tax bulletin - september 2015 - ey

1Tax bulletin |

Tax bulletinSeptember 2015

2 | Tax bulletin

HighlightsBIR Rulings

• A regional or area headquarters (RHQ) is not subject to income tax and is exempt from value-added tax (VAT). (Page 4)

• The transfer of real property by way of disturbance compensation is exempt from capital gains tax (CGT) and documentary stamp tax (DST) under the Comprehensive Agrarian Reform Law (CARL) of 1998. (Page 4)

• LocalpurchasesofmotorvehiclesforofficialuseoftheWorldOrganizationoftheScout Movement are subject to ad valorem tax and VAT. (Page 5)

• AninternationalaircarrierorganizedinJapanandlicensedtodobusinessinthePhilippines as a provider of international air services is subject to the preferential 1.5%GrossPhilippineBillings(GBP)taxrateundertheRP-JapanTaxTreaty,aswellas to the 3% percentage tax on the transport of cargo. (Page 5)

• The donation of a motor vehicle to a religious corporation is exempt from donor’s tax,providednotmorethan30%ofthegiftshallbeusedbythedoneeforadministration purposes.

The non-exempt donee shall be considered as the purchaser of the motor vehicle and shall be liable for any unpaid excise tax. (Page 5)

BIR Issuances

• RevenueRegulations(RR)No.9-2015amendsSection9ofRRNo.7-2014ontheaffixtureofinternalrevenuestampsandotherrequirementsoncigarettesintendedfor export. (Page 6)

• RRNo.10-2015prescribestheuseofnon-thermalpaperforallCashRegisterMachines(CRMs)/Point-of-Sales(POS)Machinesandotherinvoice/receipt-generating machines/software. (Page 7)

• RRNo.11-2015amendsSections2and7(6)ofRRNo.7-2010,asamendedbyRRNo.08-2010,onSeniorCitizens. (Page 9)

• RRNo.12-2015amendsRRNo.10-2015andextendstoOctober31,2015thedeadlineforthereconfigurationoftheCRMs/POS/otherinvoice/receipt-generatingmachines/softwaretoreflecttheinformationrequiredbyRRNo.10-2015. (Page 10)

• RevenueMemorandumCircular(RMC)No.56-2015clarifiesthesubmissionofaMonthly Electronic Sales (eSales) Report via the eSales Reporting System prescribed underRRNo.5-2005andRevenueMemorandumOrder(RMO)No.12-2012. (Page 10)

• RMCNo.58-2015circularizestheavailabilityofeBIRFormsPackageVersion5.1. (Page 11)

• RevenueMemorandumOrder(RMO)No.19-2015prescribesthepolicies,guidelinesand procedures to be observed in the audit/investigation of tax returns. (Page 12)

• RMONo.20-2015prescribesthepoliciesandguidelinesintheissuanceoftheTaxIdentificationNumber(TIN)ofemployeesusingtheeRegistrationSystemandtheprocedures for the registration of employees. (Page 16)

3Tax bulletin |

BOC Issuances

• CustomsMemorandumOrder(CMO)No.28-2015prescribestherevisedrulesandregulationsontheimportationofbalikbayanboxesfromOverseasFilipinoWorkers(OFWs). (Page 17)

• CMONo.28-2015prescribestherulesonthemandatoryfilingofconsumptionentries for sea shipments at the port of discharge in cases where the port of dischargeisnottheportoffinaldestination. (Page 18)

• CMONo.29-2015prescribestherevisedproceduresanddocumentationintheprocessing of formal consumption entries. (Page 18)

• CMONo.30-2015prescribestherulesandregulationsontheestablishment,supervisionandcontrolofwharves,containeryards,containerfreightstations,warehouses,examinationareasandotherfacilitieswithinthecustomszone,otherwiseknownastheAuthorizedCustomsFacility(ACF). (Page 19)

• CMONo.31-2015prescribestherevisedrulesandproceduresontheprocessingof an importer or consignee’s request for amendment of the Bill of Lading (BL) andAirwayBill(AWB). (Page 21)

• CMONo.32-2015prescribestherevisedrulesandregulationsontheestablishment,supervisionandcontrolofoff-dockcontaineryardsand/orcontainerfreightstationsandotheroff-dockcustomsfacilitiesoutsideofthecustomszones. (Page 22)

BSP Issuance

• CircularNo.886prescribestheguidelinesonsalary-basedgeneral-purposeconsumption loans. (Page 24)

SEC Opinions

• SaleofvouchersorgiftcertificatestoindividualsdoesnotfallwithinthedefinitionofretailtradeunderRANo.8762,otherwiseknownasRetailTradeLiberalizationActof2000. (Page 25)

• The10%allowablehonorariumtobegiventotheBoardofTrusteesisbasedonthe net income before tax of the previous year. There is no need to deduct the 10%honorariumfromthecomputationofpreviousyear’snetincomebeforetax. (Page 25)

Court Decisions

• Tobeexemptfromtax,theincomeofanon-stock,non-profiteducationalinstitutionmustbeusedactually,directly,andexclusivelyforeducationpurposesas prescribed by the Constitution and the Tax Code. (Page 26)

• ServicesrenderedtoPAGCORandPAGCOR-authorizedbingooperatorsareexemptfromVAT,pursuanttoSection108(B)(3)oftheTaxCode. (Page 27)

• TheCTAhasjurisdictiontoreviewrulingsoftheCommissionerofInternalRevenue(CIR)andtheSecretaryofFinance,whicharedeemeddecisionson“othermatters”arisingundertheTaxCode,pursuanttoSection7(a)(1)ofRANo.1125.

Hotel services rendered in the Philippines to an international carrier are subject to 12% VAT. (Page 28)

4 | Tax bulletin

BIR Rulings

BIR Ruling No. 270-15 dated August 14, 2015

Facts:

A Co. is a regional or area headquarters (RHQ) established in the Philippines byBCo.,aNewZealandcompany.ACo.’sactivitiesarelimitedtoactingasasupervisory,communicationsandcoordinatingcenterforitsaffiliates,subsidiaries or branches in the region. Issue:

IsACo.exemptfromincometaxandfromVAT?

Ruling:

1. Yes,ACo.isexemptfromincometax.AnRHQisdefinedinSection22(DD)of the Tax Code as a branch established in the Philippines by a multinational company,whichbranchdoesnotearnorderiveincomefromthePhilippinesandwhichactsasasupervisory,communicationsandcoordinatingcenterforaffiliates,subsidiariesorbranchesintheAsia-PacificRegionandotherforeignmarkets.Section28(A)(6)(a)oftheTaxCodeprovidesthatRHQsasdefinedinSection22(D)shallnotbesubjecttoincometax.

However,anRHQisconstitutedasawithholdingagentofthegovernmentif it acts as an employer and its employees receive compensation income subjecttowithholdingtax,orifitmakesincomepaymentstoindividualsorcorporationssubjecttotheexpandedwithholdingtax(EWT).

2. Yes,ACo.isexemptfromVAT.UnderSection109oftheTaxCode,servicesrenderedbyRHQsshallbeexemptfromVAT.However,salesofgoodsorservicesbyVAT-registeredsupplierstoRHQsaresubjecttoVATat0%rate.

BIR Ruling No. 275-15 dated August 24, 2015

Facts:

Mr. X is the registered owner of a parcel of land in Bulacan. He executed a deed ofconveyanceoveraportionofthelandtotheheirsofMr.Y,hisagriculturaltenant,asdisturbancecompensationresultingfromtheextinguishmentofatenancyrelationshipinaccordancewithRANo.3844,asamendedbyRANo.6657,ortheCARL.

Issue:

IsthetransferofrealpropertybywayofdisturbancecompensationexemptfromCGTandDST?

Ruling:

Yes,thetransferofrealpropertybywayofdisturbancecompensationtotheheirs of the agricultural tenant resulting from the extinguishment of the tenancy relationshipisexemptfromCGTandDSTpursuanttoSection66ofRANo.6657.

An RHQ is not subject to income tax and is exempt from VAT.

The transfer of real property by way of disturbance compensation is exempt from CGT and DST under the CARL of 1998.

5Tax bulletin |

BIR Ruling No. ITAD 241-15 dated August 14, 2015

Facts:

TheWorldOrganizationoftheScoutMovement(WOSM)purchased2motorvehicleslocallyforofficialuse.UndertheMemorandumofAgreement(MOA)betweenthePhilippinegovernmentandWOSM,WOSMisexemptfromalltaxesandcustomsdutiesonimportationandexportationofarticles,includingmotorvehiclesforofficialpurposes.

Issue:

ArethelocalpurchasesofmotorvehiclesbyWOSMforofficialuseexemptfromadvaloremtaxandVAT?

Ruling:

No.UndertheMOAbetweenthePhilippinegovernmentandWOSM,thetaxexemptiononlycoversimportationandexportationofmotorvehicles,andnotlocalpurchases.Hence,WOSM’slocalpurchasesofmotorvehiclesforofficialusearesubject to ad valorem tax and VAT.

BIR Ruling No. ITAD 243-15 dated August 28, 2015

Facts:

ACo.,aninternationalaircarrierorganizedinJapan,islicensedtodobusinessinthe Philippines as a provider of international air services to and from the Philippines.

Issues:

1. IsACo.subjecttothe1.5%GrossPhilippineBillings(GPB)taxrateundertheRP-JapanTaxTreaty?

2. IsACo.subjecttothe3%percentagetaxoninternationalcarriers?

Ruling:

1. Yes.UnderArticle8(1)oftheRP-JapanTaxTreaty,thePhilippinescantaxtheprofitsderivedbyaresidentofJapanfromtheoperationofaircraftininternationaltrafficinthePhilippines,buttherateofincometaxthatmaybeimposedonsuchprofitsshallbe60%ofthetaxchargeableunderPhilippinelaws.UnderSection28(A)(3)oftheTaxCode,thenormalGBPrateis2.5%.Thus,theapplicablerateundertheRP-JapanTaxTreatyis1.5%,or60%of2.5%.

