INSIGHTS is a monthly publication of BDB LAW to inform, update and provide perspectives to our clients and readers on significant tax-related court decisions and regulatory issuances (includes BIR, SEC, BSP and various government agencies).

DISCLAIMER: The contents of this Insights are summaries of selected issuances from various government agencies, Court decisions and articles written by our experts. They are intended for guidance only and as such should not be regarded as a substitute for professional advice.

Copyright © 2019 by Du-Baladad and Associates (BDB Law). All rights reserved. No part of this issue covered by this copyright may be produced and/or used in any form or by any means – graphic, electronic and mechanical without the written permission of the publisher.

The CTA has authority to rule on issues not raised by the parties in their pleadings.

The taxpayer was assessed for alleged deficiency internal revenue taxes. It assailed the propriety of the assessment but it failed to raise in its Petition the lack of Letter of Authority (LOA) of the Revenue Officers who conducted the audit examination. The CTA, motu proprio took cognizance of the issue despite the failure of the Taxpayer to raise the same. The BIR challenged the act of the CTA.

The CTA ruled that while the taxpayer did not raise the issue of lack of authority of the revenue officers to conduct the audit, the Court could nevertheless can take cognizance of issues that are essential to carry out its mandate, that is, to secure a just disposition of cases brought before it. It is well within the Court's authority to consider in its decision the question on scope of authority of revenue officers who were named in the LOA, even though the parties had not raised the same in their pleadings. There was no valid LOA in this case. Thus, the CTA ruled in favor of the taxpayer. (Misamis Oriental Rural Electric Service Cooperative I, Inc. (MORESCO I), vs. Commissioner of Internal Revenue, CTA Case No. 9700, November 4, 2019)

The Rules of Court places upon the movant, and not with the court, the obligations both to secure a particular date and time for the hearing of his motion and to give a proper notice thereof on the other party. It is precisely the failure of the movant to comply with these obligations, which reduces an otherwise actionable motion to a mere scrap of paper not deserving of any judicial acknowledgment.

This is a Resolution issued by the Honorable CTA in view of the Motion for Reconsideration filed by the BIR. The Court observed that the questioned Motion for Reconsideration lacks the necessary Notice of Hearing.

The CTA denied the Motion for Reconsideration filed by the BIR stating that the deficiency is fatal to BIR’s cause since a motion without a notice of hearing is considered a mere scrap of paper. Jurisprudence had been categorical in treating a litigious motion without a valid notice of hearing as a mere scrap of paper. Even if the Court disregards the aforesaid procedural infirmity, perusal of the Motion would reveal that the arguments presented therein are patently without merit; hence, there is no cogent reason to modify the assailed Decision. (Barrio Fiesta Manufacturing Corporation vs. Commissioner of Internal Revenue, CTA Case No. 9880, November 5, 2019).

An authority emanating from the BIR or his duly authorized representative is required before an examination and an assessment may be made against a taxpayer.

On the basis of a Tax Verification Notice, a revenue examiner was authorized to verify the taxpayer’s supporting documents and pertinent records relative to its internal revenue tax liabilities for the taxable year 2008.

The taxpayer was found liable for deficiency taxes. The matter was elevated to court, with the taxpayer assailing the validity of the Letter of Authority, among others. The BIR contended that a TVN issued for the purpose of audit and examination of books of accounts and accounting records has the same force and effect as the LOA issued for same purpose.

In finding for the taxpayer, the Court held in this wise, “revenue examiner’s must be authorized, through a LOA, in order that said officers may validly examine the books of accounts and accounting records of a taxpayer. In the absence of a LOA, the tax assessments issued by the BIR against such taxpayer shall be void.”. It was clear that the revenue examiner derived his authority to conduct assessment from a TVN. Moreover, this TVN was only signed by the Regional District Officer, and not by a Revenue Regional Director. Correspondingly, the revenue examiner is without any authority to assess or examine. Thus, the subject deficiency assessments for the taxable year 2008 is void. (Jinzai Experts, Inc. v. Commissioner of Internal Revenue, CTA Case No. 9473, November, 6 2019)

Any tax assessment issued without an LOA is a violation of the taxpayer's right to due process and therefore void.

