Your 2015 Tax Horoscope (Impact of recent developments)

Your 2015 Tax Horoscope (Impact of recent developments)
"2nd GMM and Seminar" Intercontinental Hotel, Makati City 19 March 2015 Lina P. Figueroa Tax Principal P&A

New forms, more reports, new procedures
Tax Updates New forms, more reports, new procedures More clarifications… reiterations VAT Withholding taxes Hope in the Courts… Hope in the Executive…

new forms more reports new procedures

Enhanced BIR Registration Forms RMC 9-2015 March 11, 2015
For RDOs covered by the roll out for the Taxpayer Registration System (TRS) under the E-TIS (Electronic Tax Information System)

LTDO Makati RDO 50- South Mkti RDO 44 – Taguig
March – RR8, LTS, LTDO Cebu Other RDOs, RRs Enhanced BIR Registration Forms RMC March 11, 2015 For RDOs covered by the roll out for the Taxpayer Registration System (TRS) under the E-TIS (Electronic Tax Information System)

Enhanced BIR Registration Forms
1901 Application for Registration for Self-Employed and Mixed Income Individuals, Estates/Trusts 1902 Application for Registration For Individuals Earning Purely Compensation Income, and Non-Resident Citizens / Resident Alien Employee 1903 Application for Registration for Corporations/ Partnerships (Taxable/Non-Taxable) 1904 Application for Registration for One-Time Taxpayer and Persons Registering under E.O. 98 (Securing a TIN to be able to transact with any Government Office) 1905 Application for Registration Information Update for Updating / Cancellation of Registration / Cancellation of TIN / New Copy of TIN card / New copy of Certificate of Registration 2305 Certificate of Update of Exemption and of Employer's and Employee's Information

New BIR Registration Forms
New Information Required Place of birth Mother's maiden name Father's name Identification details Incentive details Contact person address

BIR Form No. 0217 – Application for Contractor's Final Payment Release Certificate
(Formerly BIR Form No. 2555) Revenue Memorandum Circular No August 8, 2014

Application for Contractor's Final Payment Release Certificate – BIR Form No. 0217
All contractors engaged by the government to construct infrastructures and other projects are required to file BIR Form No before the release of final payment by the DPWH. AITEID, NO RDO

BIR Form No. 0217

Scanned copies of BIR Form 2307 and BIR Form RR Published March 6, 2015 Effective March 21, 2015

Scanned copies of BIR Form 2307 and 2316
Required only for LARGE TAXPAYERS (LTS. LTDO Cebu and Makati) Optional for non-LTS taxpayers (irrevocable option) Effective for April 15 ITR and Quarterly ITR for Q ending Jan 31 (due on Aprl 1)

BIR Form 2307 – Certification of Creditable Tax Withheld at Source RR – Summary Alphalist of Withholding Agents of Income Payments Subjected to CWT (SAWT) together with copies for Form 2307. RR – In lieu of the hard copies, submit scanned copies of Form 2307 stored in a DVD-R.

BIR Form 2316 – Certification of Compensation Payment/Tax Withheld RR – In case of employees qualified for substituted filing, submit duplicate copy to the BIR RDO on or before February 28. RR – In lieu of the duplicate original, submit scanned copy of Form 2316 stored in a DVD-R.

Requirements Scan and save as PDF file Filename Label of the DVD-R Submit to RDO where taxpayer/employer is registered together with a notarized certification

Form 2307 Form 2316 Filename requirement BIR-reg name of payor
Surname of employee TIN including HO or branch code of payor TIN of employee Year ending (TY/FY) Year ending (TY/CY) Rizal Mfg. Corp._ _ Dela Cruz_ _

? time required to scan & save
Filename requirement Impact on the company ? large taxpayer ? how many certificates ? time required to scan & save Form 2307 Form 2316 BIR-reg name of payor Surname of employee TIN including HO or branch code of payor TIN of employee Year ending (TY/FY) Year ending (TY/CY) Rizal Mfg. Corp._ _ Dela Cruz_ _

Filename requirement e.g. - all large/top 20K TPs are clients of and withhold from electricity, water, telephone LTs = 2,400 1 minute/form 60 forms/hr 2,400 cert = 40 hours = 5 days Form 2307 Form 2316 BIR-reg name of payor Surname of employee TIN including HO or branch code of payor TIN of employee Year ending (TY/FY) Year ending (TY/CY) Rizal Mfg. Corp._ _ Dela Cruz_ _

Labeling the DVD-R COMPANY FILER

Signed by an authorized representative
Sworn Certification That the soft copies of the BIR form contained in the DVD-R are complete and exact copies of the originals thereof. Signed by an authorized representative

?? during tax assessments??