2. Yes. A Co. is subject to the 3% percentage tax on gross receipts derived from the transport of cargo from the Philippines to another country under Section 118 of the Tax Code.

BIR Ruling No. ITAD 276-15 dated September 15, 2015

Facts:

The Embassy of the Holy See in the Philippines donated a motor vehicle to the RomanCatholicBishopofSorsogon,acorporationsole.

Local purchases of motor vehicles for officialuseoftheWOSMaresubjecttoad valorem tax and VAT.

AninternationalaircarrierorganizedinJapanandlicensedtodobusinessinthePhilippines as a provider of international air services is subject to the preferential 1.5% GBP tax rate under the RP-JapanTaxTreaty,aswellastothe3%percentage tax on the transport of cargo.

The donation of a motor vehicle to a religious corporation is exempt from donor’stax,providednotmorethan30%of the gift shall be used by the donee for administration purposes.

The non-exempt donee shall be considered as the purchaser of the motor vehicle and shall be liable for any unpaid excise tax.

6 | Tax bulletin

Issues:

1. Isthedonationsubjecttodonor’stax?

2. Isthedonationofthemotorvehiclesubjecttoexcisetax?

3. IsthedeedofdonationandacceptancesubjecttoDST?

Ruling:

1. UnderSection101(A)(3)oftheTaxCode,giftsinfavorofareligiouscorporationareexemptfromdonor’stax,providednotmorethan30%ofthegiftsshallbeused by the donee for administration purposes.

2. Yes.Transfersmadebyatax-exemptperson/entity,suchastheEmbassyoftheHolySee,toaperson/entitynotenjoyingindirecttaxexemption,suchasthedoneereligiouscorporation,shallbesubjecttoexcisetax.Thenon-exempttransferee shall be considered as the purchaser of the motor vehicle and shall be liablefortheunpaidexcisetaxpursuanttoRANo.9224,asimplementedbyRRNo.25-03.

3. Yes.UnderSection188oftheTaxCode,thecertificationtothedeedofdonationand acceptance is subject to a P15 DST.

BIR Issuances

Revenue Regulations No. 9-2015 dated September 2, 2015

• Section9ofRRNo.7-2014isamendedtoreadasfollows:

“SECTION9.AFFIXTUREOFSTAMPS.–SubjecttothetransitoryprovisionsofSection13hereof,andexceptasprovidedherein,allimportationsandremovalsfromtheplaceofproductionofcigarettesshallbeaffixedwiththeinternalrevenue stamps prescribed by these regulations.

Cigarettesmanufacturedforexportsshall(a)complystrictlywithallexistingBIRrulesandregulationsrelatingtoregistrationofbrands,manufacture,import,utilizationandwithdrawalofrawmaterials,workinprocessandfinishedproducts,labelsandpostingofexportbonds,amongothers;(b)havelabelsstatingclearlythat the cigarettes are strictly for sale in the country of destination for which itwasallowedtobemanufacturedfor;(c)havelabelsthatarenotsimilarinanywaytothelabelsofcigarettessoldinthePhilippines;and(d)provideproofthatthecigarettesauthorizedformanufactureforaforeigndestinationwereactuallyshippedtothecountryofdestinationforwhichitwasauthorizedtobemanufacturedfor,asevidencedbyacertifiedtruecopyofthebillofladingand/orshippingmanifestclearlyidentifyingthequantity(astonumberofpacks)andbrandofcigarettesactuallyshipped,wherethecountryofdestinationisclearlyidentified.Thesecigarettesmanufacturedforexportshallbeprovidedtherangeofuniqueidentifiercodes(UICs)ofinternalrevenuestamps,thruIRSIS,intendedforaffixturetothecigarettesforexport,andsaidUICshallbereleasedtothelocalmanufacturer.Provided,further,ThatthepriceofThreeCentavos(P0.03),perpieceofinternalrevenuestampofsuchcigarettesforexport,shallbepaidby the local manufacturer-exporter. The payment thereof shall be considered constructiveaffixtureoftheinternalrevenuestampsonsuchcigarettesforexport:Provided,finally,thattherangeofUICsthatwerereleasedtothelocalmanufacturer-exportershallbereportedtotheBIR,thruIRSIS,pursuanttotheprovisions of the following Section of these Regulations.

RRNo.9-2015amendsSection9ofRRNo.7-2014ontheaffixtureofinternalrevenue stamps and other requirements on cigarettes intended for export.

7Tax bulletin |

Theinternalrevenuestampshallbeaffixedattheupperportionoftheimmediatecontainerofthecigarettes(e.g.hardpack,softpack,tincan,etc.)regardlessofthenumberofstickscontainedtherein,overlappingtheintendedopening of the immediate container in such a manner as to effectively seal the containerandpreventtheremovalofthesticksofcigaretteswithoutbreakingthesaidstamp,beforetheimmediatecontaineriswrappedincellophaneortransparentwrapper.However,forcontainersofcigaretteswithpictogram,theinternalrevenuestampmaybeaffixedatthesideoverlappingtheintendedopening of the immediate container in a manner as to effectively seal the containerandpreventtheremovalofthesticksofcigaretteswithoutbreakingthesaidstamp,beforetheimmediatecontaineriswrappedincellophaneortransparentwrapper.Moreover,theinternalrevenuestampshallbeaffixedon the cigarette container in a manner without violating the health warning requirementsprescribedunderexistinglaw,rulesandregulations.

InordertofacilitatethemonitoringofinternalrevenuestampsdulyissuedtotheimportersandlocalmanufacturersbytheBIR,throughAPO,thestampsshallbeaffixedtotheimmediatecontainersofcigarettesonafirst-in-first-out(FIFO)basis.

Any cigarettes found in any area in the Philippines without any internal revenue stampaffixedshallbepresumedtohavebeenwithdrawnwithoutthepaymentoftheexcisetaxduethereon,andshallbesubjecttothepenaltiesprovidedforintheNationalInternalRevenueCode,asamendedandrulesandregulationspromulgated relating thereto.”

• TheseRegulationsshalltakeeffectafter15daysfollowingpublicationinleading newspaper of general circulation.

(Editor’s Note: RR No. 9-2015 was published in the Manila Bulletin on September 2, 2015.)


• AllnewbusinessregistrantswithCRM/POS/othersimilarmachines/softwarewith built-in printer for their transactions shall only use non-thermal paper.

• Consideringtheassociatedcostsoftransitioningtonon-thermalpaper,concerned taxpayers are given a period of three years to comply with the new requirements,subjecttothefollowingstaggeredimplementationdates:

For those subject machines registered starting

Staggered implementation dates

July1,2014onwards OnorbeforeJuly1,2018

July1,2013–June30,2014 OnorbeforeJuly1,2017

PriortoJuly1,2012–June30,2013 OnorbeforeSeptember1,2016

• TheOfficialReceipts(ORs)forsalesofservicesorSalesInvoices(SIs)/OtherCommercialInvoices(CIs)forsalesofgoodsshallbeprintedshowing,amongothers,thefollowinginformation:

1. Taxpayer’sRegisteredName;2. Taxpayer’sBusinessName/Style(ifany);3. A statement that the taxpayer is a VAT or Non-VAT registered followed

bytheTaxpayersIdentificationNumber(TIN)and4-digitBranchCode.(Example:VATRegisteredTIN123-456-789-0000);

RRNo.10-2015prescribestheuseofnon-thermalpaperforallCRMs/POSMachines and other invoice/receipt-generating machines/software.

8 | Tax bulletin

4. MachineIdentificationNumber(MIN);5. DetailedBusinessaddresswheresuchORs/SIs/CIsshallbeused/located;6. Dateoftransaction;7. SerialNumberoftheOR/SI/CIprintedprominently;8. AspaceprovidedfortheName,AddressandTINofthebuyer;9. Descriptionoftheitems/goodsornatureofservice;10. Quantity;11. Unitcost;12. Totalcost;13. VATamount(iftransactionissubjectto12%VAT);14. IftheVATtaxpayerisengagedinmixedtransactions,theamountsinvolved

shallbebrokendownintoVATableSales,VATAmount,Zero-RatedSales,andVAT-ExemptSales;

15. ForNon-VATORs/SIsandotherCIs(VATorNon-VAT)suchasdeliveryreceipts,orderslips,purchaseorders,provisionalreceipts,acknowledgmentreceipts,collectionreceipts,credit/debitmemo,jobordersandothersimilardocuments that form part of the accounting records of the taxpayer and/or issuedtotheircustomers,thephrase“THISDOCUMENTISNOTVALIDFORCLAIMOFINPUTTAX”inboldletters,shallbeconspicuouslyprintedatthebottomoftheNonVATORs/SIsandotherCIs;

16. TaxpayerswhosetransactionsarenotsubjecttoVATorPercentageTaxshall issue non-VAT principal receipts/invoices indicating prominently at the face of such receipts/invoices the word “EXEMPT”.

17. IfthetaxpayerissubjecttopercentagetaxunderTitleVoftheTaxCode,butalsosellsgoods/servicesexemptfromVATunderSection109oftheTaxCode,thenon-VATprincipalreceipts/invoicesshallindicatethebreakdownofSalesSubjecttoPercentageTax(SSPT)andExemptSales;

• ThefollowinginformationshallbeprintedatthebottomportionoftheOR/SI/CI:

1. Name,addressandTINoftheaccreditedsupplierofCRM/POS/othersimilarmachines/software;

2. Accreditation number and the date of accreditation (date issued “mm/dd/yyyy”andvaliduntil“mm/dd/yyyy”)oftheaccreditedsupplier;

3. BIRFinalPermittoUse(PTU)Number;4. Thephrase“THISINVOICE/RECEIPTSHALLBEVALIDFORFIVE(5)YEARS

FROMTHEDATEOFTHEPERMITTOUSE.”

