippines-USTaxTreaty,themaintenanceservicefeeisexemptfromFWT.
TheCTAfurtherheldthatsincetheserviceswererenderedintheUSoroutsidethePhilippines,themaintenanceservicefeespaidbyFDIPtoFIIarebeyondthetaxingjurisdictionoftheBIRandexemptfromFWT.