Documenting Donations
Revenue Memorandum Circular No December 5, 2014

Substantiation Requirements for Contributions or Gifts Actually Paid or Made
RR 3-98 requires… Donee – to provide Certificate of Donation to RDO and donor within 30 days from receipt of donation Donor – Notice of donation to submit to RDO within 30 days from receipt of Certificate of Donation (if P1M or more)

Substantiation Requirements for Contributions or Gifts Actually Paid or Made
Certificate of donation and Notice of donation have been consolidated in BIR Form 2322 – Certificate of Donation Submit to BIR within 30 days from receipt of donation – original copy to donor, triplicate to donee Donee to ensure consecutive numbering of the Certificate Regular taxpayer Dxxx-xxx-20xx Large taxpayers LTS-xxx-20xx Dxxx= Rdo number; xxx-Certificate number; 20xx = year Attach deed of sale to prove acquisition cost Deductible expense = net book value of property

Certificate of Donation (BIR Form 2322)

Authorized signatory

Proof Deductible amount

Proof – Deed of Sale Deductible amount Certificate of Donation (BIR Form 2322)

Preservation of Books of Accounts and Other Accounting Records
Revenue Regulations (RR) No July 30, 2014

Retention period for books of accounts, subsidiary books and other accounting records extended from 3 years to 10 years. Format: Issuances 1st th Year 6th th Year RR 5-14 Hard copies Hard copies or Soft copies Section 2-A of RR 5-14 provides specific technical requirements in observing an electronic storage system of its files and records, if the taxpayer can not meet it, then, he can maintain it on hard copies.

Requirements for Electronic Storage System Reasonable controls to ensure integrity, accuracy, and reliability. Reasonable controls to prevent and detect modification and deterioration of original data on the records. An inspection and quality assurance program A retrieval system (prescribing an indexing system) Ability to produce legible and readable hardcopies of the stored records

Testing of Electronic Storage System Testing by RO with at least 3 days prior notice RO findings appealable to RD within 10 days; 30 days to resolve the appeal Penalties: Requirement for hard copies, instead of soft copies Possible compromise penalty (failure to preserve books) up to P50,000

eFPS and eBIRForms

eFPS (Electronic Filing and Payment System)
Revenue Regulation No , December 10, 2014 Revenue Regulations No , March 17, 2015

Required to file and pay through EFPS (Revenue Regulation No. 1-2013)
Under RR No , the following taxpayers are mandated to use EFPS: Large Taxpayers Top 20,000 Corporations Top 5,000 Individual Taxpayers Government bidders/licensed local contractors; Corporations with paid-up capital stock of P10M; Corporations with complete CAS; PEZA, ecozone enterprises, all others enjoying incentives; Government offices

Under RR No , additional taxpayers are required to use EFPS: Taxpayer Account Management Program (TAMP) Accredited Importers with BIR-ICCs and BIR-BCCs

Failure to enroll and use eFPS Penalty of P1,000 per return 25% surcharge for "filing in the wring venue" Priority for audit **Effective immediately

Mandatory use of eBIRForms
Revenue Regulation No , September 8, 2014 Revenue Regulations No , March 17, 2015

Mandatory use of electronic BIR forms by non-EFPS
Mandatory coverage for ONLINE eBIRForms Accredited Tax Agent/ Practitioners and all its client-taxpayers. Accredited Printers or Principal and Supplementary Receipts/Invoices Filer of a "No Payment" Return Government-Owned or Controlled Corporations LGU except barangays Cooperatives registered with National Electrification Administration (NEA) and Local Water Utilities Admin. (LWUA)

After validation, print FRN (Filing reference) page and present to bank to make payment. (RR ) Mandatory coverage for ONLINE eBIRForms Accredited Tax Agent/ Practitioners and all its client-taxpayers. Accredited Printers or Principal and Supplementary Receipts/Invoices Filer of a "No Payment" Return Government-Owned or Controlled Corporations LGU except barangays Cooperatives registered with National Electrification Administration (NEA) and Local Water Utilities Admin. (LWUA)

Optional for other non-eFPS filers (RR ) Mandatory coverage for ONLINE eBIRForms Accredited Tax Agent/ Practitioners and all its client-taxpayers. Accredited Printers or Principal and Supplementary Receipts/Invoices Filer of a "No Payment" Return Government-Owned or Controlled Corporations LGU except barangays Cooperatives registered with National Electrification Administration (NEA) and Local Water Utilities Admin. (LWUA)

eBIR Forms shall be available to all Non-EFPS with internet (Online e-BIRForms Package) or without internet (Offline eBIR Forms Package) access. Taxpayers with internet access shall download the eBIR Forms Package from the BIR website. Taxpayer without internet access shall download the eBIR Forms from the BIR e-lounges.