• FortaxpayerstransactingwithSeniorCitizens(SCs)and/orPersonsWithDisability(PWDs)pursuanttoRANo.9994,otherwiseknownasthe“ExpandedSeniorCitizensActof2010”,aspaceforthefollowingshallalsoberequired:

1. SeniorCitizen/PWDTIN;2. OfficeoftheSeniorCitizenAffairs(OSCA)IDNo./PWDIDNo.;3. SeniorCitizenDiscount/PWDDiscount(showdetailedbreakdownof20%

discountand/or12%VATexempt);and4. SignatureoftheSeniorCitizen/PWD.

• Allexistingtaxpayersissuingreceipts/invoicesgeneratedthruCRM/POS/othersimilarmachine/software(usingthermalpaper),includingthoseconnectedtoanetworkorlinkedtotheComputerizedAccountingSystem(CAS),generatingelectronicreceipts,shallbecoveredbytherequirementsundertheseRegulations.

9Tax bulletin |

• Any violation of the regulations shall be subject to the corresponding penalties undertheapplicableprovisionsoftheTaxCode,asamended,andrevenueissuances.

• TogiveampletimeforthereconfigurationofmachinesandsystemsinordertoreflecttheaboveinformationrequiredintheORs,CIsandSIs,thereconfigurationoradjustmentsshouldbedonenotlaterthanOctober1,2015*;however,anextensionnottoexceed6monthsfromtheeffectivityoftheseregulationsmaybesoughtfromtheconcernedRevenueDistrictOfficer(RDO)orACIRoftheLargeTaxpayersService.

• TheseRegulationsshalltakeeffectafter15daysfollowingpublicationinleading newspaper of general circulation.

(Editor’s Note: RR No. 10-2015 was published in the Manila Bulletin on September 22, 2015.* See also RR No. 12-2015 below.)


• Anewparagraphtobeknownasparagraph(n)isinsertedattheendofSection2ofRRNo.7-2010,asamended,whichshallreadasfollows:

“Section2.Definitions.-ForpurposesoftheseRegulations,thefollowingtermsandphrasesshallbedefinedasfollows:

xxx

n. IdentificationDocument-anydocumentorproofofbeingaseniorcitizenwhichmaybeusedfortheavailmentofbenefitsandprivilegesundertheseRules.Itshallbeanyofthefollowing:

i. SeniorCitizens’IdentificationCardissuedbytheOfficeofSeniorCitizensAffairs(OSCA)inthecityormunicipalitywheretheelderlyresides;

ii. ThePhilippinepassportoftheelderlypersonorseniorcitizenconcerned;and

iii. Government-issuedidentificationcard(ID)whichreflectsonitsfacethename,picture,dateofbirthandnationalityoftheseniorcitizenwhichincludesanyofthefollowing:

1) DigitizedSocialSecuritySystemID2) GovernmentServiceInsuranceSystemID3) ProfessionalRegulationCommissionID4) IntegratedBarofthePhilippinesID5) UnifiedMulti-PurposeID(UMID)6) Driver’sLicense”

• Section7(6)ofRRNo.7-2010,asamended,isfurtheramendedtoreadasfollows:

“SECTION7.TaxTreatmentoftheDiscountGrantedtoSeniorCitizens.—xxx The claim of the discount granted under the Act as an additional item of deduction from the gross income of the seller is subject to the following conditions:

RRNo.11-2015amendsSections2and7(6)ofRRNo.7-2010,asamendedbyRRNo.08-2010onSeniorCitizens.

10 | Tax bulletin

xxx

6. ThebusinessestablishmentgivingsalesdiscountstoqualifiedSeniorCitizensisrequiredtokeepaseparateandaccuraterecordofsales,whichshallincludethenameoftheSeniorCitizen,IdentificationDocument,grosssales/receipts,salesdiscountgranted,datesoftransactionsandinvoicenumbersforeverysaletransactiontoSeniorCitizen.”

• TheseRegulationsshalltakeeffect15daysimmediatelyfollowingpublicationinleading newspaper of general circulation.

(Editor’s Note: RR No. 11-2015 was published in the Manila Bulletin on October 1, 2015.)


• Section8ofRRNo.10-2015isamendedtoreadasfollows:

“SECTION8.TRANSITORYPROVISIONS.-Inordertoprovideampletimeinprocuring,reconfiguringmachinesandsystems,tocomplywithSection5,adjustmentsshallbeundertakenonorbeforeOctober31,2015.AnyextensionduetoenhancementsofsystemsrequiredtobeundertakenabroadshallseektheapprovalfromtheconcernedRegionalDirectororACIR,LargeTaxpayerService,whichshallnotbelongerthansix(6)monthsfromtheeffectivityofthese Regulations.”

(Editor’s Note: RR No. 12-2015 was published in Manila Bulletin on October 8, 2015.)

Revenue Memorandum Circular No. 56-2015 dated July 20, 2015

• eSales is a real-time online reporting of actual sale transactions recorded by CRMs/POS/othersimilarmachines/software.SincetheCRM/POSmachinesarerequiredtobetamper-proof,theyareexpectedtocontaintheoriginaldatathatshouldserveasbasisfortaxassessmentsbyrevenueexaminers.Hence,salesrecordscontainedintheCRM/POSmachinesarenotallowedtobealteredoramended except in meritorious cases.

• However,inthecourseoftheimplementationofRRNo.5-2005(whichprescribes the monthly submission of sales reports and other information generatedbyCRMandPOSmachinesand/oranymachinesgeneratinginvoices/receipts)andRMONo.12-2012(whichprescribestheguidelinesandproceduresintheimplementationofeSalesreporting),itwasnotedthatseveral adjustments/amendments were made on the amount of monthly eSales asreported,resultinginthereconstitutionofsalesasrecordedinCRM/POSmachines.

• Giventheforegoing,anyamendmentontheamountofmonthlysalesreportedshallrequireawrittenjustificationaddressedtotheconcernedLargeTaxpayerService(LTS)InvestigatingOffice/RevenueDistrictOffice(RDO),withthecorrespondingadjustingentriesproperlyrecordedinthebooksofaccounts.

• MonthlyeSalesreportsshallbesubjectedtovalidationorverificationbytheconcernedoffices,providednoelectronicLetterofAuthority(eLA)orLetterNotice (LN) has been issued.

RRNo.12-2015amendsRRNo.10-2015andextendstoOctober31,2015thedeadlineforthereconfigurationoftheCRMs/POS/otherinvoice/receipt-generatingmachines/softwaretoreflectthe information required by RR No. 10-2015.

RMCNo.56-2015clarifiesthesubmission of a Monthly eSales Report via the eSales Reporting System prescribedunderRRNo.5-2005andRevenueMemorandumOrder(RMO)No.12-2012.

11Tax bulletin |

• IncaseaneLAorLNhasbeenissued,anincidentreportonthepost-validationorinspectionconductedbytheconcernedinvestigatingofficesshallbeconsolidated with the ongoing audit/investigation covered by the eLA or LN.

• Taxpayers who fail to comply with the foregoing requirements shall be included inthepriorityauditprogramoftheconcernedinvestigatingoffices.

Revenue Memorandum Circular No. 58-2015 dated September 17, 2015

• eBIRFormsPackageVersion5.1isnowavailableanddownloadablefromanyofthefollowingsites:

1. www.knowyourtaxes.ph;2. www.dof.gov.ph;3. Dropboxusingthislink:http://goo.gl/UCr8XS;4. Directlink:http://ftp.pregi.net/bir/ebirforms_package_v5.1.zip;or5. www.bir.gov.ph

• TheneweBIRFormspackagehasthefollowingmodifications:

1. BIRFormNo.1707-A(AnnualCapitalGainsTaxReturnforOnerousTransferofSharesofStockNotTradedThroughtheLocalStockExchange)isincludedinthepackageand37returnsarenowavailableineBIRForms;

2. BIRFormNos.1601E,1702-MXand2000wereenhanced;and3. AnnualIncomeTaxReturns(BIRFormNos.1700,1701,1702-EX,1702-

MX&1702-RT)cannowbesubmittedonlinethrutheeBIRFormsSystem.

• Allthe37taxreturnscanbefiledbyclickingthe“SUBMIT”or“FINALCOPY”buttonandthetaxpayerwillreceivethecorrespondingconfirmationthruemailnotification.Taxpayersusingthisnewversionshallfollowthesesimpleandconvenientsteps:

Step1.DOWNLOAD,INSTALLandRUNeBIRFormsPackageVersion5.1;Step2.CompletetheProfilepage,selectfromtheListofBIRForms,thenclick

“Fillup”.Accomplishtheselectedtaxreturnbydirectlyencodingdatainit;

Step3.ClickVALIDATEafteraccomplishingthetaxreturn.Iftherearechangestomake,clickEDITbutton.Makesuretovalidateaftereverychangemade;

Step4.ClickSUBMITbutton:

4.1.Ifsuccessful,taxpayerwillberedirectedtoeBIRFormsLoginpageandshallenterhis/her/itsUsernameandPassword.

4.2.Ifunsuccessful,clickFINALCOPYbuttontouseanalternativemodeofelectronicsubmissionandanemailconfirmationwillbereceived by the taxpayer. Those who are not yet enrolled in the eBIRFormsSystemarerequiredtofullyandunconditionallyagreetotheTermsofServiceAgreement(TOSA).

• ThepreviouseBIRFormsPackageVersion5.0maystillbeusedforfillingallotherBIRformsnotincludedinthemodificationsstatedinthisRMCNo.58-2015.

RMCNo.58-2015circularizestheavailabilityofeBIRFormsPackageVersion 5.1.

