TAXATION OF REAL ESTATE TRANSACTIONS AND PROFESSIONALS

Atty. Vic C. MamalateoOctober 8, 2015

CREBA ANNUAL CONVENTION, Bacolod City

PARTIES TO REAL ESTATE TRANSACTION

• SELLER RE BROKER BUYER

CORP

BROKER

CORP

IND

IND

SELLER OF REAL PROPERTY

• A. INDIVIDUAL– Compensation income earner or retiree– Engaged in RE business or engaged in non-RE business

• B. CORPORATION– Person engaged in RE business – RE dealer, RE developer,

or RE lessor– Person engaged in non-RE business: manufacturer or

dealer of goods, or seller of service– Unincorporated joint venture

• Between landowner and RE developer (taxable partnership)• Between two general contractors licensed by PCAB (partnership is

exempt from income tax, but share of joint venture partners in sale of RE by uJV is taxable to them)

CAPITAL ASSET/ORDINARY ASSET

• Sec. 39(A)(1), NIRC: “CAPITAL ASSET” means property held by the taxpayer (whether or not connected with his trade or business), but does not include:– Stock in trade of the taxpayer or other property of a kind

which would properly be included in the inventory of the taxpayer, if on hand at the close of the taxable year; or

– Property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; or

– Property used in the trade or business, of a character which is subject to the allowance for depreciation; or

– Real property used in trade or business of the taxpayer.

NATURE OF REAL PROPERTY

• I. REAL PROPERTY IS A CAPITAL ASSET

– Seller is a compensation income earner or retiree, or is engaged in non-real estate business and the asset sold is not used in its trade or business

• II. REAL PROPERTY IS AN ORDINARY ASSET

– Seller is engaged in real estate business (as a RE dealer, RE developer, or RE lessor); or

– Seller is engaged in non-real estate business andasset sold is used in its trade or business.

TYPES OF SALE UNDER TAX CODE

• A. CASH SALE– Full consideration is received at the time of execution of instrument of

sale

• B. INSTALLMENT SALE– 1. DEFERRED PAYMENT SALE NOT ON THE INSTALLMENT

PLAN (treated as cash sale)- INITIAL PAYMENTS (composed of down payment and all monthly amortizations in the YEAR OF SALE) is more than 25% of the gross selling price.

-- 2. SALE ON INSTALLMENT PLAN- INITIAL PAYMENTS is 25% or less of the gross selling price in the sale of sale.

RECEIPT OF CONSIDERATION OF SALE

• DEFERRED PAYMENT SALE, NOT ON INST PLAN (Initial payments exceed 25% of GSP)– Entire selling price (whether received or not) shall be

reported for tax purposes in year of sale; net taxable income (gross selling price less cost and deductions) is subject to the applicable income tax rate.

• SALE ON INSTALLMENT PLAN (Initial payments do not exceed 25% of GSP)– Collection in year of sale: Report amount received in Year 1

as taxable income times gross profit rate = gross income– Succeeding years of collection: Report amount received

every year as taxable income times gross profit rate = gross income

APPLICABLE TAX SYSTEM

SCHEDULAR TAX SYSTEM: CAPITAL ASSET

• Gross Selling Price (GSP) or Fair Market Value (FMV) at time of sale, whichever is higher

• Multiplied by: 6%

• CAPITAL GAINS TAX

GLOBAL TAX SYSTEM: ORDINARY ASSET

• Selling Price

• Less: Cost or Basis

• Gross Income

• Less: Deductions

• Net taxable income (corp)

• Multiplied by: 30%

• REGULAR CORP INCOME TAX

• Less: Creditable Withholding Tax

• Balance

SALE OF ORDINARY ASSET

• Transfer of ordinary asset for less than adequate consideration (Sec 100, NIRC):– Fair market value xxx

– Less: Selling price - xxx

– Excess of FMV over SP xxx

– Multiplied by:

– (Buyer is member of family) x 2%-15%

– (Buyer is a stranger) 30%

– DONOR’S TAX xxx

DEVELOPER & BROKER RELATIONSHIP

• RE DEV AGENCY RE BROKERS AGENT

CORP PART

A

B

C

X

RE BROKERS AND AGENTS

• A. RE BROKERAGE AGENCY– RE Developer has a marketing agreement with the RE

brokerage agency, an unincorporated entity

• B. RE BROKER– RE Developer has a contract directly with the RE Broker, or

– RE brokerage agency has a contract with the RE Brokers, regarding the sharing of commissions received by RE Agency from RE Developer