?? Mandatory for non-EFPS BEST PRACTICE – Use eBIR Forms Avoid risk of non-acceptance by the bank Avoid risk of non-acceptance by the RDO There are 36 BIR forms comprised of Income tax returns, Excise, VAT, Withholding, DST, Percentage, ONETT Form and Payment Form (Online submission for ITRs and ET returns will be announced)

more clarifications more reiterations

Nature of Tax Exemption Rulings for Sec. 30 corporations
Revenue Memorandum Order (RMO) No Sept 18, 2014

Clarification on the issuance of Tax Exemption Rulings
Effects of non-filing of TER The absence of a valid, current and subsisting ruling will not operate to divest qualified entities of the tax exemption. Prove qualification for tax exemption in the event of a tax investigation.

Clarifying the Tax Treatment of Stock Option Plans and
Other Option Plans Revenue Memorandum Circular (RMC) No November 3, 2014

Clarifying the Tax Treatment of Stock Option Plans and Other Option Plans
Includes "Equity-settlement Option" and "Cash-settlement Option" Grant of Option Grantor cannot claim expense deduction if no payment was received for the grant of option. If the option was granted for a price, the full price of the option shall be considered capital gains and shall be taxed as such. Upon issuance of Option, subject to DST amounting to P0.75 on each P200 of the par value of the stock or 25% of the DST paid upon the original issuance of the stock if no par value.

Sale or Transfer of Option Any grant of an Option for consideration, or transfer of the Option is subject to capital gains tax. If the Option is transferred by the grantee/subsequent owner without any consideration, the same shall be treated as donation of shares of stocks subject to donor's tax based on the FMV of the Option at the time of the donation.

Exercise of Option Subject to withholding tax on compensation or FBT Subject to applicable expanded withholding tax if the Option is exercised by supplier of goods or services Company pays donor's tax if the Option is exercised by neither employee nor supplier of goods or services

BASIS = BV/FMV (whichever is higher) at the time of exercise of Option minus the purchase price fixed on the grant date

NEW Reportorial Requirements to the RDO 30 days from GRANT DATE
Clarifying the Tax Treatment of Stock Option Plans and Other Option Plans NEW Reportorial Requirements to the RDO 30 days from GRANT DATE Terms and Condition of the stock option Names, TINs, position of the grantees BV/FMV/par value of the shares at the grant date Exercise price, exercise date and/or period Taxes paid on the grant, if any Amount paid of the grant, if any

NEW Reportorial Requirements to RDO
Clarifying the Tax Treatment of Stock Option Plans and Other Option Plans NEW Reportorial Requirements to RDO 10th day of the month following the month of EXERCISE Exercise date Names, TINs, position who exercised the option BV/FMV/par value of shares at the exercise date Mode of settlement (cash or equity) Taxes withheld on the exercise, if any Fringe benefits tax paid, if any

Tax Treatment of Payouts by Employee Pension Plans
Revenue Memorandum Circular No May 12, 2014

Clarification on tax treatment of payouts by employee pension plans
Particulars Contributory e/ER & e/EE contribute Non-Contributory Only Dividends Taxable Separation benefits (if separation is not tax-exempt) E/ee contribution- Exempt E/er contribution- Taxable Earnings- Taxable

Taxation of interest income from long-term deposits (Reiteration)
RMC March 6, 2015

Taxation of interest income from long-term deposits
Depositor is an individual citizen (R or NR), resident alien or NRAETB in the Phils. Certificate in the name of the individual (not a corporation/bank/ trust unit of the bank) In savings, common or indiv trust funds, dep subs, IMA, other BSP prescribed

4. Issued by banks only 5. Maturity period of not less than 5 years 6. In denomination of P10K or BSP prescribed 7. Should not be terminated by original investor before 5th year

Additional requirements for individuals investing in common or individual trust funds, IMAs Investment is actually held/managed by the bank Underlying investments must comply with Section 22 (FF) Trust account/IMA must hold on to that underlying investments in continuous and uninterrupted period for at least 5 years

Registration and Compliance requirements of Marginal Income Earners pursuant to RR No.7-2012
Revenue Memorandum Circular No Feb 5, 2014

Marginal Income Earner (Revenue Regulation No. 7-2012)
Marginal Income Earner – those individual whose business do not realize gross sales or receipts exceeding P100,000 in any 12-month period. The activities of such Marginal Income Earner should be principally for subsistence or livelihood. Includes farmers/fishermen selling directly to consumers, sari-sari stores, carinderias, tricycle drivers Excludes professionals, artists, consultants, sales agents, brokers

