Latest BIR Issuances TAX UPDATES September 17, 2015 (Thursday)

Latest BIR Issuances TAX UPDATES September 17, 2015 (Thursday)
USER NOTE: Before populating this template with information, you will need to save it under a different name. This ensures you don’t save over your template while populating it. To do this, under File choose ‘Save as’. Rename your presentation to a relevant title, and save it in the correct location. You will then be able to click the save shortcut while creating the rest of the presentation, which will save over your file. TAX UPDATES Latest BIR Issuances USER NOTE: To update the information in this deck, just highlight over the text you want to update and re-type. This will ensure type sizes and locations will remain consistent throughout. September 17, 2015 (Thursday) Wendell D. Ganhinhin Partner Tax & Outsourcing, Cebu and Davao Branches

Topic Outline Topic Revenue Issuances
Submission of BIR Form No and 2316 scanned copies RR No and RMC Venue for filing of ITR by employees of LTs RMC No FAQs on Withdrawal certificates on petroleum products RMC No BIR and Land Registration Authority joins to implement verification of eCAR RMC No

Memorandum of agreement among the DOF, DOJ, BIR and LRA RMC No Non-issuance of Provisional permit to use cash register instruments RMC No Inter-agency Memorandum of Understanding signed to support implementation of Ease of doing business of the World Bank International Finance Corporation supported by certain government t agencies RMC Updated BIR Citizen's Charter as Consolidated RMC No

Amendments on certain policies, guidelines and procedures in the issuance of Importers’ ICC / Brokers’ Clearance Certificate RMO No Revised Consolidated Schedule of Compromise Penalties RMO No High-risk taxpayers for VAT audit expanded RMO Other recent issuances Supreme Court decisions

RR 2-2015/RMC 24-2015: SUBMISSION OF BIR FORMS 2307 AND 2316

ALL taxpayers registered with LTS
WHO ARE COVERED? ALL taxpayers registered with LTS NON-LTS Taxpayers, at his/her/its option Once adopted, shall NO LONGER be allowed to submit in hard copies thereafter

AMENDATORY PROVISIONS:
SAWT – shall be submitted as prescribed by RR Hard Copy of the BIR Forms 2307 – submitted to the Revenue District Office together with the ITR and the confirmation of the e-submitted SAWT

In lieu of the submission of the hard copies: Scan the original copies of the BIR Form 2307 Store the soft copies using “PDF” file format with the filenames alphabetically arranged in a DVD-R. Filename format: ABC Corporation_ _

Label the DVD-R:

Submit the DVD-R to the BIR Office, together with the notarized Certification

SUBMISSION OF BIR FORM 2316 as prescribed by RR 11-2013:
In lieu of the submission of the hard copies: Scan the original copies of the BIR Form 2316 Store the soft copies using “PDF” file format with the filenames alphabetically arranged in a DVD-R. Filename format: DELA CRUZ_ _

Label the DVD-R:

Submit the DVD-R to the BIR Office, together with the notarized Certification

There is still a NEED to retain hard copies
OTHERS: Effectivity: March 21, 2015 Any returns due to be submitted on or before April 30, 2015: TP has the option to submit the required forms, either in hard or in scanned copies For quarterly filings with deadline falling beyond April 30, TPs are mandated to submit BIR Form 2307. There is still a NEED to retain hard copies

Venue for filing of ITR by employees of Large Taxpayers
Revenue Memorandum Circular No March 24, 2015

However, new employees of LT registered where the LT employer is registered following Revenue Regulations and using eTIS1, shall file their no payment ITR with the concerned Large Taxpayer Office or pay in any AABs (ITR with payment of LT.

Clarification on taxpayers use of eBIR forms and manual BIR forms
Revenue Memorandum Circular No March 30, 2015 Revenue Memorandum Circular No

Clarification on taxpayers’ use of eBIR forms and manual BIR forms (RMC No. 11-2015 and12-2015)
Non eFPS Client-Taxpayers required to use eBIR Forms– taxpayers who are otherwise authorizing their tax agents/practitioners to file on their behalf. Thus, client-taxpayers whose tax agents/practitioners only sign the audit certificate but have no authority to file the returns in their behalf are not covered by the said Revenue.

Clarification on taxpayers’ use of eBIR forms and manual BIR forms (RMC No. 11-2015 and12-2015)
The following taxpayers may file manually “no payment returns Senior Citizen (SC) or Persons with Disabilities (PWD); Employees deriving purely compensation income; and Employees qualified for substituted filing but opted to file for an Income Tax Return (ITR).