12 | Tax bulletin

Revenue Memorandum Order No. 19-2015 dated September 15, 2015

• Ingeneral,alltaxpayersareconsideredpossiblecandidatesforaudit.

• Tocoversuchaudit/investigationoftaxpayers,electronicLettersofAuthority(eLAs) shall be issued.

• Thesaidaudit/investigationshallinclude,butshallnotbelimitedto,thefollowingcases:

1. Mandatory Cases:

• Taxpayers with claims for income tax refund or issuance of tax credit certificate;

• TaxpayerswithclaimsforVATrefund/credit;

• Claimsfortaxrefund/creditofexcisetaxunderTitleVIoftheTaxCode,regardlessofamount;

• Claimsfortaxrefund/creditonerroneous/doublepaymentoftaxes,regardlessofamount;

• Request for tax clearance of taxpayers due to retirement/cessation of business,withgrosssales/receiptsexceedingP1,000,000.00orgrossassetsexceedingP3,000,000.00;

• Request for tax clearance of taxpayers undergoing merger/consolidation/split-up/spin-off and other types of corporate reorganizations;

• CaseswithunresolvedLetterNotices(LNs);

• Estatetaxreturnswithothertaxliabilities;and • Policy cases covered by written directive of the Commissioner.

2. Priority Taxpayers/Industries-UnlessrevisedthroughtheissuanceofanRMO,thetaxreturnstobeauditedshallbebasedonthefollowingcriteria:

• TaxpayersmandatorilycoveredtofiletheirreturnsusingeFPSor

eBIRFormsunderexistingrevenueissuances,butfailedtousethesame;

• Taxpayersmaintaininganendinginventoryof100%ormoreoftheirgrosssales;

• Issue-orientedaudits(e.g.,transferpricing,BaseErosionProfitShifting(BEPS),industryissues);

• Taxpayerswhosecomplianceisbelowtheestablishedbenchmarkrate;

• Taxpayers who have failed to comply with the submission of informationreturnsrequiredunderexistingrevenueissuances(e.g.,Alphalist,InventoryList,ListofTenants,SLS/P,eSales);

• Taxpayersenjoyingtaxexemptions/incentives;

RMONo.19-2015prescribesthepolicies,guidelinesandprocedurestobe observed in the audit/investigation of tax returns.

13Tax bulletin |

• Taxpayerswhichwereplacedundersurveillance,OplanKandadoandotherenforcementprogramsoftheBureau;

• Taxpayers reporting gross/net loss or no taxable income or no tax due for2consecutiveyears;

• Governmentagencieswithvalidated“duetoBIR”perCOAreport;

• LocalGovernmentUnits(LGUs)engagedinproprietaryactivitiesorLGUswhofailtoremittaxeswithheldregularly;

• Taxpayerswithincometaxdueoflessthan2%ofgrosssales/revenues;

• Taxpayerswithincreaseinassetsofmorethan50%fromthepreviousyear,butwithreportednetloss;

• Taxpayers with claims for losses/damages due to natural calamities or thoseclaiminginventoryobsolescence;

• Taxpayer deriving its revenue/income exclusively or substantially from itsparentcompany/subsidiaries/affiliates;

• Taxpayers claiming write-off of input tax as allowable deduction in its annualincometaxreturns;

• Taxpayers with shared expenses and other interrelated charges being imputedbyaparentcompanytoitsaffiliatesand,likewise,anaffiliatetootheraffiliatesinaconglomerate;

• Professionals(e.g.,lawyers,doctors,engineers,architects,CPAs,actors/actresses,mediapersonalities,professionalathletes,insuranceagents,realestateservicepractitioners,eventplanners)withlowincomeand/orbusinesstaxcompliance;

• Realestateindustry;

• Telecommunicationsindustry(Telcos);

• ContractorsofNationalGovernmentAgencies(NGAs),LGUsandGovernmentControlledCorporations;

• Sellersofgoodsandservicesviae-commerce;

• Hospitals,Clinics,Medical/DentalLaboratories;

• Amusement/Entertainment/EventCenters;

• AdvertisingAgencies; • BusinessProcessingOutsourcingCompanies; • InsuranceCompanies;

• Restaurants/FastFoodChains/CateringServices/Bars/CoffeeShops;

• Taxpayerswithzero-ratedsales;and

14 | Tax bulletin

• Taxpayerswithintelligenceinformation,suchasspecificbusinessknowledge,thirdpartydataandpubliclyavailableinformation(e.g.,from media press releases vs. actual revenue/tax declaration per return)

3. Other priority audit that may be identified by the Regional Director (RD)/Asst. Commissioner, Large Taxpayers Service (ACIR-LTS):

• RD’s/RevenueDistrictOfficer’s(RDO)OtherAuditPriority• ACIR-LTS/Chief,LTDivision’s—Makati&Cebu(LTD)/Chief,LTAudit

Division’s(LTAD)OtherAuditPriority

TheaboveOfficialsarenotprecludedfromselectingtaxpayerswhichdonot fall within the foregoing criteria but may be possible candidates under other priority audit

• The tax returns to be selected for priority taxpayers/industries and other priorityauditthatmaybeidentifiedbytheRD/ACIR-LTSforregionaltaxcases,shallconsistof60%TaxpayerAccountManagementProgram(TAMP)and40%non-TAMPtaxpayersoftheRevenueDistrictOffice(RDO).

• TheRDOandRD/LTD,LTADandACIR-LTSareequallyresponsibleinensuringthat only returns of taxpayers registered within their jurisdiction and those that matchtheselectioncriteriaofthisOrderareselectedforissuanceofeLAs;otherwise,theyshallbesubjecttoadministrativesanctions.

• Anydeviation,exceptthoseselectedunderotherpriorityauditsidentifiedbytheRD/ACIR-LTS,shallrequirearequestwithawrittenjustificationtobesubmittedbytheRDtotheDeputyCommissioner-OperationsGroup(DCIR-OG)forregionalcases,andACIR-LTStotheCommissionerforLTcases.AcopyoftherequestapprovedbytheDCIR-OGshallbefurnishedtotheAssistantCommissioner,AssessmentService(ACIR-AS)formonitoringpurposes.

• Ifthetaxpayerhasbeenauditedforthelasttwoyearsandhasbeenagainselectedforauditinthecurrentorthirdyear,theRDO/LTD/LTADshallsubmitawrittenexplanationtotheCommissioner,copyfurnishedtheDCIR-OGforRegionalcases,onwhysuchtaxpayershallbesubjectedtoauditforthreesucceedingyears,unlesstheRDO/LTD/LTADhasestablishedthatsuchtaxpayerhas an under declaration of sales/income or overstatement of expenses/deductionsbyatleast30%(prima facie evidence of fraud).

• TheRDO/LTD/LTADshouldevaluatediscrepanciesoraudit/reviewfindingsarisingfromtaxpayerswithfiledclaimsforVATrefund/creditreferredbytheVAT Credit Audit Division (VCAD) or Tax Audit Review Division (TARD) in order to determine any tax implications and may select the taxpayer-claimant for issuanceofaneLA,ifnecessary.

• However,ifthetaxpayer-claimantisalreadythesubjectofanexistingeLAfor

thesametaxableyearcoveredbytheclaim,theaudit/reviewfindingsshouldbeconsolidated with the existing eLA/case.

• The Electronic Letter of Authority Monitoring System (eLAMS) shall be used in therequest,approvalandissuanceofeLAs,aswellasinupdatingthestatusofthesame,untiltheCaseManagementSystem(CMS)oftheenhancedTaxInformationSystem(eTIS)isrolled-outintheNational,RegionalandDistrictOffices.

15Tax bulletin |

• Asageneralpolicy,thesimultaneousinvestigationofallliabilitiesofthetaxpayer shall be followed and one eLA shall be issued for each taxable year or periodtoincludeallinternalrevenuetaxliabilitiesofthetaxpayer,exceptwhenaspecifictaxtypehadbeenpreviouslyexamined(e.g.,auditofVATunderVATAudit Program and VAT arising from claim of tax refund/credit).

• Notwithstandingtheforegoingpolicies,eLAsshallbeissuedforthefollowingtaxcases:

1. SpecificauditofclaimsforVATrefundorissuanceofTaxCreditCertificate(TCC) wherein one eLA shall be issued for each taxable period/quarter of claim.

2. Retirement from business provided that cases where the gross sales/receiptsoftheretiringtaxpayeramounttoP1,000,000.00andbeloworgrossassetsdonotexceedP3,000,000.00shallnolongerbeverified/investigated.

3. Forestatetaxcaseswithothertaxliabilities,2separateeLAsshallbeissuedtothesameRO,onefortheestatetaxliabilityandaseparateeLAcovering the audit of other tax liabilities for the year immediately preceding the death of the taxpayer and the short period within the year up to the death of the decedent.

• Inrequestingdocumentstobepresentedduringtaxinvestigation,theROshallcomplywithRMONo.53-98,asamendedbyRMONos.16-2007and22-2007,and other applicable revenue issuances.

• TheROshallmarkintheChecklistofRequirementsonlythedocuments/recordswhichareapplicableandrelevantintheaudit,andshouldnotrequirethetaxpayer to submit tax returns and other information which can be retrieved within the Bureau.

• IfaneLAhasbeenissuedundertheVATAuditProgramandsubsequently,thetaxpayerbecomesacandidateforregularauditintheRDO/LTD/LTADbasedontheselectioncriteriaunderthisOrderforthesametaxableyear,therequestforeLA for regular audit shall not include the VAT liability even if the eLA issued under the VAT Audit Program is for a particular taxable quarter only.