• C. RE AGENT– Works for a RE Broker, who shares his commissions with

the RE Agent

DUTIES OF RE DEV & RE AGENCY

• A. PAYMENT OF COMMISSION BY RE DEVELOPER TO RE BROKERAGE AGENCY– Commission income of RE Agency is subject to 12% VAT,

which must be passed on to RE Developer;– Commission income of RE Agency is subject to 10%/15%

expanded withholding tax on the part of RE Developer, which is remitted to BIR within 10 days of the following month. Non-withholding of tax will result in the disallowance of its commission expense from gross income, whether deficiency EWT is paid or not during BIR audit. BIR Form 2307 will be issued to RE Agency, which can be used as credit against its income tax liability.

– RE Agency will issue VAT receipt to RE Developer upon receipt of payment of commission.

DUTIES OF RE AGENCY & RE BROKER

• If RE Broker is VAT-registered person:– 12% VAT will be passed on to RE Agency, and RE

Broker must issue VAT receipt to RE Agency upon receipt of payment of commission;

– RE Agency must withhold the 10%/15% EWT from commission of RE Broker, which tax must be remitted to the BIR within the prescribed period, and BIR Form 2307 must be issued to RE Broker, as tax credit against his income tax liability. Non-withholding of tax will result in the disallowance of its commission expense from gross income, whether deficiency EWT is paid or not during BIR audit.

DUTIES OF RE AGENCY & RE BROKER

• If RE Broker is not VAT-registered person:– RE Broker will not pass on the 12% VAT to RE Agency, and

non-VAT receipt will be issued upon receipt of commission.– RE Agency must withhold the 10%/15% EWT from

commission of RE Broker, which tax must be remitted to the BIR within the prescribed period, and BIR Form 2307 must be issued to RE Broker, as tax credit against his income tax liability. Non-withholding of tax will result in the disallowance of its commission expense from gross income, whether deficiency EWT is paid or not during BIR audit.

– RE Broker is subject to the 3% percentage tax on gross commission received.

TRANSFER OF INTEREST ON REALTY

• RR 17-2003, Mar 31, 2003– If upon completion of payment of purchase price of

real property but before execution of the Deed of Sale, the buyer assigns his right to another for a consideration, the assignment is a separate sale of real property; hence, subject to EWT or FWT, as the case may be, and to DST on the same basis.

– Sale of interest on real property (property purchased by CTS but sold by original buyer before it was fully paid) is taxable on seller based on realized gain (SP –C).

EXPANDED WITHHOLDING TAX

• The seller is habitually engaged in real estate business, the asset sold is an ordinary asset subject to income tax, and the buyer is a resident of the Phil and is engaged in trade or business in the Phil:

• Basis is GSP or FMV, whichever is higher EWT Rate– GSP is P500,000 or less 1.5%– GSP is over P500,000 – P2 M 3.0%– GSP is over P2 M 5.0%

• If the first two conditions above are present and the buyer is a resident of the Phil but is not engaged in trade or business in the Phil (e.g., employee), the EWT shall be deducted and withheld by him when paying the last installment(s). However, if buyer is a qualified non-resident citizen (e.g., OFW), there is no duty to withhold the tax.

• If the seller is not habitually engaged in real estate business (e.g., build-and-sale person or a bank) and the two other conditions above are present, the applicable EWT rate shall be 6% of GSP or FMV as determined by the CIR, whichever is higher.

RR 10-2013, June 6, 2013

• INCOME PAYMENTS SUBJECT TO EWT (RR 2-98, as amended by RR 14-2002 and RR 30-2003):

– Professionals, including real estate service practitioners (RE consultants, RE appraisers, and RE brokers) under RA 9646 (RESA Law) – 10% EWT up to P720,000 gross commission; 15% EWT, over P720,000

– RE brokers who failed or did not take up the licensure examination given by RE Service under PRC – 10% EWT of gross commission.

• If licensed RE broker wants that the commissions to be received in July to Dec of the year will be subject to 10% EWT, he must file a Sworn Declaration as of June 30 of such year stating that his gross commissions have not exceeded P720,000. If he fails to do so and to submit copy thereof to payor of commission, the proper EWT rate shall be 15%.