Amendments on certain policies,
guidelines and procedures in the issuance of Importers’ ICC / Brokers’ Clearance Certificate Revenue Memorandum Order No January 7, 2015

Amendments on issuance of Importers’ ICC / Brokers’ Clearance Certificate (RMO 1-2015)
A) For Prospective Applicants The following are no longer required upon filing of the application for ICC/BOC:

In addition to the requirements under RMO , Annex A to F should be attached together with the certification from the respective authorities: Annex A – issued by concerned RDO/Head office/LTD Chief certifying that the taxpayer has satisfied all the criteria stated under RMO No ;

2) Annex B – from concerned chief of Regional Legal Division that the applicant has no pending criminal charges

3) Annex C – from the concerned chief of the Regional Collection Division that the applicant has no delinquent account

4) Annex D – from the Accounts Receiving Monitoring Division (ARMD) that the applicant has no listed tax liability

5) Annex E – from the Chief, Audit Information, Tax Exemption and Incentives Division (AITEID) that the applicant has filed the requisite SLSPI for the immediately preceding 8 taxable quarters;

6) Annex F – from the Chief, Miscellaneous Operations Monitoring Division (MOMD) that the applicant had electronically filed the requisite Alphabetical List of Employees and/or Alphabetical List of Income Recipients Subjected to Creditable/Final Withholding Taxes during the last 2 preceding years and that the same were successfully uploaded to the Bureau's data warehouse

Applications of importers/brokers submitted to Accounts Receiving Monitoring Division (ARMD) any certification that is different from the one issued by the concerned offices shall be automatically denied.

B) For those who were issued Provisional ICC/BCC Required to submit one month prior to the expiry of the six-month validity period of the Provisional ICC/BCC C) Processing Timeline – 24 maximum working days from receipt of application

Revised Consolidated Schedule of Compromise Penalties
Revenue Memorandum Order No March 23, 2015

Revised Consolidated Schedule of Compromise Penalties (RMO 7-2015)
Policies and guidelines prescribed under RMO No. 19 – 2007 shall remain In all cases of criminal violations of the NIRC, not involving the commission of fraudulent act.

Increase in the minimum compromise penalty Old schedule: New Schedule:

The amendments include the following among others: Prohibition for certain acts to be compromised for the second time, such as the failure or refusal to issue receipts or sales commercial invoices, or for the issuance of receipts that do not truly reflect the information that should be contained therein. Failure for two consecutive years to file the Annual Alpha List of Payees and/or Alpha List of Employees from whom taxes were withheld shall be considered as willful failure to comply with such requirements, which implies fraud, and, therefore cannot be compromised.

RELEVANT BIR ISSUANCES
(From May 2015 to September 15, 2015)

FAQs on Withdrawal Certificates on Petroleum Products
Revenue Memorandum Circular No May 5, 2015

FAQs on Withdrawal Certificates on Petroleum Products (RMC No. 23-2015)
RMC – Reiterates issuance of Withdrawal Certificate (WC) which is needed for purposes of monitoring the movement of petroleum products and ensuring correct excise taxes have been paid RMC Prescribed information in a WC among others: exact description of the product volume and amount of excise tax paid whether imported or locally manufactures whether product is bonded, tax exempt or tax paid

WCs should be attested by Revenue Officer on Premise (ROOP), unless: If no assigned ROOP, then depot/facility shall submit a monthly report, together with the duplicate copies of all WCs issued on or before the 8th day of the following month; If ROOP not available, supervisor shall attest

the issuance of WC shall be on a per removal basis and per consignee basis; hence, each lorry or delivery tank, consist of various petroleum products, shall be covered by a WC; In case a change on the prepared WC is necessary, a new WC shall be issued

Memorandum of agreement among the DOF, DOJ, BIR and LRA
Revenue Memorandum Circular No May 19, 2015 Revenue Memorandum Circular No

RMC 29-2015 Memorandum of agreement among the DOF, DOJ, BIR and LRA
Parties agrees to set up the infrastructure necessary to link both BIR and LRA nationwide and to verify all real property transfers.

BIR and Land Registration Authority joins to implement verification of eCAR (RMC 28-2015)
All transactions involving transfer of real properties processed in the Register of Deeds requiring the presentation of the eCAR, shall be automatically verified using the LRA’s PHILIPPINE LAND REGISTRATION AND INFORMATION SYSTEM PHILARIS prior to the processing of a transfer transaction.

BIR and Land Registration Authority joins to implement verification of eCAR (RMC 28-2015)
Role of DOJ and DOF Oversee the faithful compliance by their respective attached agencies concerned of the provisions of this AGREEMENT.