• Thereportofinvestigation/verificationofcasescoveredbyeLAs/TaxVerificationNotice(TVN)/MemorandaofAssignment(MOA)pursuanttothisOrdershallbesubmittedbytheROwithinthefollowingprescribednumberofcalendardays:

Case Classification No. of DaysCases covered by eLAs other than claims for VAT refund/credit

180daysforRegionalcasesand240daysforLTcases,fromthedateoftheeLA

Claims for VAT refund/credit cases

60daysforRegionalcases,and80daysforVCADandLTcases,fromthedateoffilingoftheapplication

TVN on estate tax cases 60daysfromsubmissionofcompletedocumentsMOAonone-time-tax-transaction(ONETT)cases

5 days from submission of complete documents

MOAonprotestedcases/reinvestigation

60daysfromthesubmissionofcompletedocumentsincaseofrequestforreinvestigation;60daysfromthedateofMOAincaseofrequestforreconsideration

16 | Tax bulletin

• FailureonthepartoftheROtorenderareportofinvestigation/verificationwithintheprescribedtimeframeshallnotnullifytheeLA,whichshallremainenforceable,subjecttotheperiodoflimitationunderSections203and222ofthe Tax Code.

• However,theROwhofailstosubmitthereportinvestigation/verificationshallbe subject to any applicable administrative sanction.

Revenue Memorandum Order No. 20-2015 dated September 18, 2015

• EmployeesshallberegisteredattheRevenueDistrictOffice(RDO)wheretheemployeeisregisteredoratthelocalRDOofthebusinessaddresswheretheLarge Taxpayer (LT)-Employer is physically located.

• The employer shall be responsible for transfer of registration of an employee due to a change of employer and shall submit the duly-accomplished and signed BIRFormNo.1905(ApplicationforRegistrationInformationUpdate)oftheemployee.

• ThetransferofregistrationofsuchemployeeshallbeinitiatedbytheRDOwhichreceivestheapplication.IncasetheemployeeortheemployerisrelativelyfarawayandunabletovisittheRDOfortheapplicationoftransferofregistration,afaxedcopyoftheduly-signedBIRForm1905shallbeacceptedbytheRDOsorLargeTaxpayersAssistanceDivision(LTAD)/ExciseLargeTaxpayerRegulatoryDivision(ELTRD)/LargeTaxpayersDivision(LTD)–Makati/LTD-Cebu

• Taxpayers with the following circumstances cannot be registered using the eRegistrationSystem:

1. Thosewithincompletedataonthebasictaxpayerinformationform;and2. ThosewithsimilarorfoundtohavematchingrecordsintheBIRdatabase

thatfallunderanyofthefollowingvalidationrules:

• samelastname,firstnameandmiddlename►• samelastname,firstnameandmiddleinitial• samelastname,firstnameandbirthdate• samelastname,middlenameandbirthdate• foramarriedfemalewhosecivilstatusenteredineREGismarried,the

enteredmiddlename,firstnameandbirthdatearethesameasthoseofanotherfemaleintheBIRdatabase.

• OnlyanLT-EmployerisallowedtotransactbusinesswiththeLTAD/ELTRD/LTDMakati/LTD-CebuwheretheLT-Employerisdulyregisteredinrelationtothe“ApplicationforRegistration”and“UpdateofExemption”oftheiremployees.

• AnLT-EmployershallsecuretheTINofitsnewemployeesusingtheeRegistration System.

• An LT-Employer that cannot register its new employees thru the eRegistration Systemshallsecureitsemployees’TINsintheLTAD/ELTRD/LTD-Makati/LTD-Cebu where the LT-Employer is duly registered.

RMONo.20-2015prescribesthepolicies and guidelines in the issuance oftheTINofemployeesusingthe eRegistration System and the procedures for the registration of employees.

17Tax bulletin |

• TheLT-EmployershallsubmitawrittenrequestfortheTINissuancewithacorrespondingtransmittallistofitsnewemployeeswhofiledBIRFormNo.1902(ApplicationforRegistrationForIndividualsEarningPurelyCompensationIncome,andNon-ResidentCitizens/ResidentAlienEmployee)totheChiefofOfficetogetherwiththeprescribedregistrationformandeRegistrationSystemmessage.

• TheLT-EmployershallsubmitawrittenrequestfortheissuanceofTINCardsofitsemployeestotheconcernedLTAD/ELTRD/LTD-Makati/LTD-Cebu,attachingthelistofnewlyregisteredemployeesinbatchesof20,indicatingtheirfullname(surname,firstname,middlename),birthdate,addressandthedateofregistrationordateofTINissuance,togetherwithBIRForm1902andtheprintedeRegConfirmationPage,ifregisteredusingtheeRegistrationSystem.

• Non-LTEmployers,suchascorporationsundertheTaxpayerAccountManagementProgram(TAMP)andthoseregistered/enrolledineFPS,shallalsosecuretheTINofitsnewemployeesusingtheeRegistrationSystem.

• AllotherEmployers(whoarenotclassifiedasLargeTaxpayers,TAMPcorporationsoraneFPSregisteredusers),maysecuretheTINoftheiremployeeseitherthroughtheeREGSystemorthroughtheRDOhavingjurisdiction over the employer’s business address.

• AnemployeewithconcurrentmultipleemploymentshallsecureaTINattheRDOhavingjurisdictionoverhisprincipal/mainemployer.

• AnemployeeshallrequestfortheissuanceoftheTINCardfromtheRDO

havingjurisdictionovertheemployer’sbusinessaddressoranycomputerizedRDOs.

• Those employers who are required to use the eRegistration System but gave instructionstoitsnewemployeestovisittheRDOsorLTAD/ELTRD/LTD-Makati/LTD-CebuwithphotocopiesofallegedeRegistrationSystemmessage,shallbeimposedapenaltyofP1,000.00peremployeepursuanttoSection275oftheTax Code.

• ApenaltyofP1,000.00butnottoexceedP25,000.00foreveryinstanceshallbeimposedoneRegistrationSystemandUpdateofExemptionofEmployeeData Entry Module users who supply erroneous/invalid information.

BOC Issuances

Customs Memorandum Order No. 27-2015 dated September 2, 2015

• ThisCMOappliestoallnon-commercialinboundconsolidatedshipmentsofOFWsandforreturningOFWsbringinginpersonalandhouseholdeffects.

• OperationalProvisions

1. Balikbayanboxesshallnotbesubjecttorandomorarbitraryphysicalinspection,butshallonlyundergomandatoryX-rayscanning.

2. Incaseswheretheshipmentistaggedas“suspect”afterX-rayscanning,theinspectorshallidentifythespecificbalikbayanboxandshallrecommendtheissuanceofanAlertOrder.Balikbayanboxeswithoutviolation shall be segregated and provisionally released to allow its continuous processing.

CMONo.27-2015prescribestherevised rules and regulations on the importationofbalikbayanboxesfromOFWs.

18 | Tax bulletin

3. Balikbayanboxeswhicharealertedshallbesubjectto100%physicalexaminationattheauthorizedexaminationareatobeconductedbyaCustomsExaminerinthepresenceofapprehendingofficers,freightforwarder/consolidator,andtherepresentativesofOverseasWorkersWelfareAdministration(OWWA)and/oradesignatedofficerofanOFWassociation.

4. Forpurposesoftradefacilitationandtoaddressportcongestion,theBOCmayallow100%examinationofalertedshipmentstobeconductedatthewarehouse of the freight forwarder/consolidator upon submission of an AffidavitofUndertaking.

5. FailureonthepartofthecustomsofficialorpersonneltocomplywithanyofthesedirectivesshallbedealtwithinaccordancewithSection3604oftheTCCP,asamended,andappropriatecivilservicerulesandregulations.

►• CMONo.27-2015takeseffectimmediately.


• Themandatoryfilingofaconsumptionentryshallapplytoallarticlesimportedbyseaandintendedforconsumptioninthecustomsterritory,incasetheportofdischargeisnottheportoffinaldestination.Itshallnotapplytoarticleswhichare:

1. ImportedbyaccreditedlocatorsofPEZAzonesandfreeports;2. Intendedforusebyaccreditedcustomsbondedwarehouses(CBWs),or3. Importedforimmediateexportation.

►• Allarticlesimportedbysea,exceptfortheexempteditems,shallimmediatelybecoveredbythenecessaryimportentryforimmediateconsumption,whetherformalorinformal,whichshallbefiledattheassessmentofficeattheportoffirstdischargeuponimportationintothePhilippineterritory.Insuchcases,transshipmentsshallnotbeallowedandthefilingoftheentryattheportoffinaldestinationshallbeprohibited.

►• CMONo.28-2015takeseffectimmediately.


►• TheuseoftheImportEntryandInternalRevenueDeclaration(IEIRD)orBOCForm236isdiscontinuedandhasbeenreplacedbytheSingleAdministrativeDocument (SAD) secured through the e2m Customs System and printed. The SAD shall serve as the entry declaration as required by existing rules and regulations.

►• ThedeclarationsbytheimportersandlicensedcustomsbrokersintheSADshallbeunderoath,andshallbeprintedintwocopiesandtherequireddocumentsshallbeattachedtotheSADbasedonexistingregulations.ThefirstcopyshallbefortheBOC,thebacksideofwhichmaybeusedforthereturnorfindingsofthecustomsofficerconcerned.Thesecondcopyshallbethecopyoftheimporterandlicensedcustomsbrokerandshallalsoserveastheacknowledgementreceipt.

►• MISTGshallprovideacopyoftheSADtovariousgovernmentagenciesliketheBIR,PSO,TCandothergovernmentagencies.

CMONo.28-2015prescribestherulesonthemandatoryfilingofconsumptionentries for sea shipments at the port of discharge in cases where the port ofdischargeisnottheportoffinaldestination.

CMONo.29-2015prescribestherevised procedures and documentation in the processing of formal consumption entries.

19Tax bulletin |

►• DocumentarystampsintheamountofP265onformalconsumptionentriesshallbeaddedbytheMISTGinthecomputationofdutiesandtaxesbasedonentry declarations and settled through PASS5.