REV REGS NO. 1-2015, Jan 5, 2015

• SUBJECT: Amended Sec. 2.78.1(A)(3), RR 2-98 (de minimisbenefits), as last amended by RR 8-2012, and Sec. 2.33(C), RR 3-98 (fringe benefits), as last amended by RR 8-2012, by adding RR 2-98(k) [benefits of relatively small value] and RR

3-98(C) [fringe benefits not subject to FBT]:

– Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive scheme, provided that the total annual monetary value received from both CBA and productivity incentive scheme combined do not exceed P10,000 per employee per taxable year

REV REGS NO. 2-2015, Dec 17, 2014

• SUBJECT: Amended RR 2-2006 and 11-2013 re submission of copies of BIR Forms 2307 and 2316.

• Sec. 2. Mandatory submission of Summary Alphalist of Withholding Agents of income payments subjected to CWT (SAWT) by the payee/income recipient and of Monthly Alphalist of Payees (MAP) subjected to withholding tax by the withholding agent/income payor as attachment to their filed returns.

• D. Returns to be filed with SAWT and CWT:• Provided, however, that the SAWT shall be submitted thru the

applicable modes of submission prescribed under RR 1-2014, using the data entry and validation module of the BIR.

REV REGS NO. 2-2015, Dec 17, 2014

• On the other hand, in lieu of the submission of hard copies of CWT (2307) as attachment to SAWT, the following procedures shall be strictly observed:– 1. Scan the original copies of 2307 thru a scanning machine or

device;– 2. Store the soft copies of 2307, using the PDF file format with the

filenames alphabetically arranged in a Digital Versatile Disk-Recordable (DVD-R). The filename shall contain the following information separated by an underline:

a. BIR-registered name of the taxpayer-payor;b. TIN, including the head office code or branch code of the

payor, whichever is applicable; and c. Taxable period;

3. Label the DVD-R in accordance with the format prescribed in Annex “A” of the Regulations; and

REV REGS NO. 2-2015, Dec 17, 2014

– 4. Submit the duly accomplished DVD-R to the BIR office where the TP is registered, together with the notarized certification, using the format in Annex “C” of the Regulations, duly signed by the authorized representative of the TP, certifying that the soft copies of the said BIR form contained in the DVD-R are the complete and exact copies of the original thereof.

• E. With respect to the provisions of Sec. 2.83 of RR 2-98, as amended by RR 11-2013, the same are further amended as follows:

• Sec. 2.83. Statements and Returns• However, in cases covered by substituted filing, the employer shall

furnish each employee with the original copy of BIR Form 2316and, in lieu of the submission of hard copies of the duplicate original thereof, the following procedures shall be strictly observed:

– 1. Scan the original copies of 2316 thru a scanning machine or device;

REV REGS NO. 2-2015, Dec 17, 2014

– 2. Store the soft copies of 2316, using the PDF file format with the filenames alphabetically arranged in a Digital Versatile Disk-Recordable (DVD-R). The filename shall contain the following information separated by an underline:

a. Surname of the employee;b. TIN of the employee; and c. Taxable period;

– 3. Label the DVD-R in accordance with the format prescribed in Annex “A” of the Regulations; and

– 4. Submit the duly accomplished DVD-R to the BIR office where the TP is registered, together with the notarized certification, using the format in Annex “C” of the Regulations, duly signed by the authorized representative of the TP certifying that the soft copies of the said BIR form contained in the DVD-R are the complete and exact copies of the original thereof.

REV REGS NO. 2-2015, Dec 17, 2014

• Sec. 3. Taxpayers covered by the amendatory provisions.– The requirements prescribed in the preceding Sections of this regulation shall be strictly complied with by all taxpayers registered with the LTS: Provided, however, that any non-LTS taxpayer duly registered under the RDO may at his/her option, comply with the said require-ments: Provided, further, that the non-LTS registered TP shall no longer be allowed to submit in hard copies thereafter, once the said TP opted to adopt the requirements prescribed by these regulations.

RMC 24-2015, Apr 13, 2015

• SUBJECT: Clarification on RR 2-2015, re submission of scanned copies of BIR Forms 2307 and 2316

• 1. As prescribed in RR 2-2015, the submission of 2307 and 2316 shall fall on March 21, 2015, or 15 days after its publication in Manila Bulletin on March 6, 2015.