Non-issuance of Provisional permit to use cash register instruments
Revenue Memorandum Circular No June 8, 2015

Non-issuance of Provisional permit to use cash register instruments (RMC 30-2015)
Issuance of Provisional PTU to prospective/new CRMs/POS/other sales machines/receipting software users

Issuance of Provisional PTU to prospective/new CRMs/POS/other sales machines/receipting software users Effective immediately until Electronic Accreditation and Registration (eAccReg) System shall be modified

All concerned taxpayers are encouraged to acquire BIR-accredited CRMs/POS/other sales machines/receipting software with their corresponding supplier. See list in the BIR website. New applications of PTU with BIR-National Office level only.

Implementation of Ease of doing business of the World Bank International Finance Corporation
Revenue Memorandum Circular No June 8, 2015

Implementation of Ease of doing business of the World Bank International Finance Corporation (RMC ) Ease of Doing Business (EODB) Report of the World Bank International Finance Corporation (IFC) focuses on the regulations and institutions affecting small and medium-sized domestic businesses

Parties to the Memorandum of Understanding to ensure Implementation of the Gameplan for Competitiveness:

Reduced Procedures in Starting a business
Ease of doing business of the World Bank International Finance Corporation Reduced Procedures in Starting a business Time to complete 6 steps 16 steps 8 days 34 days

Updated BIR Citizen's Charter as Consolidated
Revenue Memorandum Circular No July 13, 2015

Updated BIR Citizen's Charter as Consolidated RMC 39-2015
Below are the frontline services and Guidelines covering the BIR Citizen's Charter: Processing of TIN of employees, one-time taxpayers, self-employed, estates and trusts Certificate of Registration, TIN Cards, Authority to Print Registration of manual books One-time transaction involving sale of shares/real property, donations subject to donor's tax Permit to operate as manufacturer/trader/importer of excisable articles Authority to release imported goods (ATRIG) Tax clearance for bidding

Updated BIR Citizen's Charter as Consolidated RMC 39-2015
Delinquency verifications for foreign corporations/ individuals Issuance of VAT exemption certificates (VEC) and ID cards (VEIC) for embassies and its personnel Rulings on tax exemption of embassies and their personnel Issuance of Tax Credit Certificate (TCC) pursuant to a court order Rulings on exchange of real properties to correct mistakes Tax exemption rulings for senior citizens Tax exemption rulings of the National Housing Authority and private sector participants in socialized housing program Certificate of exemption for scholarship and job/livelihood programs Contractor's final payment release certificate

Amendments to VAT Audit for LTServices
Revenue Memorandum Order No August 14, 2015

Amendments to VAT Audit for LTServices (RMO 16-2015)
Additional Coverage for High Risk Taxpayers Taxpayers whose VAT compliance is below the available established industry benchmarks; Taxpayers with discrepancy in sales/revenues reported per SLS versus VAT returns; and Taxpayers whose excess input tax carried forward in the VAT return of the succeeding quarter is different from the input tax reflected in the VAT return from the previous quarter.

Relevant BIR Issuances (From July 15 to September 15, 2015)
Revenue Memorandum Circular RMC No , July 15, 2015 RMC No. 41, 2015, July 14, 2015 RMC No , July 28, 2015 RMC No , July 31, 2015 RMC No , August 24, 2015 RMC No , September 3, 2015 Revenue Regulation RR No , September 2, 2015 Revenue Memorandum Order RMO , September 2, 2015

Amending Section 9 of Revenue Regulations
No Prescribing the Affixture of Internal Revenue Stamps on Imported and Locally Manufactured Cigarettes and the Use of the Internal Revenue Stamp Integrated System (IRSIS) Revenue Regulations No September 2, 2015

Relevant BIR Issuances REVENUE REGULATION 9-2015, Sept
Relevant BIR Issuances REVENUE REGULATION , Sept. 2, 2015 (cont'd) For cigarettes manufactured for exports: (a) Shall strictly comply with all existing BIR rules and regulations relating to the registration of brands, manufacture, import, utilization, and withdrawal of raw materials, work in process and finished products, labels and posting of export bonds, among others; (b) Shall have labels stating clearly the cigarettes is strictly for sale in the country of designation for which it is allowed to be manufactured for;

Relevant BIR Issuances REVENUE REGULATION , Sept. 2, 2015 (cont'd) For cigarettes manufactured for exports: (c) Shall have labels that are not similar in any way to the labels of cigarettes sold in the Philippines; and (d) Shall provide proof that the cigarettes authorized for manufacture to a foreign destination were actually shipped to the country of destination for which it was authorized to be manufactured for as evidenced by a certified true copy of the bill of lading and/or shipping manifest clearly identifying the quantity (as to number of packs) and brand of cigarettes actually shipped where the country of destination is clearly identified.