►• TheuseofSupplementalDeclarationValue(SDV)shallbediscontinued.TosecurethebasicinformationindicatedintheSDV,Box39oftheSADisconsideredamandatoryfieldintheentrydeclaration.

►• WiththeimplementationofthemandatorysubmissionofairmanifestsintheE2M,printoutofthee-AWBshallbeacceptedassupportingdocumenttotheSAD.However,importersandlicensedcustomsbrokersshallbeallowedtousetheIEIRDinlieuoftheSADuntilsuchtimeastheinventoryoftheBOCisexhausted.

►• CMONo.29-2015takeseffectimmediatelyandexpresslyrepealsCMONos.37-2001and20-2004withregardtotheuseofIEIRDandSDV.


►• Coverage

1. ThisCMOcoversallwharves,containeryards,containerfreightstations,warehouse,examinationareasandotherfacilitieslocatedincustomszonesand/orinairportsandseaports,andusedforthetemporaryhandlingand storage of imported goods immediately discharged from the carrying airplanes,vesselsandothermeansofinternationaltransport.

2. ExistingfacilitiesaccreditedasCBWswillbesubjecttoreviewandre-accreditationasanAuthorizedCustomsFacility(ACF).

3. ThisCMOdoesnotapplytowarehousesandfacilitieswithexistinglicensesasContainerYardsand/orContainerFreightStationsOutsideCustomsZones(CY/CFS-OCZ)andotherOff-DockCustomsZoneswhicharesubjectto a separate set of rules and regulations.

►• GeneralProvisions

1. Allwharves,containeryards,containerfreightstations,warehouses,examination areas and similar facilities shall be considered as part of the customszoneandshallbesubjecttothesupervisionandcontroloftheBOCasanACF.

2. Thesefacilitiesshallalsobesubjectedtosuchrequirements,rulesandconditions which may be imposed by the Commissioner of Customs andshallbemadeaccessibletoallauthorizedCustomsofficialsorrepresentatives upon proper demand for ocular inspection.

3. Inventoryandothermanagementrecordsofimportedcargoeshandledandstoredbyauthorizedoperatorsshallbemaintainedandkeptatalltimesintheirplacesofbusiness,andshallbeaccessibleandavailableonlinetoauthorizedBOCofficers.Theserecordsshallalsobesubjecttoinspectionbyauthorizedcustomsofficialsorrepresentativesand,uponproperdemand,shallimmediatelybeproducedandsubmittedtosuchofficialsorrepresentatives.

CMONo.30-2015prescribestherulesandregulationsontheestablishment,supervisionandcontrolofwharves,containeryards,containerfreightstations,warehouses,examinationareasand other facilities within the customs zone,otherwiseknownastheACF.

20 | Tax bulletin

4. OnlyACFoperatorsshallbeallowedtohandleandstoreimportedgoodsthatareimmediatelydischargedfromthearrivingairplane,vesselandother means of international transport.

►• OperationalProvisions

1. AnypersonorfirmdesiringtoestablishandoperateanACFshallapplyinwritingtotheCollectionDistrictwheretheproposedACFaretobelocated,andsubmittherequireddocumentaryrequirements.AnACFmusthavealsowrittenandverifiableproceduresrelatingtosecurityprocedures.

TheACFmanagementshallcausethemandatoryandperiodictrainingofasufficientnumberofitspersonnelforthehandling,storageandmanagementofdangerousgoods.UponissuanceoftheCertificateofAuthoritytoOperate,theACFshallcomplywiththefollowingrequirements:

• E2M Connectivity • CPRS Registration • Interestbearingaccount/TreasuryBond/Insurancefromany

government financial institution to cover for duties and taxes due on lostordamagedgoodstransferredtotheACFintheamountprovidedin the Certificate of Authority

• PaymentofanAnnualSupervisionFee

2. ThelicensetooperateanACFshallbevalidfortheperiodgrantedintheCertificateofAuthoritywhichshallnotbelessthan3years.

3. Theapplicationforrenewalshallbefilednotlaterthan6monthsbeforetheexpirationoftheauthoritytooperateanACF.Failuretofileanapplicationforrenewal6monthspriortoitsexpirationshallautomaticallybesubjecttoapenaltyintheamountofP100,000.

4. UponwrittenrequestoftheACFoperator,citingreasonstherefor,anACFmaybeclosedvoluntarily,atwhichpointallcargoesremainingwiththeACFshallbereleasedtoitsconsigneesuponpaymentofallcustomsduties,taxes and other charges due thereon and after compliance with applicable lawsandregulations.AnyoverstayingcargoesstillremainingwiththeACFshallbeinventoriedandtransferredtoBOCWarehouseattheexpenseoftheACF.

5. TheACFshallbesuspendedorrevokedonanyofthefollowinggrounds:

• Whenthefacilityisusedinstoringsmuggledgoods• Ifinvolvedinpilferage• Cargoes cannot be accounted for• Overchargingoffees• Violationofcustomslaws,rulesandregulations• OtherviolationsoflawsofthePhilippines

Incaseofacustoms-initiatedrevocationorcancellation,theDistrictCollectorconcernedshallorderitsDeputyCollectorforOperationstoconductaninvestigation,allowingtheACFoperatortosubmitevidencetothe contrary. The administrative proceeding should be summary in nature andshouldbeterminatedwithin30workingdaysfromreceiptoftheorderto conduct hearing.

21Tax bulletin |

6. Incaseofrelocation,expansionorprovisionofadditionalfacilities,theACFoperatorshallsecureapprovalfromBOC.

7. AdditionalfacilitiesoutsidetheCollectionDistrictwheretheACFacquireditsauthoritytooperatemaybepermitteduponapplication,whichshallbeconsidered as a new and original application.

►• CMONo.30-2015repealsregulationsinconsistenttherewith,andtakeseffectimmediately.


►►• GeneralProvisions

1. AllBillsofLading(BLs)andAirwayBills(AWBs)whicharesubjecttoamendmentmustfirstbevalidatedbytheshippingline,airline,freightforwarder or consolidator concerned.

2. TheE2Mprohibitstheamendmentofthefollowingdataelements:

►►• NatureofBLorAWB►►• Consignee’sname►►• Consignee’saddress

IncasethereisarequestforchangeinthenatureoftheBLorAWB,consignee’snameorconsignee’saddress,theconsignee,shippingline,airline,freightforwarderorconsolidatorconcernedshallsubmittheamendedBLorAWBintheE2Mtoreplacetheincorrectone.

3. Modificationof“validated”BLsorAWBsislimitedtocertaindatafieldssuchas:

• Type of BL• UniversalConsigneeReference(UCR)• Container Number• Total Containers• Modificationofcontainersize(20/40/45)• Status(FCL/CL)• Unitofmeasureofpackages• Volume (CBM)• Description of goods• Locationofgoods,freightandamount• Declared value and currency type• TransportandInsuranceCost.

4. Whenerroneousdataneedtobecorrected,requestsforamendmentshallbefiledwiththeDistrictCollectorconcerned.Onceapproved,theamendment of data in E2M shall be performed by the Deputy Collector forOperations.TheamendedversionoftheBLorAWBshallbesentbyE2M through the VASP through which the original version was submitted. The VASP shall send the amended copy of the BL to the temporary transit shedstoensurethesynchronicityofBLorAWBdatabetweentemporarytransitshedsandtheBOC.

CMONo.31-2015prescribestherevised rules and procedures on the processing of importer or consignee’s request for amendment of the BL and AWB.

22 | Tax bulletin

• TheDistrictCollectorofCustomsmay,atthewrittenrequestoftheconsignee,shippingline,airline,freightforwarderorconsolidatorconcerned,allowtheamendmentofBLandAWBonlyinthefollowinginstances:

1. Amendmentsconsideredclericalinnatureandnotsubstantialormaterial;

2. Amendments considered substantial or material such as change in consignee’sname,addresses,descriptionofgoods,weight,volumeandsimilaramendmentsshallbeallowedonlyunderthefollowingconditions:

• Thewrittenrequestshallbemadeunderoath;• AnimportentryintheVASPhasbeenlodgedintheE2MandtheImport

entry,withsupportingdocuments,havebeensubmittedtotheEntryProcessingDivision(EPD)orequivalentunit;

• There is no covering alert or hold order and the subject shipment has notbeentaggedas“abandoned”;and

• Incaseofrequestsforchangeintheconsignee’sname,therequestmustbesupportedbyanundertakingoftheoriginalconsigneethattheBOCshallnotbeheldresponsibleforthereleaseofthecargo.

• TherequestshallbefiledsolelywiththeOfficeoftheDeputyCollectorforOperationswhoshallresolvetherequestpromptlyuponapprovaloftheDistrictCollector.WheresuchrequestisapprovedordisapprovedbytheDistrictCollector,thesameshallbeforwardedtotheDeputyCollectorforOperationsfor the amendment in the E2M System or for the issuance of the notice of disapproval to the importer or consignee.

• Allconsignees,shippinglines,airlines,freightforwardersorconsolidatorsconcernedshallpayaP500processingfeeuponsubmissionofitsapplication.

• CMONo.31-2015takeseffectimmediatelyandshallgovernallpendingrequestsforamendmentofBLandAWB,andothersimilarrequests.


►►• Coverage

ThisCMOcoversalloff-dockcontaineryards/containerfreightstations(OCC)andwharves,warehouses,examinationareasandotheroff-dockcustomsfacilities(OCF)locatedoutsideofcustomszonesusedforthetemporaryhandlingandstorageofimportedgoods,aswellasOCFsoperatedbyconsolidatorsandfreightforwardersofconsolidatedcargo,includingthosehandlingbalikbayanboxes.

►►►• GeneralProvisions

1. AnOCCorOCFistobetreatedlikethecontainerterminalinsidethecustomszoneinallaspects,subjecttowhateveradditionalrequirements,rules and conditions which may be imposed by the Commissioner of Customs.

