RR No. 19, Assessment Division OTHER UPDATES Presented by: CYNTHIA E. OMERES, CPA Revenue Officer RR No. 19, Assessment Division

RMC No. 27-2011 This Circular is issued to revoke BIR Ruling Nos. 2-99 (dated January 12, 1999), DA-184- 04 (dated November 10, 2004), and DA-087- 06 (dated March 6, 2006).

BIR Ruling Nos. 002-99 (Jan.12,1999), Delegated Authority (DA)-184-04, DA-569-04, DA-087-06: “Since the law and implementing regulations do not categorically state that the exemption covers only the regular GSIS and Pag-Ibig contributions, it is safe to conclude that GSIS optional and Pag-Ibig 2 contributions are likewise excludible from the gross income of the taxpayer and hence, exempt from income tax”

RMC 27-2011 & RMC 53-2011 Therefore, contributions referred to in Sec. 32(B)(7)(f) of the NIRC of 1997 cover only the mandatory/compulsory contributions of the concerned employees to SSS, GSIS, PHIC and HDMF; Thus, this Office holds that voluntary contributions to these institutions in excess of the amount considered compulsory are not excludible from the gross income of the taxpayer and hence, not exempt from Income Tax and Withholding Tax; and

RMC 27-2011 & RMC 53-2011 Consequently, the exemption from withholding tax on compensation referred to in Sec. 2.78.1(B)(12) of RR 2-98 shall apply only to mandatory/compulsory SSS, GSIS, Medicare and Pag-ibig contributions.

GSIS Contribution - (RA 8291) means the amount payable to GSIS by the member and the employer in accordance with Sec. 5 of this Act; - it shall be mandatory for the member and the employer to pay the monthly contributions specified in the schedule as provided; SSS Contribution -(RA 8292) the amount paid to the SSS by and on behalf of the member in accordance with Sec. 18 of this Act.

SSS Employee’s Contribution: The employer shall deduct and withhold from such employee’s monthly salary, wage, compensation or earnings, the employee’s contribution in an amount corresponding to his salary, wage, compensation or earnings during the month in accordance with the schedule as provided.

Philhealth Contribution RA 7875 – The amount paid by or in behalf of a member to the Program for coverage, based on salaries or wages in the case of formal sector employees, and on household earnings and assets, in the case of the self-employed, or on other criteria as may be defined by the Corp. Pag-Ibig Contribution RA 9697 - The amount payable to the Fund by the members and their employers

Pag-Ibig Fund Generation and Contributions RA 9679 – The money of the Fund shall be generated by the provident savings that the covered employees shall contribute for the purpose every month, and the equal amounts that their respective employers shall mandatorily contribute. Rates: 1% -employee’s income is <= P1,500/mo. 2% -employee’s income is >P1,500/mo 2% -employer’s share for all employees (P5,000 max. X 2%)= P100.00 Maximum contribution = P100.00

EFFECTIVITY: The taxability of the voluntary contributions of employees to SSS, GSIS, PHILHEALTH and HDMF shall apply to employees’ contributions beginning July 1, 2011.

Income Tax Returns -New Forms- (RMC 57-2011)

Policies and Guidelines Income tax filing covering and starting with calendar year 2011, which are due for filing on or before April 15, 2012 the following revised forms are to be used: BIR Form 1700 version November 2011 BIR Form 1701 version November 2011 BIR Form 1702 version November 2011

Policies and Guidelines All juridical entities following fiscal year of reporting are required to use the new BIR Form 1702 starting with those covered by fiscal year ending Sept. 30, 2011 that are due to be filed on or before Jan. 15, 2012. Disclosures on the Supplemental Information portion of BIR Form 1700 and 1701 will be “OPTIONAL” for calendar year 2011 and will be “MANDATORY” for calendar year 2012.

New Forms BIR Form 1700 RMC-2011-57-1700 nov 2011.pdf

Taxability of Security Agencies (RMC 39-2007)

Income Tax Treatment of the Payments Made to the Security Agency On the Part of the Security Agency: The Contract for Security Services entered into by and between the Security Agency and its Client must provide for a breakdown of the amount of security services into two components: (1) the Agency Fee and (2) the Security Guards’ salaries

Illustration: Vigilant Security Agency, Inc. was contracted by Tanzo Jewelry Corp. to provide security services. The contract price on a monthly basis is P 18,000.00 broken down into: Security Guards’ salaries of P 14, 179.08 and Agency Fee of P 3,820.92(inclusive of VAT) Entry:

On the Part of the Client or User of Security Services: Required to withhold and remit the Expanded Withholding Tax (EWT) on the Agency Fee. Allowed to recognize an input tax based on the Agency Fee.

VAT Treatment of the Payments for Security Services The twelve percent (12%) VAT will only be computed on the Agency Fee. Only the portion of the payment representing the Agency Fee, if covered by a VAT Official Receipt, will entitle the VAT-registered Client to a claim of input tax credit.

Manner of Issuing Receipt for the Entire Contract Price The VAT Official Receipt shall cover the entire amount which the Client pays to the Security Agency representing the compensation of its services (Agency Fee). With respect to the security guards’ salaries must be covered by a Non-VAT Acknowledgement Receipt.

Update on VAT (RR 16-2005)

Adjusted threshold amounts Adjusted VAT Threshold (RR 16-2011) Section Nov. 1/2005 Adjusted threshold amounts Sale of Residential Lot Sec. 109(P) P1,500,000 P1,919,500 Sale of Residential House & Lot Sec. 109(P) 2,500,000 3,199,200 Lease of residential units Sec. 109(Q) 10,000 12,800 Sale or lease of goods or properties or the performance of services Sec. 109(V) 1,500,000 1,919,500