Relevant BIR Issuances REVENUE REGULATION , Sept. 2, 2015 (cont'd) For cigarettes manufactured for exports: - Shall be provided the range of Unique Identified Codes (UICs) of internal revenue stamps, thru IRSIS, intended for affixture to the cigarettes for export, and said UIC shall be released to the local manufacturer. - The price of PhP0.03 per piece of internal revenue stamp on such cigarettes for export shall be paid by the local manufacturer-exporter. *The payment shall be considered as constructive affixture of the internal revenue stamps on such cigarettes for export

Relevant BIR Issuances REVENUE REGULATION , Sept. 2, 2015 (cont'd) For cigarettes manufactured for exports: - The range of UICs that were released to the local manufacturer-exporter shall be reported to the BIR, thru the IRSIS Any cigarettes found in any area of the Philippines without any internal revenue stamp affixed shall be presumed to have been withdrawn without the payment of the excise tax due thereon, and shall be subject to penalties under the NIRC and rules and regulations promulgated relating thereto.

Prescribing the Policies and Workaround Procedures in Handling Taxpayers with More than Nine Hunderd Ninety-Nine ("999") Branch Codes under the Electronic Accreditation and Registration (eAccReg) System Revenue Memorandum Order No September 2, 2015 - - -

Relevant BIR Issuances REVENUE MEMORANDUM ORDER 18-2015, Sept
Relevant BIR Issuances REVENUE MEMORANDUM ORDER , Sept. 2, 2015 (cont'd) In line with the Electronic Tax Information System – Tax Registration System (eTIS-1 TRS) project of the BIR, the 3-digit maximum limit of the Integrated Tax System (ITS) can now be addressed, to which it could cater up to 5-digit TIN branch codes. - In spite of this, other electronic services of the BIR such as the eAccReg and Electronic Sales (eSales) reporting systems have a maximum of 3-digit TIN branch code upon enrollment. - Thus, all TINs that will be generated via eTIS-1 TRS with more than 5-digit TIN branch code will not be accepted in the eAccReg and eSales Systems.

Relevant BIR Issuances REVENUE MEMORANDUM ORDER , Sept. 2, 2015 (cont'd) Procedure for Supplier/Taxpayer-User Register all applications for Permit to Use of CRMs/POS/SPMs under TINs with more than "999" branch codes as Roving Machines with the RDO/LTS having jurisdiction over the Head Office TIN via the eAccReg System; The Head Office shall notify the Chief of Office of RDO/LTAD/ELTRD/LTD-Makati/LTD-Cebu via or letter with the list of branches who have more than "999" TIN branch codes subject for registration of the machines. Details like Machine Type and Serial Number of the machines should be included relating to the branches that will use such machines.

Relevant BIR Issuances REVENUE MEMORANDUM ORDER , Sept. 2, 2015 (cont'd) Procedure for Supplier/Taxpayer-User (3) Submit the sales report of all registered CRMs/POS/SPMs of branches with more than "999" via the eSales System (4) Enroll in the eAccReg and eSales System with the 5-digit TIN branch code and register the machines of the branches with more than "999" after the cancellation of its Permit to Use from its Head Office, using the original machine serial number upon availability of the enhanced eAccReg and eSales Systems.

Relevant BIR Issuances REVENUE MEMORANDUM ORDER , Sept. 2, 2015 (cont'd) These workaround procedures shall be observed until such time both systems and ITS are enhanced; Once the enhanced eAccReg is already capable to process the registration of those taxpayers with more than "999" branch codes, all permits issued under this RMO shall be cancelled but with retention of the sales data, and the corresponding machines shall be registered with the concerned LTAD/ELTRD/LTD-Makati/LTD-Cebu/RDO having jurisdiction over the particular branch office using the machine's original serial number

Relevant BIR Issuances REVENUE MEMORANDUM ORDER , Sept. 2, 2015 (cont'd) Further, they should enroll in the eAccReg and eSales System using the 5-digit TIN branch code.

Clarifying the Nature and Extent of the Agricultural Cooperative Being the Producer of Sugar for Exemption from Advance VAT and Percentage Tax Purpose Pursuant to Sections 5(b)(c) of Revenue Regulations (RR) No , in relation to Section 4(a) of RR No , and in line with Section 8(b.2.1.2) of the Joint Rules and Regulations Implementing Articles 60, 61, and 144 of Republic Act (RA) No. 9520, or the Cooperative Code of 2008 Revenue Memorandum Circular No July 15, 2015

Relevant BIR Issuances REVENUE MEMORANDUM CIRCULAR 40-2015, July 15, 2015 (cont'd)
Issued to clarify the nature and extent of the agricultural cooperative being the producer of sugar for sale to non-members or another agricultural cooperative for exemption from advance VAT or Percentage Tax purposes. Section 109 (1), NIRC: Exempts from VAT the sale by agricultural cooperative duly registered with the Cooperative Development Authority ("CDA") of their produce, whether in its original state or processed form, to non-members

Section 5(b) of RR : The withdrawals of sugar for sale to non-member is subject to the payment of advance VAT or percentage tax if the agricultural cooperative is not an agricultural producer of sugar. Section 5(c) of RR : If the seller-cooperative is not an agricultural producer but merely purchases sugar from the planter, whether members or non-members, or transfer the sugar to cooperative through assignment, its sale of the resulting sugar to another agricultural cooperative shall be subject to VAT and its withdrawals from the Sugar Refinery/Mill will only be allowed upon payment of the advance VAT or percentage tax.