2. AnOCCshallexclusivelyhandleonlyLessContainerLoad(LCL)shipments.AnOCFshallexclusivelyhandleonlyFullContainerLoad(FCL)shipments.AfacilityshalleitherbeanOCCoranOCFunlessthesameisgiventheauthoritytooperatebothasanOCCandanOCF.ACertificateofAuthority(CoA)tooperateanOCCorOCFshallbevalidforaperiodofthreeyears.

CMONo.32-2015prescribestherevised rules and regulations on the establishment,supervisionandcontrolofoff-dockcontaineryardsand/orcontainer freight stations and other off-dockcustomsfacilitiesoutsideofthecustomszones.

23Tax bulletin |

3. Inventoryandothermanagementrecordsofimportedcargoeshandledandstoredbyauthorizedoperatorsshallbemaintainedandkeptatalltimes in their places of business and shall be accessible and available onlinetotheBOC.Suchrecordsshallalsobesubjecttoinspectionbyauthorizedcustomsofficialsorrepresentativesand,uponproperdemand,shallimmediatelybeproducedandsubmittedtosuchofficialsorrepresentatives.

• OperationalProvisions

1. AnypersonorfirmdesiringtoestablishandoperateanOCCorOCFshallapplyinwritingtotheCollectionDistrictwheretheproposedOCCorOCFfacilitiesaretobelocated.Anapplicantmustlikewisehavewrittenandverifiableproceduresonmattersrelatingtosecurity.

TheOCCorOCFmanagementshallcausethemandatoryandperiodictrainingofasufficientnumberofitspersonnelforthehandling,storageandmanagementofdangerousgoods.UponissuanceoftheCoAtoOperate,whichshallbevalidfor3years,theOCCorOCFshallcomplywiththefollowingrequirements:

• E2M Connectivity • CPRS Registration • Interest-bearingaccount/TreasuryBond/Insurancefromany

government financial institution to cover for duties and taxes due on lost or damaged goods in the amount of P1 million

• PaymentofanAnnualSupervisionFee

2. TheapplicationforrenewaloftheCoAtooperate,togetherwiththeupdateddocumentaryrequirements,shallbefiledwiththeDistrictCollectorconcerned,throughtheDeputyCollectorforOperations,notlaterthan6monthsbeforetheexpirationoftheauthoritytooperate.Failuretofileanapplicationforrenewal6monthspriortoitsexpirationshallautomaticallybesubjecttoapenaltyintheamountofP100,000.

3. UponwrittenrequestoftheOCCorOCFoperatortotheDistrictCollector

concerned,citingreasonstherefor,thefacilitymaybeclosedvoluntarily.The District Collector shall require all cargoes remaining with the operator tobereleasedtoitsconsigneesuponpaymentofallcustomsduties,taxesand other charges due thereon and after compliance with applicable laws and regulations. Any overstaying cargo still remaining with the operator shallbeinventoriedandtransferredtoaBOCWarehouseattheexpenseofoperator.

4. TheOCCorOCFshallbesuspendedorrevokedonanyofthefollowinggrounds:

• Whenusedinstoringsmuggledshipments• Ifinvolvedinpilferage• Cargoes cannot be accounted for • Overchargingoffees• Violationofcustomslaws,rulesandregulations• OtherviolationsoflawsofthePhilippines

24 | Tax bulletin

Incaseofacustoms-initiatedrevocationorcancellation,theDistrictCollectorconcernedshallorderitsDeputyCollectorforOperationstoconductaninvestigation,allowingtheoperatortosubmitevidencetothecontrary. The administrative proceeding should be summary in nature and shouldbeterminatedwithin30workingdaysfromreceiptoftheordertoconduct hearing.

5. Incaseofrelocation,expansionorprovisionofadditionalfacilities,theOCCorOCFoperatorshallsecureapprovalfromBOC.

6. AdditionalfacilitiesoutsidetheCollectionDistrictwheretheOCCorOCFacquired its authority to operate may be permitted upon application to the DistrictCollectorconcernedsubjecttotheapprovaloftheCommissioner,whichshallbeconsideredasanewandoriginalapplication.Hence,aseparate accreditation to operate is necessary on new applications to establishandoperateanOCCorOCFasprovidedinthisCMOshallapply.

7. AllOCCandOCFoperatorsshallsubmittotheDistrictCollectorconcernedandtheDirector,PortofOperationsService,AOCG,aweeklyreportinelectronic format all shipments transferred to their facilities.

►►• TheexistinglicensesofCY/CFS-OCZatthetimeofimplementationofthisOrdershallremainvaliduntilDecember31,2015.AllexistingCY/CFS-OCZarerequiredtosubmittheirapplicationforissuanceofCoAnotlaterthanOctober31,2015.

►►• CMONo.32-2015takeseffectimmediatelyandexpresslyrepealsallorders,memoranda,circularsorpartsthereof,whichareinconsistentwiththisCMONo.32-2015.

BSP Issuance

BSP Circular No. 886 dated September 8, 2015

►►• TheMonetaryBoard,initsResolutionNo.1380dated27August2015,approvedtheguidelinesonsalary-basedgeneral-purposeconsumptionloans,as well as the amendments of Section X321 of the Manual of Regulations for Banks(MORB)andSection4337SoftheManualofRegulationsforNon-bankFinancialInstitutions(MORNBFI)includingtheirrespectivesubsections.

►►• TheFinancialReportingPackage,prescribedunderSubsectionX191.2ofMORBisfurtheramendedtorevisethe:(a)ManualofAccounts(MOA);and(b)reportingtemplatesofthespecificFinancialReportingPackageforBanks(FRP)andtheSimplifiedFinancialReportingPackageforRuralandCooperativeBanks(SFRP).

►►• ThisCircularshallapplytoallsalary-basedgeneral-purposeconsumptionloansasdefinedhereinincludingthoseoutstandingpriortotheeffectivityoftheCircular.FinancialInstitutionsshallbegiven6monthsfromtheeffectivityofthisCirculartoadopt/amendtheirpolicies,proceduresandcreditriskstrategyon salary-based general-purpose consumption loans to comply with the provisions contained therein.

CircularNo.886prescribestheguidelines on salary-based general-purpose consumption loans.

25Tax bulletin |

►►• Thiscircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.

[Editor’s Note: Circular No. 886 was published in Malaya on September 11, 2015.]

SEC Opinions

SEC-OGC Opinion No. 15-10 dated September 2, 2015

Facts:

ACo.,adomesticcorporation,wasengagedinthesaleofvouchersorgiftcertificatestoitsindividualmembers.ACo.buysthesaidvouchersfromdifferentmerchantswhoprovidethegiftcertificatesatdiscountedprices.ACo.paysforthegiftcertificates,netofdiscounts,andsellsthemtomembersatfullprice.

Issue:

IsthesaleofvouchersorgiftcertificatesconsideredretailtradewithinthepurviewofRANo.8762?

Ruling:

No,thesaleofvouchersorgiftcertificatesisnotconsideredretailtrade.Vouchersorgiftcertificatesarenotgoodsforconsumption.Theyareintendedtobeusedbythebearertopurchasegoodsorservicesfrommerchants,andnotasend-useforconsumption to satisfy human wants and desires.

RANo.8762coversonlythesaleofgoodsforconsumptiontothegeneralpublicasend-user.Theterm“retail”isassociatedwithandlimitedtogoodsforpersonal,familyorhouseholduse,consumptionandutilization.Theitemssoldmustbe“thefinalandendusesofaproductwhichdirectlysatisfyhumanwantsanddesiresandareneededforhomeanddailylife.”Moreover,thelawcoversonlythesaleofgoodsfor consumption to the general public as end-user.

SEC-OGC Opinion No. 15-12 dated September 22, 2015

Facts:

ThePresidentofanon-stocksavingsandloanassociationsoughttheopinionoftheSEContheinterpretationofSection30oftheCorporationCode,particularlyonthemanner of determining the honorarium to be given to its Board of Trustees.

Issue:

Shouldanon-stocksavingsandloanassociationdeducttheproposedhonorariumofitstrusteesfromthenetincomeofthepreviousyearbeforecomputingthe10%allowablehonorariumtobegiventoitsBoardofTrusteesforthecurrentyear?

Saleofvouchersorgiftcertificatesto individuals does not fall within the definitionofretailtradeunderRANo.8762,otherwiseknownasRetailTradeLiberalizationActof2000.

The10%allowablehonorariumtobegiven to the Board of Trustees is based on the net income before tax of the previous year. There is no need to deductthe10%honorariumfromthecomputation of previous year’s net income before tax.

26 | Tax bulletin

Ruling:

No,itshallbecomputedbasedonthe“netincomebeforeincometaxoftheyearduring which the directors have served as such”. The compensation paid to the directors will be considered as an expense during the year and therefore deducted from gross income in order to produce the net income before income tax.

Anyconcernsinvolvingnon-stocksavingsandloanassociations,suchastheapplicabilityofSection30oftheCorporationCodeshouldbeaddressedtotheBSPwhich is the competent authority to determine such issues.

Court Decisions

De La Salle Lipa, Inc. vs. Commissioner of Internal RevenueCTA(ThirdDivision)CaseNo.8363promulgatedAugust24,2015

Facts:

RespondentCommissionerofInternalRevenue(CIR)assessedPetitionerDeLaSalleLipa,Inc.(DLSL)for,amongothers,deficiencyincometaxontheincomederivedfrom the lease of its facilities to a school canteen operator. The school protested theassessmentarguingthatitisexemptfromtaxesasanon-stock,non-profiteducationalinstitutionwhereallitsassetsandrevenuesareactually,directlyandexclusively used for educational purposes. DLSL also argued that the amount paid by the canteen operator is not rent but an “advance donation” for the joint operationofthecanteen,whichisnotsubjecttoincometax.TheBIRdeniedtheprotest.