The taxpayer in this case received a Letter of Authority from the BIR authorizing Revenue Officer (RO) Enguerra to conduct the audit examination. The case was subsequently transferred to RO Bisares by virtues of a MOA but no new LOA was issued in his favor. The taxpayer then assailed the validity of the assessment for lack of valid LOA. The BIR alleged that the MOA is sufficient to authorize the RO to continue the audit investigations.

The CTA ruled that any tax assessment issued without an LOA is a violation of the taxpayer's right to due process and therefore void. Here, there was no valid LOA, authorizing the ROs to conduct the audit investigation of Taxpayer. Thus, the assessment arising from such investigation is a nullity. (Republic of the Philippines, vs. Robiegie Corporation, CTA OC No. 024, November 7, 2019)

In case the criminal offender is a corporation, the penalty shall be imposed on the Partner, President, General Manager, et.al., responsible for the violation.

The CTA dismissed the instant criminal case for lack of probable cause as the People failed to comply with the Court’s Resolution which will establish the personal identity and personal circumstances of the accused, Roland P. Vasquez, under Section 4 of Rule 110 of the Revised Rules of Criminal Procedure (People of the Philippines Vs. RPV Electro Technology Philippines Corporation/ Roland P. Vasquez (President), CTA Crim. Case No. 0-713, November 7, 2019)

The law mandates that PEZA shall manage and operate the ecozones as a separate customs territory, thus, creating the legal fiction that the ecozone is a foreign territory. As a result, sales made by a supplier from the customs territory to a purchaser in the ecozone shall be treated as exportation from the customs territory. Conversely, sales made by a supplier from the ecozone to a purchaser in the customs territory shall be considered as an importation into the customs territory.

The taxpayer filed a claim for refund of unutilized creditable input tax attributable to its zero-rated sales for taxable year 2013. It is engaged in the business of manufacturing and exporting of nickel/cobalt mixed sulfide and it is also registered with the Philippine Economic Zone Authority (PEZA) as an Ecozone Export Enterprise.

The Court partially granted the claim of the taxpayer stating that the VAT zero-rating on the sales of goods, properties or services by a VAT-registered entity to a PEZA-registered entity applies only when such goods, properties or services are consumed, used or rendered within the Ecozone and in connection with the registered activities of the said PEZA-registered entity. Stated simply, if the sales of goods, properties or services are consumed, used or rendered within thecustoms territory, i.e., outside the ecozone, such sales by a VAT- registered entity to a PEZA-registered entity shall be then subject to the regular twelve percent (12%) VAT. 

Based on the pieces of evidence it presented, the taxpayer was able to establish that only its local purchases of services from SMCC Philippines, Inc. and the lease expenses incurred in Manila office were consumed and rendered outside the PEZA zone. (Taganito HPAL Nickel Corporation vs. Commissioner of Internal Revenue, CTA Case No. 9128, November 8, 2019)

CTA has jurisdiction to review BIR's Notice of Denial of the taxpayer’s application for abatement.

The taxpayer had deficiency taxes and sent a letter to the BIR indicating its willingness to pay the said amounts, with a request for abatement of penalties, surcharges and interests incident thereto, due to its alleged continued financial losses. It filed an Application for Abatement or Cancellation of Tax, Penalties and/or Interest and paid the basic deficiency. The BIR then denied its application for abatement of the penalties, surcharge and interest on the EWT and WTC and issued a Warrant of Distraint and/or Levy to enforce collection. This prompted the taxpayer to file Petition for Review before the CTA. BIR challenged the jurisdiction of the CTA to entertain the same alleging that since there is no decision on disputed assessment which could be the subject of review by the CTA, the latter has no jurisdiction.