Section 8(b.2.1.2) of the Joint Rules and Regulations Implementing Articles 60, 61, and 144 of RA 9520 or the Cooperative Code of 2008: the sale by agricultural cooperatives to non-members can only be exempted from VAT if the producer of the agricultural products sold is the cooperative itself. - If the cooperative is not the producer (e.g. trader), only those sales to its members shall be exempt from VAT.

Section 8(b.2.1.2) of the Joint Rules and Regulations Implementing Articles 60, 61, and 144 of RA 9520 or the Cooperative Code of 2008 It is thus clear from the aforementioned provisions that in order that withdrawals of sugar by agricultural cooperative for sale to non-members or to another agricultural cooperative be exempt from advance VAT or Percentage Tax, the agricultural cooperative must be the producer of sugar.

Section 4(a) of RR : a cooperative is said to be the producer of the sugar if it is the tiller of the land it owns, or leases, incurs cost of the agricultural production of the sugar and produces sugar cane to be refined.

Section 4(a) of RR : … Consistent with Article 23 (c) of RA 9520: a producer's cooperative is one that undertakes joint production whether agricultural or industrial. It is formed and operated by its members to undertake the production and processing of raw materials or goods produced by its members into finished or processed products for sale by the cooperative to its members and non-members. Any end product or its derivative arising from the raw-materials produced by its members, sold in the name and for the account of the cooperative, shall be deemed a product of the cooperative and its members.

Section 8(b.2.1.2) of the Joint Rules and Regulations Implementing Articles 60, 61, and 144 of RA 9520: the exempt transactions pursuant to Section 109 (1)(L) of the NIRC shall include sales made by a duly registered agricultural cooperative organized and operated by its members to undertake the production and processing of raw materials or goods produced by its members into finished or processed products for sale by said cooperative to its members and non-members: Provided, finally, that any processed product or its derivative arising from the raw materials produced by its members, sold in the name and for the account of the cooperative, shall be deemed the product of the cooperative.

Section 8(b.2.1.2) of the Joint Rules and Regulations Implementing Articles 60, 61, and 144 of RA 9520: CLARIFICATION A duly registered agricultural cooperative is said to be the producer of sugar – consistent with the concept of a producer's cooperative being a joint production wherein raw materials or goods are produced by its members for processing into finished or processed products – if the following requisites are present: (next slide)

THE REQUISITES MUST CONCUR
Relevant BIR Issuances REVENUE MEMORANDUM CIRCULAR , July 15, 2015 (cont'd) REQUISITES: (a) It is the tiller, thru its member, of the land it owns, or leases; AND (b) It incurs cost of agricultural production of the sugar and produces the sugar cane to be refine THE REQUISITES MUST CONCUR Absence of any one of these requisites, an agricultural cooperative cannot be considered a producer of sugar, and thus, its withdrawals of sugar for sale to non-members to another agricultural cooperative are subject to advance VAT or Percentage Tax.

Clarifications on the Documentary Requirements for the Registration of Labor Organization, Association or Group of Union or Workers Pursuant to Section III (C) of "Annex A" of Revenue Regulations No Revenue Memorandum Circular No July 24, 2015

Relevant BIR Issuances REVENUE MEMORANDUM CIRCULAR 41-2015, July 24, 2015
Clarifications on the Documentary Requirements for the Registration of Labor Organization, Association or Group of Union or Workers Pursuant to Section III (C) of "Annex A" of Revenue Regulations No

The labor organization, association or group of union or workers with issued certificate of registration from the DOLE acquires legal personality pursuant to the labor code. The Certificate of registration issued by the DOLE and constitution and by-laws are now accepted and required documents for the registration of a labor organization, association, or group of union workers with the BIR.

Non-acceptance of Checks/Drawn Checks from Closed Banks by Revenue Collection Officers
Revenue Memorandum Circular No July 28, 2015

All Revenue Collection Officers (RCOs)/Special Collection Officers (SCOs)/Collection Officers (COs) are hereby advised not to accept checks, as well as taxpayer's checks drawn from the lists of banks that were ordered closed from January,2014 to June 30,2015 (please see Annex "A-7" and Annex "A-2"), as per reports from the Philippine Deposit Insurance Corporation (PDIC), in payment of internal revenue taxes.