• 2. For initial implementation, and to give ample time to comply with the technical requirements in submitting scanned copies of 2307, taxpayers adopting accounting period either on CY or FY basis shall have the option to submit the required 2307, either in hand or in scanned copies, together with the quarterly income tax returns due to be submitted on or before April 30, 2015. For quarterly filings with deadline falling beyond April 30, 2015, taxpayers are mandated to submit 2307 in scanned copies.

RMC 24-2015, Apr 13, 2015

• 3. The provisions of Sec 4, RR 2-2006 for the retention of the hard copy of said Certificates of Tax Withheld shall remain in force and effect and the presentation thereof may be requested during audit for purposes of validating the tax credits arising from the withholding taxes which are being claimed by taxpayers in their ITRs.

• 4. The preparation of separate copies of 2307 and issuance thereof, where there are 2 or more income payments made by an income payor-WA to the same income recipient-payee that are subjected to different CWT rates is not required under RR 2-98, as amended.

• 5. If so desired by the concerned taxpayer, he may file a written request for certified true copy of the scanned 2307 or 2316 with the BIR, provided that a certification fee and corresponding DST shall be paid by the requesting taxpayer.

RMC 24-2015, Apr 13, 2015

• 6. The authorized representative of the taxpayer shall be the PRINCIPAL OFFICER of the corporation.

• 7. The printing of the logo of taxpayer in the DVD-R is optional.

• 8. Large Taxpayers are covered but non-large taxpayers may, at his/its option, comply with the requirements. However, non-LT shall no longer be allowed thereafter to submit in hard copies 2307 and 2316 once they opted to adopt the same.

• 9. Failure to comply with the requirements in RR 2-2015 shall subject the concerned taxpayer to penalties under the Tax Code and RMO 7-2015, if applicable.

RMC 24-2015, Apr 13, 2015

• 10. The respective images of such certificates shall be separately stored or saved in the DVD-R using a sequential number annexed at the end of each filename, prepared in accordance with the format prescribed under RR 2-2015, which is separated by an underscore.– Example: BMC_131885220000_09312014_1

BMC_131885220000_09312014-2

Accordingly, the income recipient is now allowed to store or save all these images in a single PDF file and the hard copies of 2307 shall be scanned individually and stored/saved in the DVD-R pursuant to the above illustration.

11. There is no required specific size of paper for purposes of printing 2306 and 2316. It is sufficient that the detailed information required in each of the BIR forms are captured in the paper and the same can be read clearly.

RMC 24-2015, Apr 13, 2015

12. The taxpayer may use any device, whether flatbed scanner, camera or other available device, in capturing the images of 2307 and 2316, provided that the images thereof can be stored in soft copies in PDF format, using DVD-R.

13. The minimum resolution of the images should be at least 20 dot-per-inch (dpi), set to black and white.

• 14. The required specification of the DVD-R should be single and single-layered.

REV REGS NO. 3-2015, Mar 9, 2015

• SUBJECT: Implements RA 10653, increasing 13th month pay and other benefits– The amount of P82,000 shall only apply to the 13th month

pay and other benefits under RR 2-98, as amended, and shall in no case apply to other compensation received by an employee under an employer-employee relationship, such as basic salary and other allowances. Further, it must be emphasized that this exclusion from gross income is notapplicable to self-employed individuals and income generated from business.

– The amount of P82,000 shall apply to 13th month pay and other benefits paid or accrued beginning Jan 1, 2015.

REV REGS NO. 10-2015, Sept 21, 2015

• SUBJECT: Use of non-thermal paper for all CRM/POS and other invoice/receipt-generating machine/ software

• Background: Sec 1 of RR 5-2014 amended Sec 2 of RR 17-2013, which provides:– Sec. 2. Retention periods.– All taxpayers are required to

preserve their books of accounts, including subsidiary books and other accounting records for a period of 10 years reckoned from the day following the deadline in filing a return, or if filed after the deadline, from the date of the filing of the return for the taxable year when the last entry was made in the books of accounts.

REV REGS NO. 10-2015, Sept 21, 2015

• The term “other accounting records” includes the corresponding invoices, receipts, vouchers and returns and other source documents supporting the entries in the books of accounts. They also be preserved for a period of 10 years counted from the date of last entry in the books to which they relate.