The CTA ruled that it has jurisdiction to review the Notice of Denial of Taxpayer's application for abatement. The CTA has jurisdiction over other cases that arise out of the NIRC or related laws administered by the BIR. Thus, other than decisions of BIR pertaining to assessments or refunds, decisions of BIR relating to "other matters" may be taken cognizance of by the CTA, for as long as the said "other matters" arose under the NIRC or other laws administered by the BIR. Here, the Notice of Denial of Taxpayer's application for abatement is a matter, which arose under the NIRC of 1997. Thus, CTA has jurisdiction. (Commissioner of Internal Revenue, vs. Pacific Hub Corporation, CTA EB No. 1837 (CTA Case No. 8895), November 8, 2019)

The filing of the Complaint Affidavit with the DOJ is the reckoning point in the counting of the 5-year prescriptive period for criminal cases arising from the Tax Code.

The accused was charged for alleged violations of Section 255 of the NIRC, as amended. He filed a Motion to Quash the Information on the ground of prescription. He alleged that the date of discovery of the alleged crime is on January 30, 2014, the day BIR filed its Complaint-Affidavit with the DOJ. Counting five (5) years from January 30, 2014, the prescriptive period lapsed on January 30, 2019. Here, the Information was filed only on March 18, 2019. Thus, prescription had allegedly set in.

The BIR countered that under Section 281 of the NIRC, tax cases are "practically imprescriptible" as long as the period from the discovery of the offense and institution of judicial proceedings does not exceed five years. Thus, the reckoning period of 5 years is allegedly interrupted upon the filing of the Complaint Affidavits on January 30, 2014. As such, the filing of the criminal Information on March 18, 2019 was well within the 5-year period.

The CTA ruled that the period of prescription commences to run from the day of the perpetration of the offense, and if not known, from its discovery and the institution of judicial proceedings for its investigation and punishment. Citing the Lim Case, the SC interpreted the commencement of the prescriptive period under Section 281 of the NIRC, as amended, stating that in addition to the fact of discovery, there must be a judicial proceeding for the investigation and punishment of the tax offense before the five-year limiting period begins to run. Here, the filing of the Complaint Affidavit with the DOJ on January 30, 2014 is the reckoning point in counting the 5-year prescriptive period provided under Section 281 of the NIRC, as amended. Thus, the Motion to Quash was granted on the ground of prescription. (People of the Philippines vs. Ulysses Palconet Consebido, CTA Crim. Case Nos. 0-700, 0-702, & 0-703, November 8, 2019)

In order to be entitled to a refund or issuance of a TCC for unutilized input VAT on the cancellation of registration due to retirement from or cessation of business, or due to changes in or cessation of status, taxpayer must show that it has no internal revenue tax liabilities against which the TCC may be utilized.

The taxpayer filed a claim for refund praying for the issuance of a tax credit certificate representing its alleged accumulated unused/excess input Value-Added Tax (VAT) as of the cancellation of its VAT registration.

The Court denied the claim of the taxpayer stating that upon examining the records of the case, the taxpayer failed to present the tax clearance certificate issued by the BIR, to show that it has no internal revenue tax liabilities. It merely alleges that it filed an application for tax clearance and presented a Delinquency Verification Report for Tax Clearance issued by the BIR. Such document cannot be considered as tax clearance as it does not clearly state that the taxpayer has no pending tax liabilities, but merely verifies and checks the status of the taxpayer (e.g., compliance with the requirements of the BIR, filing of tax returns, existence of open cases or outstanding tax liabilities and on-going assessments). (Deltek Systems (Philippines) Ltd., vs. Commissioner of Internal Revenue, CTA Case No. 9445, November 11, 2019)

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. It is an accepted and desirable practice in courts of law and administrative tribunals.

This is a resolution of the Court for the Joint Motion for Approval of Judicial Compromise Agreement, filed by the parties on May 29, 2019. After submitting the documentary evidence supporting the approval of the offer of comprise the taxpayer to the BIR, the court found that the stipulations in the Judicial Compromise Agreement are not contrary to law, morals, good customs, public order and public policy.