Registration and Compliance Requirements of MIE
Registration using BIR Form 1901 with the following minimal documentary requirements: - Sworn Statement of Income for the year; and - NSO Certified or Local Civil Registry Birth Certificate Exemption from the payment of Annual Registration Fee; Registration of Books of Accounts Issuance of registered (with ATP) principal receipts/sales invoices Filing and Payment of Annual Income Tax Return using BIR Form 1701; and Exemption from payment of business taxes. *No specific exemption from Wtax except for agricultural suppliers

Registration and Compliance Requirements of MIE
No more basis for using "marginal income earner" as reason for failure to provide OR/invoice to support expense or for failure to withhold. Registration using BIR Form 1901 with the following minimal documentary requirements: - Sworn Statement of Income for the year; and - NSO Certified or Local Civil Registry Birth Certificate Exemption from the payment of Annual Registration Fee; Registration of Books of Accounts Issuance of registered (with ATP) principal receipts/sales invoices Filing and Payment of Annual Income Tax Return using BIR Form 1701; and Exemption from payment of business taxes. *No specific exemption from Wtax except for agricultural suppliers

Requirements for applications for BIR Rulings under RMO 9-2014
(February 2014) Denial rulings have been issued in 2014 and 2015 for failure to comply with the requirements such as sworn declaration, complete documents, authorized representative, etc.

…securing the VAT and WITHHOLDING TAXES…
Value-Added Tax (VAT)

Requirement of Food and Drug Administration Certification for the feed ingredients to be exempt from VAT Revenue Memorandum Circular (RMC) Nos , and

Requirement of Food and Drug Administration Certification for the feed ingredients to be exempt from VAT General rule: VAT EXEMPT = sale or importation of fertilizers, seeds, seedlings, and fingerlings, fish prawn, livestock and poultry feeds including ingredients used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets)

Requirement of Food and Drug Administration Certification for the feed ingredients to be exempt from VAT BIR requires certification from FDA that ingredients are unfit for human consumption or that the ingredient cannot be used for the production of food for human consumption. Emphasis given on the following feed ingredients: Whey Powder Skimmed Milk Powder Lactose Buttermilk powder Whole Milk Powder Palm Olein

VAT on interest income is here to stay

Interest income from loans to affiliates are subject to VAT
CTA Case No. 8112, April 11, 2014, KEPCO PHILIPPINES CORPORATION, petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE LAPANDAY, 2009 WATERFRONT, 2013

Interest income from loans to affiliates are subject to VAT
VAT on interest income Interest income from loans to affiliates are subject to VAT The lender need not be a lending investor to be subject to VAT on the interest income. The enumeration in the Tax Code of services subject to VAT is not exclusive.

VAT on interest income Microfinance activities of non-stock non-profit (NSNP) company are subject to VAT CTA Case No. 8336, June 20, 2014, Kabalikat Para sa Maunlad na Buhay Inc. vs CIR

Microfinance activities of non-stock non-profit company are subject to VAT
Non-stock, non-profit organization's micro-financing activities that are not part of their registered activities are subject to VAT. NSNP organizations are liable to pay VAT on their sale of goods or services in the course of trade or business which covers regular conduct or pursuit of commercial or economic activity by any person including NSNP organizations (irrespective of the disposition of their net income, whether or not they sell exclusively to members or their guests.

Refundable input VAT from zero-rated sales
Taganito Mining Corporation v. CIR, CTA EB Case Nos. 935 & 936, December 16, 2014 CIR v. Northwind Power Development Corporation, CTA EB Nos & 1042, December 16, 2014

Refundable input VAT from zero-rated sales
Even if the taxpayer is subject to 0% on all its sales, it can only claim refund based on its “creditable input tax” attributable to the zero-rated sale during the period. In case of input taxes on capital goods, such refundable input tax refers only to the portion amortized during the period of claim.