• Further, in relation to Sec 5.2 of RR 11-2004, it provides “that all tape receipts issued, and the data printed on the receipts, are of a quality that can be preserved for a period within which the CIR is authorized to make an assessment and collection of taxes, as prescribed in Secs 203 and 222 of NIRC, as amended.

• Sec. 3. All new business registrants with CRM/POS and other similar machines/software with built-in printer for their transactions shall use non-thermal paper only.

REV REGS NO. 10-2015, Sept 21, 2015

• Sec. 4. Considering the associated costs of transitioning to non-thermal paper, a tiered compliance structure is hereby put in place to allow concerned taxpayers to meet compliance requirements over a three-year period (3-year depreciable life). Accordingly, all existing taxpayers with CRM/POS/other similar machines/software using thermal paper for their daily transactions are subject to the herein prescribed staggered implementation dates, to wit:

• Registered CRM/POS Staggered Implementation Dates• July 1, 2014 onwards On or before July 1, 2018• July 1, 2013-June 30, 2014 On or before July 1, 2017• Prior to July 1, 2012-June • 30, 2013 On or before Sept 1, 2016

REV REGS NO. 10-2015, Sept 21, 2015

• Sec. 5. The ORs for sales of services or SI/CIs for sales of goods generated from CRM/POS/other similar machines/software, shall be printed showing, among others, the following: (1) Taxpayer’s registered name; (2) TP’s business name/style (if any); (3) A statement that the taxpayer is VAT or non-VAT registered followed by the TIN and 4-digit Branch Code; (4) Machine identification number; (5) Detailed business address where such OR/SI/CIs shall be used/located; (6) Date of transaction; (7) Serial number of the OR/SI/CI printed prominently; (8) A space provided for the name, address and TIN of the buyer; (9) Description of the items/goods or nature of service; (10) Quantity; (11) Unit cost; (12) Total cost; (13) VAT amount, if transaction is subject to 12% VAT; (14) If taxpayer is engaged in mixed transactions, the amounts involved shall be broken down into VATablesales and VAT amount, zero-rated sales, and exempt sales; (15) For non-VAT OR/SI/CIs, such as DRs, order slips, POs, PR/AR/CRs, credit/debit memos, job orders, etc., the statement “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX” shall be conspicuously printed in bold letters; (16) Taxpayers whose transactions are not subject to VAT or percentage

REV REGS NO. 10-2015, Sept 21, 2015

• tax shall issue non-VAT principal receipts/ invoices, indicating prominently on the face of such receipts/invoices the word “EXEMPT;” and (17) If taxpayer is subject to percentage tax under Title V, but also sells goods/services under Sec 109(A) to (W), excluding (E) [Services subject to percentage tax under Title V, NIRC] of the same Code, as amended by RA 10378 (Act recognizing reciprocity for income tax exemption of intl air carriers), the non-VAT principal receipt/invoice shall indicate the breakdown of sales subject to percentage tax and VAT-exempt sales.

REV REGS NO. 10-2015, Sept 21, 2015

• The following information shall be printed at the bottom portion of the OR/SI/CI: (1) Name, address and TIN of the accredited supplier of CRM/POS/other machine/software; (2) Accreditation number and date of accreditation (date issued “mm/dd/yyyy” and valid until “mm/dd/yyyy” of accredited supplier; (3) BIR Final Permit to Use number; (4) The phrase “THIS INVOICE/RECEIPT SHALL BE VALID FOR FIVE YEARS FROM DATE OF PERMIT TO USE.”

REV REGS NO. 10-2015, Sept 21, 2015

• For taxpayers transaction with senior citizens and/or PWD pursuant to RA 9994, in addition to the information enumerated above, a space for the following shall be required: (1) Senior citizen/PWD TIN; (2) OSCA ID No./PWD ID No.; (3) Senior citizen discount/PWD discount (show detailed breakdown of 20% discount and/or 12% VAT exempt); and (4) Signature of senior citizen/PWD.

• However, for taxpayers whose transactions are not covered by RA 9994, the above information may not be indicated.

REV REGS NO. 10-2015, Sept 21, 2015

• Sec 6. All existing taxpayers issuing receipts/invoices generated thru CRM/POS/other similar machines/softwares(using thermal paper or otherwise), including those connected to a network or linked to CAS or components thereof, generating electronic receipts, shall be covered by the requirements set forth under Secs 4 and 5 hereof.