The Court stated that parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided that these are not contrary to law, morals, good customs, public order, or policy. Corollary thereto, once submitted to the Court and stamped with judicial approval, a compromise agreement becomes more than mere private contract binding upon the parties. Having the sanction of the Court and entered as its determination of the controversy, it has the force and effect of any judgment. (Splash Corporation, Inc., vs. Commissioner of Internal Revenue, CTA Case No. 9370, November 11, 2019)

Criminal infractions under the Tax Code shall prescribe after five (5) years, reckoned from the commission of tax offense and if not known, from discovery thereof and institution of judicial proceedings for investigation and punishment.

BIR lodged complaint-affidavits against Accused for tax evasion under Section 254 of the NIRC, as amended and failure to supply correct and accurate information in the Tax Returns under Section 255 of the same Code. DOJ dropped the tax evasion for lack of probable cause but charged Accused for violation of Sec. 255 of the Tax Code. The Accused then raised the defense of prescription alleging that the charges brought by the BIR was done beyond the 5-year prescriptive period.

The CTA ruled that the case must be dismissed. Criminal infractions under the Tax Code shall prescribe after five (5) years, reckoned from the commission of the tax offense and if not known, from discovery thereof and institution of judicial proceedings for investigation and punishment. Here, the BIR referred the Joint Complaint-Affidavits to DOJ on September 23, 2010, hence, the five (5)-year prescriptive period begun to run on said date. BIR had until September 23, 2015 to file the requisite Information with the Court. However, the Information was only filed on June 18, 2019. Thus, the case should be dismissed on the ground of prescription. (People of the Philippines vs. Juanchito D. Bernardo, Chairperson Praxedes P. Bernardo and JDBEC Incorporated, CTA Crim. Case No. 0-733, November 12, 2019)

The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other. However, once the carry over option is taken actually or constructively, it becomes irrevocable for that taxable period. The phrase "for that taxable period" merely identifies the excess income tax, subject of the option, by referring to the taxable period when it was acquired by the taxpayer.

The taxpayer filed a claim for refund representing its excess payment of creditable withholding taxes for the taxable year 2014.

The Court partially granted the claim for refund stating that in addition to its choice to be refunded under Section 76 of the NIRC of 1997, taxpayer must also prove compliance with the following requirements, namely: 1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax; 2) The fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld; and 3) It must be shown on the return that the income received was declared as part of the gross income. In fine, the taxpayer was able to prove its entitlement for refund/tax credit, albeit in the reduced amount (Wells Fargo Philippines Solutions Inc., vs. Commissioner of Internal Revenue, CTA Case No. 9578, November 12, 2019)

The Implementing Rules and Regulations of PEZA Law did not limit, but merely enumerated the allowable deductions. Thus, other items not enumerated may be claimed as deductions.

The taxpayer is a foreign corporation organized and existing under the laws of Ohio, USA. It is also a PEZA-registered export enterprise, entitled to the five percent (5%) preferential tax regime on gross income earned pursuant the PEZA law. It was assessed for alleged deficiency taxes arising from the denial by the BIR its “Repairs and Maintenance” as claim for deductions. The BIR countered that the allowable deductions from gross income in Rule XX of the Implementing Rules and Regulations of PEZA Law and RR No. 11-2005, is exclusive. And since “Repairs and Maintenance” costs are not included, the same should be disallowed.