Per Monetary Board Resolutions of the Bangko Sentral ng Pilipinas (BSP), the said banks and their branches are prohibited from doing business in the Philippines and have all been placed under receivership with PDIC as the designated Receiver.

Inclusion of Bank of Tokyo-Mitsubishi UFJ, Ltd
Inclusion of Bank of Tokyo-Mitsubishi UFJ, Ltd. in the List of Authorized Agent Banks Which are Authorized to Accept Payment of Internal Revenue Taxes from Taxpayers Enrolled in the Bureau's Electronic Filing and Payment System (eFPS) Revenue Memorandum Circular No July 31, 2015

Relevant BIR Issuances REVENUE MEMORANDUM CIRCULAR 44-2015, July 31, 2015
The Bank of Tokyo-Mitsubishi UFJ, Ltd. is now authorized to accept on-line payment of internal revenue taxes thru ePFS effective July 27, 2015/

Clarifying the Withholding of VAT on Government Money Payments for Overseas Economic Cooperation Fund (OECF) Funded Projects under the Exchange of Notes between the Republic of the Philippines and the Government of Japan Revenue Memorandum Circular No August 24, 2015

Relevant BIR Issuances REVENUE MEMORANDUM CIRCULAR 45-2015, August 24, 2015 (cont'd)
The Exchange of Notes between the Republic of the Philippines and the Government of Japan for OECF Funded Projects undertaken in the Philippines provides for a standard provision as follows: "The Government of the Republic of the Philippines will, by itself or through its executing agencies assume: all fiscal levies and taxes imposed in the Republic of the Philippines on Japanese companies operating as suppliers, contractors and/or consultants with respect to the payment carried out for and the income accruing from the supply of the products and/or services required for the implementation of the projects enumerated in the list; and …

The Exchange of Notes between the Republic of the Philippines and the Government of Japan for OECF Funded Projects undertaken in the Philippines provides for a standard provision as follows: "The Government of the Republic of the Philippines will, by itself or through its executing agencies assume: … all fiscal levies and taxes imposed in the Republic of the Philippines on the Japanese employees engaged in the implementation of the projects enumerated in the List with respect to their personal income derived from Japanese companies operating as suppliers, contractors, and/or consultants.

Records of Discussion of the Exchange of Notes bears the previous creditable VAT withholding system under RA 8424 and RMC On the contrary, on 01 July RA No was enacted whereby a final VAT withholding tax system on government money payments was introduced. It is a settled principle of statutory construction that in the event of an irreconcilable inconsistency, the later provision should prevail over the earlier one. Accordingly, RA No which provides for the 5% final withholding VAT on government money payments shall prevail.

Following Section 114 (c) of the NIRC, the general rule is that the Government or any of its political subdivision, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs), shall, before making payment on account of each purchased goods and services which are subject to value added tax, deduct and withhold a final VAT of 5%

However, in case of Japanese firms or Nationals operating as suppliers, contractors or consultants on and/or services to be provided under the OECF funded projects pursuant to the Exchange of Notes, the Government of the Republic of the Philippines will, itself or through the executing agencies, or instrumentalities, assume all fiscal levies or taxes imposed in the Republic of the Philippines Accordingly, the executing government agency shall assume the 5% final withholding tax by including in its budget pursuant to Section 13 of the General Appropriations Act, which allots a portion of the national budget for the payment of the national internal revenue taxes and customs duties arising therefrom.

The BIR upholds the validity and application of RA No for government money payments under the OECF Funded Projects pursuant to an Exchange of Notes between the Republic of the Philippines and the Government of Japan:

The Government of the Philippines, itself or through its executing agencies or instrumentalities, shall assume the final withholding VAT at the rate of five (5%) of the gross payment thereof under Section 114 (C) of the NIRC, as amended. This will be paid out from the fund of the Government of the Philippines, or of its respective government agencies or instrumentalities as a final settlement of the tax due on the income received by the Japanese contractors; and

The Japanese contractors of OECF Funded Projects cannot include in its billing the whole 12% VAT that will be assumed by the Philippine Government or its instrumentalities or agencies in accordance with the exchange of notes.