• Sec 8. In order to provide ample time in procuring, reconfiguring machines and systems, to comply with Sec. 5, adjustments shall be undertaken on or before Oct 1, 2015. Any extension due to enhancements of systems required to be undertaken abroad shall seek the approval from the concerned Regional Director or ACIR, LTS, which shall not be longer than six (6) months from the effectivity of these Regulations.

RMC 57-2015, July 21, 2015

• SUBJECT: Submission of inventory list and other reporting requirements

• Sec. 1: This Circular aims to consistently apply the data requirements across different sectors with the peculiarity of the industry where the taxpayers belong, directing the volume of reporting. Hence, the additional reports or schedules to be submitted and filed with the annual inventory list shall cover companies maintaining inventory of stock-in-trade, raw materials, goods in process, supplies and other goods, such as manufacturing, wholesaling, distributing/ retailing sectors, including real estate dealers/developers, service companies, e.g., construction companies, building contractors, etc. It bears stressing that the data/information contained in the said schedules/lists

RMC 57-2015, July 21, 2015

• should be reconciled with the amount declared in the financial statements and annual income tax returns.

• Sec. 2: Formats and deadline. All taxpayers with tangible asset-rich balance sheets, often with at least half of their total assets in working capital assets (e.g., accounts receivable and inventory), shall submit, in addition to the annual inventory list, schedules/lists prescribed herein, in hard and soft copies, using the format shown in Annex “A” (for manufacturing/merchandising or retail company); Annexes “B” and “B-1” (for real estate company), and Annex “C” (for construction industry). Taxpayers not belonging to the above-described industries shall adopt the herein-prescribed format that is applicable to their existing inventory.

ANNEX “B”

• Project• Total projected estimated revenue• Actual cost incurred

– Prior years– Current years– Total

• Estimated cost to complete• Total estimated project cost• Realized gross profit

– Prior years– Current year

• Total saleable units– Available for sale– Units sold in prior years– Units sold in current year– Unsold at year end

ANNEX “B-1”

• Project

• VATABLE SALES– Deferred cash sales

– Installment sales• Principal

• Interest & other charges

– VAT

– Zero-rated sales

– Exempt sales

– Balance

ANNEX “B-1”

• SALES DURING THE YEAR– VATABLE SALES (net of VAT)

• Cash sales

• Deferred sales

• Installment sales– Principal

– Interest & other charges

– Zero-rated sales

– Exempt sales

– Total sales

ANNEX “B-1”

• COLLECTIONS DURING THE YEAR

– VATABLE SALES (net of VAT)

• Cash sales

• Deferred sales

• Installment sales– Principal

– Interest & other charges

• Zero-rated sales

• Exempt sales

• Total

ANNEX “B-1”

• COLLECTIONS DURING THE YEAR– VATABLE SALES (net of VAT)

• Cash sales

• Deferred sales

• Installment sales– Principal

– Interest & other charges

• VAT

– Zero-rated sales

– Exempt sales

– Total collections

ANNEX “B-1”

• ACCOUNT RECEIVABLE – END– VATABLE SALES

• Deferred sales

• Installment sales– Principal

– Interest & other charges

• VAT

– Zero-rated sales

– Exempt sales

– Balance

RMC 57-2015, July 21, 2015

• The soft copies of the inventory list including other applicable schedules shall be stored/saved in DVD-R properly labeled and submitted, together with a notarized certification, as shown in Annex “D” hereof, duly signed by the authorized representative of the taxpayer certifying that the data/information contained in the DVD-R are true and correct.

• For initial filing using the herein prescribed format, the schedules and inventory list shall be submitted on or before Sept 30, 2015, covering ending inventory as of Dec 31, 2014, and thereafter every 30th day following the close of the taxable year (depending on the accounting period adopted by the taxpayer.

RMC 57-2015, July 21, 2015

• The inventory lists as well as other applicable schedules are to be submitted with the RDO where the non-large taxpayers are registered and with the LTAD, ELTRD, LTD-Makati and Cebu for taxpayers classified as large under the LTS.

• The submission of the schedules and inventory list that does not conform with the herein prescribed format shall be deemed not received by the concerned BIR office and shall be considered as grounds for the imposition of penalties under Secs 250 and 255 of the 1997 Tax Code, as reiterated in RMO 7-2015.