The CTA ruled that Repairs and Maintenance" should form part of Moog's costs of sales in the determination of its taxable income subject to the 5% preferential tax rate on gross income earned. The Implementing Rules and Regulations of PEZA Law did not limit, but merely enumerated the allowable deductions. Subsequently, RR No. 2-2005 limited the direct costs to the enumeration of allowable deductions therein. As it stands, RR No. 11-2005 removed the exclusivity of the allowable deductions from gross income. Thus, the allowable deductions from gross income of PEZA-registered enterprises enumerated in the IRR of the PEZA Law and RR No. 2-2005, as amended by RR No. 112005, are not exclusive. Thus, if a particular cost or expense is directly related to the PEZA-registered activity, it should be treated as a direct cost and includible in the allowable deductions from the gross income. (Moog Controls Corporation-Philippine Branch, vs. Commissioner of Internal Revenue, CTA EB No. 1809 (CTA Case No. 9077) and Commissioner of Internal Revenue, vs. Moog Controls Corporation-Philippine Branch, CTA EB No. 1810 (CTA Case No. 9077), November 14, 2019)

In a claim for tax refund or tax credit, the applicant must prove not only entitlement to the claim but also compliance with all the documentary and evidentiary requirements therefor.

This is a Resolution on the two Motion for Partial Reconsideration filed by the respective parties assailing the Decision of the Court promulgated on March 4, 2019. Taxpayer contends that that it was able to comply with all the essential basic conditions to prove its entitlement to its claim for refund. While, BIR posits that the taxpayer is not entitled to refund of excess and unutilized creditable withholding tax for calendar year ended 31 December 2013.

The Court denied the Motion filed by the BIR for lack of merit while it partially granted the Motion filed by the taxpayer as the taxpayer was able to convince the Court that it is partially entitled to its claim. Further, SMIC was able to establish the compliance with the requisite that the income upon which the taxes were withheld should be included in the return of the recipient. (SM Investments Corporation. vs. Commissioner of Internal Revenue, CTA Case No. 9322, November 18, 2019)

Section 228 of the NIRC, as amended, cannot be interpreted in the same manner as Section 195 of the LGC, because the period for the local treasurer to decide on the protest is not the same mandate as the Commissioner of Internal Revenue.

The taxpayer was assessed business tax delinquencies from the years 2009 to 2019. According to the taxpayer, the amount sought to be collected pertains to local business tax assessment for different years. However as already decided, the CTA, as well as the Regional Trial Court, has no jurisdiction to entertain the appeal on the ground that the appeal was filed out of time.

In the construction of Section 195 of the Local Government Code(LGC), the filing of an appeal should be made within thirty (30) days from either receipt of the decision issued before the lapse of the sixty (60) day period or from the lapse of the said period, whichever comes earlier. The taxpayer’s appeal was filed on February 22, 2018 with the RTC, when it should have been filed on March 26, 2016. Thus, it was filed out of time, which as a result, deprives the said court of jurisdiction.

The CTA rejects the taxpayer’s contention that the interpretation of Section 195 of LGC should be interpreted the same as Section 228 of the NIRC of 1997, as amended. In comparing the two provisions, Section 195 of the LGC provides for a period for the local treasurer to decide on the protest while Section 228 of the NIRC, as amended, has no such mandate to the Commissioner of Internal Revenue. Section 195 of the LGC clearly states that when a notice of assessment is received by the taxpayer, he may file a written protest within sixty (60) days from the receipt of such notice. Otherwise, the assessment becomes conclusive and unappealable. Since it was admitted that there was no protest filed, the assessment has therefor become conclusive and unappealable. (Public Safety Mutual Benefit Fun, Inc., represented by its President, Maria A. Avenido vs Rosette F. Laquian, Acting City Treasurer, San Juan City C.T.A. A.C. No. 214 November 22 2019)

Revenue Memorandum Circular No. 116-2019 dated 18 October 2019 – This clarifies the treatment of alien individuals in the Philippines by regional or area headquarters and regional operating headquarters of multinational companies, offshore banking units and petroleum service contractors or subcontractors pursuant to Section 4.C of Revenue Regulations No. 8-2018.

This memorandum circular provides that the respective income of alien individuals employed by the above-mentioned entities shall be similarly taxed as income of regular employees of locally established entities. Hence, these alien individuals are subject to the same administrative requirements such as substituted filing, issuance of BIR Form No. 2316, inclusion of monthly withholding tax remittance on compensation and alphalists.