RMC dated June 2, 1999 no longer finds application to cases or transactions after the effectivity or RA No. 9337

Clarification of the Provisions on the Submission of Monthly eSales Report via the Electronic Sales (eSales) Reporting System Prescribed under Revenue Regulations (RR) No and Revenue Memorandum Order (RMO) No Revenue Memorandum Circular No September 3, 2015

Relevant BIR Issuances REVENUE MEMORANDUM CIRCULAR 56-2015, September 3, 2015 (cont'd)
eSales is a real time reporting online of actual sales transactions recorded by CRM/POS machine, or other sales machines and/or software Inasmuch as the CRM/POS machines are required to be tamper-proof, they are expected to contain the original data that should serve as basis for tax assessment by revenue examiners. Hence, sales records contained therein shall not be allowed to be altered or amended, except on meritorious cases

However, in the course of implementation of RR and RMO , it was ascertained that several adjustments/amendments were made on the amount of monthly eSales as reported resulting in the reconstitution of sales as recorded in CRM/POS machines. As such, any amendment in the amount of monthly sales reported shall require a written justification addressed to the concerned LTS Investigating Office/RDO with the corresponding adjusting entries properly recorded in the Books of Accounts

Thus, monthly eSales reports shall be subject to validation/verification by the concerned offices Provided that no electronic LOA (eLA)/LN has been issued covering the said particular month Otherwise, an incident report on the post validation/inspection conducted by the concerned investigating offices shall be consolidated with the ongoing audit/investigation covered by the eLA/LN

Taxpayers who failed to comply with the forgoing requirements shall be included in the priority audit program of the concerned investigating offices.

SUPREME COURT RULINGS

ING Bank (petitioner) Vs. BIR (respondent)
FACTS: ING Bank is the Philippine branch of Internationale Nederlanded Bank N.B., a foreign banking corporation incorporated in Netherlands. ING Bank received Final Assessment Notice on Jan. 3, 2000 dated Dec. 3, The notice covered various deficiency tax assessments for taxable years 1996 and 1997. On Feb. 2, 2000, ING Bank paid the deficiency assessment for 1996 compromise penalty and 1997 deficiency documentary stamp tax and deficiency final tax plus interests. However, ING Bank protested the remaining deficiency tax assessments.

FACTS CONT'D ING Bank filed a Petition for Review before the CTA on Oct. 26, 2000 seeking the cancellation and withdrawal of the deficiency tax assessments. CTA Second Division rendered Decision on Aug. 9, 2004 that the assessment for 1996 and 1997 deficiency income tax, 1996 and 1997 deficiency branch profit remittance tax, and 1997 deficiency documentary stamp tax be CANCELLED and WITHDRAWN. However, assessments for 1996 and 1997 deficiency withholding tax on special savings accounts were UPHELD. Petitioner was also ordered to pay the respondent the aggregate amount of P240,106, plus 20% delinquency interest per annum from February 3, 2000 until fully paid.

FACTS CONT'D Both the petitioner and respondent filed Motions for Reconsideration under CTA Second Division dated Nov. 12, 2004 but denied due to lack of merit. On Dec. 8, 2004, ING Bank filed its appeal before the CTA En Banc but denied due course and dismissed for lack of merit. On Dec. 20, 2007, ING Bank filed a Manifestation and Motion informing Supreme Court that it availed the tax amnesty authorized and granted under Republic Act It stated that it filed before the respondent its Notice of Availment of Tax Amnesty on Dec. 14, 2006 with complete supporting documents.

FACTS CONT'D ING Bank originally raised the following issues in its pleadings: Whether the CTA En Bank erred in concluding that petitioner’s Special Saving Accounts are subject to DST as certificates of deposit under Sec. 180 of the 1977 Tax Code Whether the CTA En Banc erred in holding petitioner liable for deficiency onshore tax considering under the 1977 Tax Code and the pertinent revenue regulations, the obligation to pay the ten percent (10%) final tax on onshore interest income rests on the payors-borrowers and not on the petitioner as payee-lender. Whether CTA En Banc erred in holding petitioner liable for deficiency withholding tax on compensation for the accrued bonuses in the taxable years 1996 and 1997 considering that these were not distributed to petitioner’s officers and employees during those taxable years, hence, not yet subject to withholding tax.

ISSUES: Whether petitioner ING Bank may validly avail itself of tax amnesty granted by Republic Act. No. 9480 Whether petitioner ING Bank is liable for deficiency withholding tax on accrued bonuses for taxable years 1996 and 1997.

RULINGS: Petition is PARTLY GRANTED –
The assessment with respect to petitioner’s liabilities for deficiency documentary stamp taxes on its special savings accounts and deficiency tax on onshore interest income under the foreign currency deposit system are SET ASIDE solely in view of the ING Bank’s availment of tax amnesty program under Republic Act. No The April 5, 2005 Decision of the CTA En Banc which affirmed the August 9, 2004 Decision and November 12, 2004 Resolution of the CTA Second Division holding ING Bank liable for deficiency withholding tax on compensation for the taxable years 1996 and 1997 in the total amount of P564, inclusive of interest is AFFIRMED.