Withholding Taxes

Presentation of Tax Exemption Certificate or Ruling by Exempt Individuals and Entities
Revenue Memorandum Circular (RMC) No Feb 6, 2014

Presentation of Tax Exemption Certificate or Ruling by Exempt Individuals and Entities
Withholding agents shall require all individuals and entities claiming income tax and withholding tax exemption to provide a valid, current and subsisting tax exemption certificate or ruling before payment of the income. No tax exemption certificate or ruling => subject to withholding tax Failure to withhold - deficiency withholding tax, interest, non-deductibility of the expense

PEZA, BOI, SBMA companies Section 30 corporations
Presentation of Tax Exemption Certificate or Ruling by Exempt Individuals and Entities Affected? PEZA, BOI, SBMA companies Section 30 corporations business leagues, chamber of commerce, NSNP educational institutions FWT on interest income of NSNP schools, international organizations, Withholding agents shall require all individuals and entities claiming income tax and withholding tax exemption to provide a valid, current and subsisting tax exemption certificate or ruling before payment of the income. No tax exemption certificate or ruling => subject to withholding tax Failure to withhold - deficiency withholding tax, interest, non-deductibility of the expense

Withholding on REIT and raw sugar
Revenue Regulation No December 22, 2014

Amendments on Subsection (Z)
(Z) Income payments to Real Estate Investment Trust (REIT) – Income payments made to corporate taxpayers duly registered with the Large Taxpayers Regular Audit Division 3 (now Regular LT Audit Division 3) of the Bureau of Internal Revenue, as REITs for purposes of availing the incentive provisions of Republic Act No. 9856, otherwise known as "The Real Estate Investment Trust Act of 2009", as implemented by RR No – One percent (1%)

Amendments on Subsection (Z)
Example Rental Parking Fees Storage Fees Toll Fees User Fees Ticket sales (Z) Income payments to Real Estate Investment Trust (REIT) – Income payments made to corporate taxpayers duly registered with the Large Taxpayers Regular Audit Division 3 (now Regular LT Audit Division 3) of the Bureau of Internal Revenue, as REITs for purposes of availing the incentive provisions of Republic Act No. 9856, otherwise known as "The Real Estate Investment Trust Act of 2009", as implemented by RR No – One percent (1%)

Amendments on Subsection (AA)
(AA) Income payments on locally produced raw sugar – Proprietors or operators of sugar mills/refineries on their mill share, direct buyers of Quedans or Molasses Storage Certificates from the sugar planters on locally produced raw sugar and molasses shall withhold the creditable income tax and remit the same to the BIR based in the applicable base price of ONE THOUSAND PESOS (P1,000) per FIFTY (50) kilogram (kg.) bag and FOUR THOUSAND PESOS (P4,000) per metric ton, respectively, subject, however, to adjustment, when deemed necessary by the Commissioner, upon consultation with the Administrator of the SRA. – One percent (1%)

DIFFICULT ASSESSMENTS AND REFUNDS
Handling assessments and refunds

Clarifications on due process requirement in the issuance of a deficiency tax assessment
Revenue Memorandum Circular (RMC) No

The Commissioner or his duly authorized representative shall issue Preliminary Assessment Notice (PAN), Formal Letter of Demand/Final Assessment Notice (FLD/FAN) and Final Decision of Disputed Assessment (FDDA). Duly authorized representative refers to Revenue Regional Directors, Assistant Commissioner-Large Taxpayer Service, and Assistant Commissioner-Enforcement and Advocacy Service

Taxpayers shall submit/file their responses to the PAN and protest to the FLD/FAN with the duly authorized representative of the Commissioner who signed the PAN and FLD/FAN. Issuance of FLD/FAN reiterating the deficiency taxes previously made in the PAN is a denial of the response to PAN. FLD/FAN should be issued within 15 days from filing/submission of the taxpayer's response to the PAN. Otherwise, the Revenue Officer who caused the delay shall be subject to administrative sanctions.

PAN ---------------------- FAN
Clarifications on due process requirement in the issuance of a deficiency tax assessment PAN FAN Options: PAY or FAN no option to discuss or evaluate reply all discussions/ evaluation shall take place after the FAN Taxpayers shall submit/file their responses to the PAN and protest to the FLD/FAN with the duly authorized representative of the Commissioner who signed the PAN and FLD/FAN. Issuance of FLD/FAN reiterating the deficiency taxes previously made in the PAN is a denial of the response to PAN. FLD/FAN should be issued within 15 days from filing/submission of the taxpayer's response to the PAN. Otherwise, the Revenue Officer who caused the delay shall be subject to administrative sanctions.

Submission of all relevant supporting documents in support of the protest shall be made within 60 days from date of filing of the protest letter, otherwise, the assessment shall become final. 60 days is not extendible

Failure to submit documents shall not automatically render the assessment as final and executory
Phil Foods Properties, Inc. v. CIR, CTA Case No. 8185, Third Division, December 3, 2014

The BIR considered the tax assessment final, executory and demandable because of failure to submit documents within 60 days. CTA: Submission of protest without supporting documents does not invalidate the filing of the protest. Lack of documentation will only matter when the BIR evaluates the merits of the protests, but should not automatically result in the deficiency assessment becoming final and executory.