DLSLfiledaPetitionforReviewwiththeCourtofTaxAppeals(CTA).Theschoolarguedthatitisanon-stocknon-profiteducationalinstitutionexemptfromtaxunderSection30(h)oftheTaxCodeandSection4(3),ArticleXIVoftheConstitution.DLSLarguedthat,regardlessofthesource,itsincomeisexemptfromtaxaslongasitisactually,directlyandexclusivelyusethefundsforeducationalpurposes.Allitsrevenuesaresolelyusedfortheexpansion,operationand maintenance of its campus in the pursuit of its primary purpose of providing Christian education to the youth.

Ontheotherhand,theCIRarguedthatDLSL’sclaimofexemptionfromincometaxhas no basis since the sources of revenues being taxed are non-educational income. The school and the canteen operator purportedly entered into a joint venture contract to operate the canteen but they in fact executed a contract of lease. The BIRaddedthattobeexempt,thecanteenmustbeownedandoperatedbytheeducation institution itself as an ancillary activity and the same is located within the school premises.

Tobeexemptfromtax,theincomeofanon-stock,non-profiteducationalinstitutionmustbeusedactually,directly,andexclusivelyforeducationpurposes as prescribed by the Constitution and the Tax Code.

27Tax bulletin |

Issue:

IsDLSLliablefordeficiencyincometax?

Ruling:

Yes.Anon-stock,non-profiteducationinstitutionshallbeentitledtoincometaxexemptionundertheConstitutionandtheTaxCodeifitcanprovethat:

1. Itisanon-stock,non-profiteducationinstitution;and,2. Theincomeitseekstobeexemptedfromtaxisusedactually,directly,and

exclusively for education purposes.

DLSL failed to prove that the alleged donation by the canteen operator was commingledinthegeneralfund.Italsofailedtoestablishthatitsfundswereactually,directly,andexclusivelyusedforeducationpurposesasitsAuditedFinancialStatementsreveal,amongothers,thattherewereitemsthatarenotrelatedtoitsfunctionasaneducationinstitution,suchasretirementcontribution,entertainment,amusementandrecreation.

TheCTAalsoruledthattheBIRwascorrectintreatingthecontractbetweentheschoolandthecanteenoperatorasacontractoflease,andnotacontractofdonation as DLSL attempted to establish. There was no donative intent on the part of the operator and the purported donation was belatedly executed.

Perception Gaming, Inc. vs. Bureau of Internal RevenueCTA(FirstDivision)CaseNo.8449promulgatedAugust26,2015

Facts:

PetitionerPerceptionGaming,Inc.(PGI)filedwiththeBIRaclaimforrefundoferroneouslypaidVATandunutilizedinputVATattributabletoitszero-ratedsalesofserviceforthefirstquarterof2010.PGIinitiallysubjectedto12%VATitsgrossreceiptsfromthesaleandleaseofgamingmachinestoentitiesauthorizedbythePAGCORtooperategamingcentersor“bingooperators.”

AstheCIRfailedtoactontheclaim,PGIfiledaPetitionforReviewwiththeCTA.

PGIarguedthatsincePAGCORandPAGCOR-authorizedbingooperatorsareexemptfromVATunderRANo.9487(orthePAGCORCharter),itsgrossreceiptsfromthelease of gaming equipment and performance of technical services in connection withthebingooperationsofPAGCORanditsoperatorsaresubjectto0%VAT.

TheBIR,ontheotherhand,insistedthattheleaseofgamingequipmenttoPAGCOR’soperatorsissubjectto12%VATbecause,whiletheoperatorsareexemptfromtaxes,itsexemptiononlycoverstaxesforwhichitisdirectlyliableandnottheVATpassed-ontothembyPGI.Moreover,sincePGIdoesnotdealdirectlywithPAGCORbutonlywithitsoperators,PAGCOR’sexemptioncannotbeextendedinitsfavor.

ServicesrenderedtoPAGCORandPAGCOR-authorizedbingooperatorsareexemptfromVAT,pursuanttoSection108(B)(3)oftheTaxCode.

28 | Tax bulletin

The CTA has jurisdiction to review rulingsoftheCIRandSecretaryofFinance,whicharedeemeddecisionson“other matters” arising under the Tax Code,pursuanttoSection7(a)(1)ofRANo. 1125.

Hotel services rendered in the Philippines to an international carrier are subject to 12% VAT.

Issue:

IsPGI’ssaleofservicestoPAGCORoperatorssubjectto0%VAT?

Ruling:

Yes.PGI’ssaleofservicestoPAGCORoperatorsareVATzero-rated.

UnderSection13(2)(a)and(b)ofthePAGCORCharter,PAGCORisnottheonlyentityexemptedfromtaxes.Thetax-exemptstatusislikewiseexpresslyconferredonotherentitiesthatPAGCORanditsoperatorscontractwithinconnectionwiththecasinooperations.TheseentitiesincludethePAGCOR-authorizedbingooperatorssincePAGCORisauthorizedunderRANo.9487to“license”thirdpartiestooperategamblingcasinos,gamingclubsandothersimilarrecreationoramusementplaces,gamingpools,i.e.basketball,football,bingo,etc.,exceptjai-alai.

SincePAGCORandPAGCOR-authorizedbingooperatorsareexemptfromVATunderthePAGCORCharter,theservicesrenderedtothemareeffectivelysubjectto0%VATpursuanttoSection108(B)(3)oftheTaxCode.

Delta Air Lines, Inc. vs. Cesar V. Purisima, in his capacity as Department of Finance Secretary and Kim S. Jacinto-Henares, in her capacity as Commissioner of Internal Revenue CTA (En Banc)CaseNo.1113promulgatedSeptember10,2015

Facts:

Petitioner Delta Air Lines (Delta) entered into an agreement with The Peninsula Manila(Peninsula)forroomaccommodationandotherhotelservicestoitsguests,pilotsandcabincrewduringflightlayoversinthePhilippines.DeltarequestedforaBIRrulingforVATzero-ratingunderSection108(B)(4)oftheTaxCodecoveringservices rendered to persons engaged in international air transport operations.

TheBIRissuedRulingNo.099-2011whereitheldthatPeninsula’sservicestoDeltaaresubjectto12%VAT,astheserviceswererenderedwithinthehotelpremisesandhadnodirectconnectionwiththetransportofgoodsorpassengers.Uponreview,theSecretaryofFinancesustainedtherulingoftheBIR.DeltafiledaPetitionforReview with the CTA.

TheSecretaryofFinanceandtheBIRargued,amongothers,thattheCTAhasnojurisdictionoverthecasesinceDeltafailedtoexhaustalladministrativeremedies,i.e.,appealtotheOfficeofthePresidentthentotheregularcourts.TheCTASecondDivisiondismissedthepetitiononjurisdictionalgrounds.Upondenialofitsmotionforreconsideration,DeltaappealedtotheCTAEn Banc.

29Tax bulletin |

Issues:

1. DoestheCTAhavejurisdictiontoruleonthevalidityofrulingsoftheBIRandtheSecretaryofFinance?

2. ArethehotelservicesrenderedbyPeninsulatoDeltasubjectto12%VAT?

Ruling:

1. Yes.TheCTAhasjurisdictiontoreviewrulingsoftheBIRandtheSecretaryofFinance.

Citing CIR vs. Leal, G.R. 113459,theCTAheldthatthejurisdictiontoreviewrulingsoftheCIRandSecretaryofFinancepertainstotheCTA,nottotheRegionalTrialCourt,consideringthatBIRrulingsareopinionsimplementingtheTaxCodepursuanttoitspowerunderthelaw.WhilethereisnoexplicitlegalprovisionthatprovideswheretoappealdecisionsoftheSecretaryofFinance,Section7(a)(1)ofRANo1125addressestheseeminggapinthelawasitveststheCTA,albeitimpliedly,withjurisdictionoversaiddecisionsas“othermatters”arisingundertheTaxCodeorotherlawsorpartoflawadministeredbytheBIR.

2. Yes.Asageneralrule,servicesperformedinthePhilippinesbyaVAT-registered person to persons engaged in international shipping or air transport operationaregenerallysubjectto0%VAT.However,RRNo.16-2005,asamendedbyRRNo.4-2007,providesthatwhentheservicesperformedinthePhilippines by a VAT-registered person are rendered to common carriers by air andsearelativetotheirtransportofpassengers,goodsorcargoesfromoneplacetoanotherwithinthePhilippines,thesameisalreadysubjectto12%VAT.

The services rendered by the hotel were rendered within the Peninsula’s premises and they have no direct connection with the transport of goods or passengers.Assuch,theycannotbeconsideredservicesdirectlyattributableto the transport of goods and passengers from a Philippine port directly to a foreignporttobeentitledtoVATzero-rating.

30 | Tax bulletin

About SGV & Co.SGV is the largest professional services firm in the Philippines that provides assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. SGV & Co. is a member firm of Ernst & Young Global Limited.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legalentity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

For more information about our organization, please visit www.ey.com/PH.

© 2015 SyCip Gorres Velayo & Co.All Rights Reserved.APAC No. 10000082Expiry date: no expiry

SGV | Assurance | Tax | Transactions | Advisory

SGV & Co. maintains offices in Makati, Cebu, Davao, Bacolod, Cagayan de Oro, Baguio, General Santos and Cavite.

For an electronic copy of the Tax Bulletin or for further information about Tax Services, please visit our websitewww.ey.com/ph

We welcome your comments, ideas andquestions. Please contact Ma. Fides A. Balili via e-mail at [email protected] or at telephone number 894-8113 andMark Anthony P. Tamayo via e-mail at [email protected] or at telephone number 894-8391.

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither SGV & Co. nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

tax bulletin - september 2015 - ey

Documents