BASIS: Taxpayers with pending tax cases may avail themselves of the tax amnesty program under Republic Act. No The Supreme Court has definitively declared the exception issues and cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer under BIR Revenue Memorandum Circular No as invalid, null, and void for going beyond the scope of the provisions of the 2007 Tax Amnesty Law. Accordingly, neither the law nor the implementing rules state that a court ruling that has not attained finality would preclude the availment of the benefits of the Tax Amnesty Law. Both RA 9480 and DOF Order No are quite precise in declaring that “tax cases subject of final and executor judgment by the courts” are the ones excepted from the benefits of the law. Also, the documentary stamp tax and onshore income tax are covered by the tax amnesty program under RA 9480 and its Implementing Rules and Regulations.

BASIS Under the National Internal Revenue Code, every form of compensation for personal services is subject to income tax and consequently, to withholding tax. The term “compensation” means all remunerations paid for services performed by an employee for his or her employer, whether paid in cash or in kind, unless specifically excluded under Sections 32(B) and 78(A) of the 1997 National Internal Revenue Code. The name designated to be the remuneration for services is immaterial. Thus, “salaries, wages, emoluments and honoraria, bonuses, allowances (such as transportation, representation, entertainment, and the like), taxable fringe benefits, pensions and retirement pay, and other income of a similar nature constitute compensation income” that is taxable. Thus, petitioner is liable for the withholding tax on the bonuses since it claimed the same as expenses in the year they were accrued.

Standard Chartered Bank (respondent) Vs. BIR (petitioner)
FACTS: On July 14, 2004, respondent (Standard Chartered Bank) received petitioner’s (Bureau of Internal Revenue) Formal Letter of Demand dated June 24, 2004, for alleged deficiency income tax, final income tax – FDCU, Withholding tax on compensation (WTC), EWT, Final withholding tax (FWT), and increments for taxable year 1998 in the aggregate amount of P33,326, On August 12, 2004, respondent protested the said assessment by filing a letter-protest dated August 9, 2004 addressed to the BIR Deputy Commissioner for Large Taxpayers’ Service stating the factual and legal bases of the assessment, and requested that it be withdrawn and cancelled.

FACTS CONT'D As of the date of filing of Petition for Review, petitioner has not rendered decision on respondent’s protest. In view of petitioner’s inaction on respondent’s protest, on March 9, 2005, respondent filed the Petition for Review. On October 14, 2005, respondent filed a Motion for Leave of Court to Serve Supplemental Petition, with attached Supplemental Petition for Review. Merit was granted and Supplemental Petition for Review was admitted in a Resolution dated December 12, 2005.

FACTS CONT'D Respondent presented its Vice-President, as witness and documentary exhibits which were admitted by court in its Resolutions dated October 1, 2007 and January 31, 2008. Petitioner presented Revenue Officer II of the BIR LTAID I, as witness, and documentary evidence marked as Exhibits 1 to 4. The parties were ordered to file their simultaneous memoranda within thirty (30) days from notice, afterwhich the case shall be deemed submitted for decision. Petitioner’s Memorandum was filed on August 4, 2008 while respondent’s memorandum was filed on October 24, 2008 after a series of motions for extension of time to file memorandum were granted by court. The case was deemed submitted for decision on November 12, 2008.

ISSUES: Whether or not petitioner’s right to assess respondent for deficiency income tax, final income tax – FCDU, and EWT covering taxable year 1998 has already prescribed under Section 203 of the NIRC of 1997, as amended, for failure to comply with the requirements set forth in RMO No dated April 4, 1990, pertaining to the proper and valid execution of a Waiver of the Statute of Limitations, and in accordance with existing jurisprudential pronouncements. Whether or not respondent is estopped from questioning the validity of the waivers of the Statute of Limitations executed by its representatives in view of the partial payments it made on the deficiency taxes (i.e. WTC and FWT) sought to be collected in petitioner’s Formal Letter of Demand and Assessment Notices dated June 24, 2004.

RULINGS: No merit was found on the petition. The period for the petitioner to assess and collect an internal revenue tax is limited only to three years by Section 203 of the NIRC of 1997 as amended.

RULINGS CONT'D In line with the waiver of the Statute of Limitations, RMO No and Revenue Delegation Authority Order (RDAO) No were issued on April 4, 1990 and August 2, 2001 respectively. The said revenue orders outline the procedure for the proper execution of the waiver. The provisions of the RMO and RDAO explicitly show their mandatory nature, requiring strict compliance. Hence, failure to comply with any of the requisites renders a waiver defective and ineffectual.

THANK YOU! Wendell D. Ganhinhin Partner
Tax & Outsourcing, Cebu and Davao Branches

Latest BIR Issuances TAX UPDATES September 17, 2015 (Thursday)

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Latest BIR Issuances TAX UPDATES September 17, 2015 (Thursday)

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