Under-declaration of purchase does not by itself result in the imposition of income tax & VAT
Commissioner of Internal Revenue vs. Agrinulture Inc., CTA EB No. 1054, January 13, 2015)

Income tax should be imposed only when there was an income, and such income was received or realized by the taxpayer. A taxpayer is free to deduct a lesser amount, or not claim any deduction at all. What is prohibited is to claim a deduction beyond the amount authorized.

Prescription period for collection is not tolled if reinvestigation is not granted
China Banking Corporation Feb 4, 2015, GR 17250

When prescription period for collection is tolled
Prescription of period to collect can be raised even only at the SC level. Period to collect may be tolled by the filing of a request for reinvestigation only if such request has been granted by the BIR. If there are no indications that the request was granted, the running of the prescription period is not suspended.

Revised payment form covered by a letter notice
(Revenue Memorandum Circular Order No , December 3, 2014)

Payment form for LN (BIR Form No. 0611-A)
(RMO , December 3, 2014) For payment of deficiency taxes arising from letter notice (LN) based on the Reconciliation of Listings for Enforcement (RELIEF) System Bureau of Customs Data Program and Tax Reconciliation System (TRS)

Tax Filing

Handling refunds

Refunding erroneously withheld tax on exempt income
Bases Conversion and Development Authority v. CIR, CTA EB No. 1123, December 16, 2014)

Refund of erroneously withheld tax
not required to declare income subjected to WT as part of its gross income Requirements under Section 76 vital only for refund of excessive income tax payments or excess creditable withholding tax not bound by the irrevocability rule on carry over of excess unutilized CWTs

Refund of input VAT from zero-rated sales
Compliance with the day mandatory and jurisdictional periods Nippon Express, GR , Feb 4, 2015

Judicial claim must be filed with the CTA within 30 days
Refund of input VAT Administrative claim must be filed within 2 years after the close of the TQ when sales were made. CIR has 120 days from submission of complete documents within which to decide. Judicial claim must be filed with the CTA within 30 days from receipt of CIR’s denial within the 120 day period from the expiration of the 120-day period without any action from the CIR.

more hope with the COURTS
More hope in the Courts…

Condominium dues are not subject to withholding tax
CTA Case No. 8382, June 3, 2014, Officemetro Philippines Inc. vs CIR

Condominium dues are not subject to withholding tax
BIR: subject to withholding tax (RMC No ) CTA: NOT subject to withholding tax. Association dues or membership fees paid to condominium corporations are merely held in trust to be used for administrative expenses incurred in servicing members and are therefore not taxable income of a condominium corporation.

Certificate of exemption not a prerequisite for income tax exemption
The Abba’s Orchard School, Inc. v. Commissioner of Internal Revenue, CTA Case No. 8377, November 4, 2014

A certificate of exemption, as prescribed in RMO and RMO , is not a prerequisite for the exemption from income tax of a qualified non-stock, non-profit educational institution pursuant to Section 30 of the Tax Code. Since the Tax Code does not provide such requirement for exemption, the BIR cannot add an additional requirement to implement the law. To qualify for income tax exemption, the entity only has to prove that it is a non-stock, non-profit educational institution and that no part of its income is derived from activities conducted for profit.

Hope for PEZA…. Deductible expenses for PEZA companies
CTA Case No. 8179, May 21, 2014, East Asia Utilities Corp. vs CIR CTA Case No. 8508, Sept 1, 2014, Medtex Corp. vs CIR

Deductible expenses for PEZA companies
Allowable deductions under RR 11-05 Direct salaries, wages or labor expenses Production supervision salaries Raw materials used in the manufacture of products Decrease in Goods in Process Account (intermediate goods) Decrease in Finished Goods Account Supplies and fuels used in production Depreciation of building, machinery & equipment used in production Rent and utility charges associated with building, equipment and warehouses used in production

BIR ruled that the enumeration of allowable deductions under RR is EXCLUSIVE. BIR Ruling No

Disallowed Royalties – Technical license agreement Royalties – Trademark license agreement Salary of general manager devoted 90% to operations BIR ruled that the enumeration of allowable deductions under RR is EXCLUSIVE. BIR Ruling No

CTA: NOT exclusive PEZA companies may be allowed to deduct expenses that are in the nature of direct costs even though the same are not included in the list under RR In determining whether an item of cost or expense is part of direct costs, the direct relation of such item in the rendition of the PEZA-registered services should be determined. If the item of cost or expense can be directly attributed to providing the PEZA-registered services, then it should be treated as direct cost.