However, with respect to seconded employees, they are likewise subject to regular income tax rates since the services they render are within the situs of taxation in the Philippines. Therefore, seconded employees are subject to the same administrative requirements as regular employees of locally established entities, except for the substituted filing.

The seconded employees shall comply with the following procedures: (a) the seconded employees shall be provided “Current Employment Status” in the Alphalist as basis for computing withholding tax on compensation. (b) they shall file their annual ITR on or before April 15 together with their BIR Form No. 2316. (c) the phrase “For Seconded Employees” shall be typed or printed in bold capital letters enclosed in open and closed parenthesis immediately under the forms title “Certificate of Compensation Payment/Tax Withheld”. And lastly, (d) the local entities shall ensure that the withholding tax on their salaries shall be computed using the annualized withholding tax method in case of termination of their services before the end of the taxable year.

Revenue Memorandum Circular No. 118-2019 dated 8 November 2019 – This Circular pertains to the availability of eRegistration (eREG) System to corporate or non-individual taxpayer-employees.

This memorandum circular makes eRegistration System (eREG) available for use by corporate or non-individual employers to facilitate the issuance of TIN of their employees. They shall enroll an authorized user who shall access the eREG System and apply for TIN of its new employees without existing TIN. Moreover, existing users shall likewise be required to re-enroll to create an authorized user account by accessing the system thru the BIR official website.

However, self-employed individual employers shall manually secure the TIN of their new employees to the Revenue District Officers having jurisdiction over their principal place of business or branch.

Revenue Memorandum Circular No. 122-2019 dated 28 October 2019 – This Circular terminates the submission of Semestral List of Regular Suppliers (SRS).

This memorandum circular addresses the issue on overlapping of requirements due to the issuance of RR No. 14-2008, which required the submission of SRS by Top 20,000 private corporations for purposes of monitoring their level of compliance in withholding and remitting the 1% and 2% CWT on purchase of goods or services, respectively. Subsequently, RMC No. 5-2009 prescribed the technical specifications for the electronic file format of report and its modes of submission.

However, prior to these issuances, RR No. 2-98, in relation to RR No. 11-2018, already prescribed the submission of Monthly Alphalist of Payees (MAP) and amended by Quarterly Alphalist of Payees (QAP), which already contains the information required in SRS.

Accordingly and consistent to the BIR’s policy of ease of doing business, the submission requirement of SRS is terminated.

Revenue Memorandum Order (RMO) No. 55-2019 dated 6 November 2019 – This Order amends certain portions of RMO No. 37-2019 relative to the prescribed policies, guidelines and procedures on the registration of employees.

This memorandum order amends the polices, guidelines, and procedures on the registration of employees. First, the Client Support Section (CSS) of the RDO shall accommodate employees in the event that the eRegistration System cannot process their TIN application due to reasons enumerated under Section II.3 of RMO No. 37-2019.

Second, the transferring-employer shall require employees mentioned in Section II(10.1) that are earning purely compensation income to accomplish BIR Form No. 1905, and facilitate the mass transfer of employees’ registration by submitting the update forms and list of said employees to the old RDO together with the request for transfer of registration of the said employers, excluding those employees who have been separated prior to the transfer.

SEC Memorandum Circular No. 23 dated November 21, 2019 – Guideline on the Revival of Expired Corporations

This Circular provides for the guidelines on the applicability and procedure for the revival of a corporation. The following should be noted upon:

I. The following corporations may file a Petition for Revival of Corporate Existence:

a. Generally, a corporation whose term has expired;
b. An Expired Corporation whose Certificate of Registration has been revoked for non-filing of reports (e.g. General Information Sheet, and Audited Financial Statements), provide that it shall file the proper Petition to Lift its Revoked Status, which may be incorporated in its Petition to Revive, and must settle the corresponding penalties thereof;
c. An Expired Corporation whose Certificate of Registration has been suspended, provided that it shall file the proper Petition to Lift its Suspended Status, which may be incorporated in its Petition to Revive, and must settle the corresponding penalties thereof; or
d. An Expired Corporation whose corporate name has already been validly re-used, and is currently being used, by another existing corporation duly registered with the Commission, provided that the former shall change its corporate name within thirty (30) days from the issuance of its Certificate of Revival of Corporate Existence.