RMC 61-2015, Sept 29, 2015

• The deadline set in RMC 57-2015 (Sept 30, 2015) is extended to on or before October 31, 2015!

RMC 59-2015, Sept 17, 2015

• SUBJECT: Availability of Update of Exemption of Employees (UEE) Data Entry Module in filing of BIR Form 2305 (Certificate of Update of Exemption and of Employers and Employee’s Information) and 2305 (Batch File Validation Module)

• In relation to RR 7-2012, 2305 shall be used for updating of employees additional exemption for dependents, change of status, and execution of “Waiver of Claim the Additional Exemption” by the husband.

• No employee shall visit the RDO/LTS in filing 2305; it shall be coursed thru the employer and it shall be electronically filed containing the required information in the prescribed electronic format, using any of the following:– Option 1: Microsoft Excel CSV format;– Option 2: Taxpayer’s own extract program; or– Option 3: BIR’s UEE Data Entry Module

RMC 59-2015, Sept 17, 2015

• For those who will be using Option 1 or 2 are required to use the 2305 Batch File Validation Module. The UEE Data Entry Module and 2305 Batch File Validation Module are available at www.bir.gov.ph/index.php/downloadables.html.

• Submission of report. Employers shall generate a monthly CSV file report using the UEE Data Entry Module or the prescribed file structure (Annex B) using Option 1 or 2 and transmit via email to BIRFORM_2305@bir.gov.ph following the procedures in the Job Aids (Annex A or B) and Process Flow (Annex C or D). Those reports submitted with invalid errors or invalid file are considered as non-filing of 2305.

RMC 59-2015, Sept 17, 2015

• Submission of supporting documents. Employees shall submit the accomplished 2305, together with the required documentary requirements to their employer. Employer shall then validate and ensure completeness of documents and shall submit the following supporting documents on or before the 10th day of the following month:– Accomplished 2305 signed by both employee and employer, together with the

complete documentary requirements (e.g., NSO certified birth certificate/ Marriage Contract, Waiver to Claim Additional Exemption, Medical Certificate, if physically incapacitated);

– System-generated email notification of electrically filed 2305; and – Printed Alphalist of Employees and Information Update report listing the

names of those with changes for the month only generated from the data entry module or printed excel file following the format in Annex F.

• Non-LT employers shall submit the supporting documents to the RDO having jurisdiction over the place of office of employer where the employee is expected to report to work. For LT employers, submit them to LTAD, ELTRD, LTD-Makati/Cebu having jurisdiction over head office.

TAXABLE PARTNERSHIP

• LANDOWNER DEVELOPER BUYERS

• (No PCAB) (No PCAB)

IND DEV

JV

A

CORPuJV is taxable partnership

sale

sale

REV REGS NO. 10-2012, June 1, 2012

• JOINT VENTURE, NOT TAXABLE AS CORPORATION– JV or consortium is formed for the purpose of undertaking

construction projects;– It involves joining or pooling of resources by licensed local

contractors; i.e., licensed as a general contractor by the Phil Contractors Accreditation Board (PCAB) of the DTI;

– Local contractors are engaged in construction business; and– JV itself is likewise licensed as such by PCAB.

• If any requirement above is absent, JV or consortium is a taxable corporation.

• Tax-exempt JV shall not include those who are mere suppliers of goods, services or capital to a construction project.

REV REGS NO. 10-2012, June 1, 2012

• Joint Venture (JV) involving foreign contractors may be treated as non-taxable corporation only if:– Member foreign contractor is covered by a special license as

contractor by PCAB; and– Construction project is certified by the appropriate Tendering Agency

(government office) that the project is a foreign-financed/ internationally-funded project and that international bidding is allowed under the Bilateral Agreement entered into by and between the Phil government and the foreign/international financing institution, pursuant to the rules and regulations of RA 4566 (Contractor’s License Law).

• Each member of JV not taxable as corporation shall report and pay taxes on their respective shares to the JV profit.

• All licensed local contractors must enroll to BIR’s EFPS at the RDO where local contractors are registered as taxpayers.

• END OF PRESENTATION. THANK YOU!!!

– Atty. Vic C. Mamalateo

– Mobile No.: 0939-9209175; 0917-5280445

– E-mail: vic.mamalateo@vcmlaw.com.ph

– vicmamalateo@yahoo.com

– Tel. No.: 3729224 Fax No.: 3729267