Allowed – Direct costs SSS Employer Cost Pag-ibig Employer Cost Medical/Health Insurance Accident/Life Insurance Uniform/Working Gears Training – Technical Hauling & trucking services Insurance/freight/brokerages fees re imported spare parts Insurance for trucks Allowed – Direct costs Safety program – fire hose, medical supplies Professional fees – consultants re "Clean Air Act", works for efficient fuel system flow CTA: NOT exclusive PEZA companies may be allowed to deduct expenses that are in the nature of direct costs even though the same are not included in the list under RR In determining whether an item of cost or expense is part of direct costs, the direct relation of such item in the rendition of the PEZA-registered services should be determined. If the item of cost or expense can be directly attributed to providing the PEZA-registered services, then it should be treated as direct cost.

Disallowed Insurance/working gear for OJTs Training – managerial skills DOE electrification fund General office expenses Representation and transportation Taxes and licenses CTA: NOT exclusive PEZA companies may be allowed to deduct expenses that are in the nature of direct costs even though the same are not included in the list under RR In determining whether an item of cost or expense is part of direct costs, the direct relation of such item in the rendition of the PEZA-registered services should be determined. If the item of cost or expense can be directly attributed to providing the PEZA-registered services, then it should be treated as direct cost.

RA 7916 only mentions "gross income". The definition was provided only in the implementing regulations. There is hope….

PEACe bonds not subject to 20% FWT
SC upholds definition of deposit substitutes BDO et al v CIR. GR , January 13, 2015

Deposit substitutes Invalid BIR Ruling: "..all treasury bonds (including PEACe Bonds), regardless of the number of purchasers/ lenders at the time of origination/issuance are considered deposit substitutes.." hence subject to 20% FWT. Tax Code: (Y) "The term "deposit substitutes" shall mean an alternative form of obtaining funds from the Public (the term 'public' means the borrowing from twenty (20) or more individual or corporate lenders at any one time)….

Deposit substitutes BTr ordered to refund to the bondholders the 20% FWT withheld in 2011 (not deposit substitute at the time of original issuance, only one lender). Subsequent sale and distribution of the PEACe bonds to 20 or more lenders or investors may render RCBC Capital Corp and Code-NGO liable to withhold the 20% final tax on the interest/discount from the bond (based on the clause "at any one time").

PAGCOR tax regime PAGCOR, GR , December 10, 2014

Tax treatment of PAGCOR
5% franchise tax on income from gaming operations RCIT on other income

LGUs cannot tax common carriers

Although the power to tax is inherent in the State, the same is not true for the LGUs to whom the power must be delegated by Congress and must be exercised within the guidelines and limitations that Congress may provide. The taxing power of LGUs shall not extend to “taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water

Exception to strict interpretation of the law
George T. Olivo and Cash World Lending Inc. v. CIR, CTA Case No. 8755, December 15, 2014

The taxpayer attempted to pay the CGT and DST after the expiration of the redemption period but was told by the receiving clerk of the RDO that the certificates of final sale are required before payment of CGT and DST. However, when the certificates of final sale were issued and the taxpayer paid the taxes, it was additionally charged interest and penalties.

CTA approved the taxpayer’s application for refund of the interest and penalties charged on the CGT and DST. While procedural rules must be followed, special cases merit exemption to relieve a litigant of an injustice not commensurate to the degree of his thoughtlessness in noncompliance with the procedure prescribed by law.

TTRA requirement CBK Power, GR , GR , Jan 14, 2015

TTRA requirement In a refund case, the requirement for prior application becomes moot. The taxpayer is asking for a refund precisely because it initially paid the FWT based on the regular rates. To impose the requirement would be illogical. The application for treaty relief should merely operate to confirm the entitlement of the taxpayer to the relief. Hence, if the taxpayer applied for the confirmation of the treaty relief before filing the application for refund, this is deemed sufficient compliance (filing albeit late/after the payment).

SC upholding requirement to file TTRA
TTRA requirement SC upholding requirement to file TTRA In a refund case, the requirement for prior application becomes moot. The taxpayer is asking for a refund precisely because it initially paid the FWT based on the regular rates. To impose the requirement would be illogical. The application for treaty relief should merely operate to confirm the entitlement of the taxpayer to the relief. Hence, if the taxpayer applied for the confirmation of the treaty relief before filing the application for refund, this is deemed sufficient compliance (filing albeit late/after the payment).

TTRA requirement The decision also reiterates that in a refund pursuant to Sec 204 (erroneously paid taxes), both the admin and judicial claims must be filed within the 2-year period. The taxpayer need not "exhaust the administrative remedies" by giving the CIR up to the last day of the 2-year period to process the administrative claim. In fact, there is no requirement that the CIR should act on the admin claim. The claim actually just serves as a warning that unless the refund is paid, court action will follow.

TTRA requirement Current BIR rulings do not anymore quote the requirement for filing prior to first payment/taxable event under RMO No conclusions that payments made prior to the filing of the application shall be subject to the regular rates

TTRA requirement ITAD 113-2014, July 21, 2014 Filed - June 1, 2011
Agreement dated April 5, 2010 Effectivity of agreement - April 1, 2009 to March 31, 2014 Payments - every quarter. ITAD , July 21, 2014 Filed - March 26, 2012 Date of Franchising agreement - April 12, 2010 First payment made on February 16, 2011

more hope in the EXECUTIVE

P82,000 tax exemption ceiling applies beginning Jan 1, 2015
Revenue Regulations No It's official!! The P82,000 tax exemption allowance will apply on all 13th month pay and other benefits paid or accrued beginning January 1, 2015.

P82K is for whole year of 2015 Reiterations The exemption allowance applies only to the 13th month pay and other benefits and should not cover basic salary and other allowances paid pursuant to an employer-employee relationship. The allowance is not available to self-employed individuals.

P82K is for whole year of 2015 Other benefits such as Christmas bonus, productivity incentive bonus, loyalty award, gifts in cash or in kind and other benefits of similar Longevity pay is in the nature of a loyalty award (granted for rendering the required years of service Performance bonus meeting the established key results areas and cost center budget (de minimis benefit) Reiterations The exemption allowance applies only to the 13th month pay and other benefits and should not cover basic salary and other allowances paid pursuant to an employer-employee relationship. The allowance is not available to self-employed individuals.

Additional de minimis benefits
Revenue Regulations No

Total not exceeding P10,000 Benefits given under collective bargaining agreement (CBA) Productivity incentives

Nature of Productivity incentives ? RA 6791 (Productivity Incentives Act of 1990) (c) "Productivity Incentives Program" refers to a formal agreement established by the labor-management committee …, whereby the employees are granted salary bonuses proportionate to increases in current productivity over the average for the preceding three (3) consecutive years. … apply to all business enterprises with or without existing and duly recognized or certified labor organizations,

Nature of Productivity incentives P10,000 vs P30,000 vs P10,000 employee achievement awards (BIR Rulings) P30,000 - Other benefits such as Christmas bonus, productivity incentive bonus, loyalty award, gifts in cash or in kind and other benefits of similar Longevity pay is in the nature of a loyalty award (granted for rendering the required years of service Performance bonus meeting the established key results areas and cost center budget (de minimis benefit/other benefits) Anniversary bonus (other benefits)

Condonation of RPTaxes of IPPs with BOT contracts with GOCCs
RMC Circularizing EO 273

Some LGUs take the position that IPPs do not enjoy these exemptions
RPTs of IPPs GOCCs engaged in power gen and trans enjoy 10% assessment level on its RPT and exemption on machineries used in power generation. Some LGUs take the position that IPPs do not enjoy these exemptions In certain cases, such taxes of IPPs are contractually assumed by the GOCCs

Reduction and condonation
RPTs of IPPs Reduction and condonation Reduction of tax dues to an amount equivalent to 15% of the FMV depreciated at 2% per annum less amounts already paid Condonation of fines, interests and penalties

Revoking the prohibition on the use of airline tickets issued outside the Philippines
RMC – Circularizes AO 45 Jan 22, 2015

Airline tickets issued outside the Philippines
Revokes LOI 1479 (1985) Nov 28, 2014 LOI 1479 prohibits use of airline tickets issued outside the Philippines Technological advances and changes in laws have rendered the ban obsolete

What's in-store for us in 2015?

CY 2015 Priority Programs Revenue Memorandum Circular No

Online system for transfer tax transactions
Electronic certificate authorizing registration (eCAR) Electronic tax information system (eTIS) RATE program Oplan Kandado Taxpayer registration information update (TRIU) – printing of PVC TIN card and securitized COR

Online importers' accreditation
Online tax clearance for bidders Electronic official registry book (ORB) Internal revenue stamps integrated system for alcohol products Compliance improvement strategy Geographical information system Asset Information management program

Enhanced mobile revenue collection officers system
E-linkage with the Bureau of Treasury Forfeited asset management Integrity management program Capacity development and public awareness (eLearning) Workflow management system

ISO certification for other RDOs
Exchange of information program & FATCA Human Resources Information System Procurement, payment, inventory, distribution and monitoring system Strategic performance management system Transfer pricing program Industry issues resolutions

Your 2015 Tax Horoscope (Impact of recent developments)

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Your 2015 Tax Horoscope (Impact of recent developments)

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