II. The required number of votes for the Revival of an Expired Stock/Non-Stock Corporation is at least a majority vote of the board of directors/trustees, and the vote of at least majority of the outstanding capital stock/members.

III. The Petition for Revival of Corporate Existence may be filed with the Commission’s Company Registration and Monitoring Department, any SEC Satellite Office, or any SEC Extension Office.

IC Circular Letter No. 2019-65, November 22, 2019 –This circular letter was issued to amend certain provisions of CL No. 2018-48, as amended by 2018-60, on Anti-Money Laundering/ Counter-Terrorism Financing (AML/CTF) Guidelines for lnsurance Commission Regulated Entities.

The amendments to the guidelines primarily updated the rules of the Commission relating to the identification and verification of beneficial ownership in relation to anti-money laundering and terrorism financing prevention and suppression. The update was issued pursuant to the 2018 IRR of RA No. 9160 or the AMLA of 2001 as well as the IRR of RA No. 10168, otherwise known as the Terrorism Financing Prevention and Suppression Act.

The following are among the salient amendments to the rules:

• The definition of customer/client includes the beneficial owner, transactors or agents of the beneficial owners, beneficiaries, and trustors of a trust;
• Guidelines in the identification and verification of agents and beneficial owners;
• Enhanced due diligence for high-risk jurisdiction or geographic location;
• Clearer guidelines on measures to be undertaken when the enhanced due diligence is required; and
• Updated table of violations and fines.

IC Circular Letter No. 2019-67, November 22, 2019 – This circular letter was issued to amend Circular Letter No. 2017-14 by lowering the Minimum Members' Equity Requirement for Mutual Companies to Php900,000,000.00.

The table in Item No. 1 of Circular Letter No. 2017-14 was amended to read:

IC Legal Opinion No. 2019-12, November 22, 2019 – Questions regarding the meaning of the terms “Flood” and “Written Notice” as stated in an insurance policy relate to the substantive and contractual rights of the parties under the said policy.

The IC was asked whether the emails sent by the lessee of an insured property fall within the definition of “written notice” stated in the insurance policy and whether the inundation brought about by the southwest monsoon fall within the definition of “Flood” as defined in the policy.

The IC denied the request for legal opinion stating that the instant request involves the substantive and contractual rights of the owner and/or lessor of the property and the insurance company under the policy, and in all probability, a party would contest the same in court if the opinion turns out to be adverse to said party. This is one of the grounds for the IC to refrain from rendering an opinion under Circular Letter no. 2017-13.

BSP Memorandum No. M-2019-027, November 15, 2019 – This memorandum provides guidelines on the electronic submission of biographical data.

This memorandum requires all BSP-supervised financial institutions (BSFIs) to use the prescribed Biographical Data Template (BDT) and the corresponding prooflist (CP) as posted in its website. Said reports shall be sent to specific email addresses as stated in the memorandum, depending on the type of institution. Each submission should contained one BDT and one scanned CP only. BSFIs that are unable to transmit the reports via email may submit the same in any portable storage device to the BSP through the Department of Supervisory Analytics.

The memorandum likewise reiterated that the following may result to a reporting violation:
1. Failure to use the correct/updated templates;
2. Failure to use an officially registered email address;
3. Transmitting to the wrong email address;
4. Failure to use the prescribed subject line; and

Failure to use the prescribed filename format for BDT and CP.

BSP Circular No. 1058, Series of 2019, November 15, 2019. – This circular provides for the individuals who are allowed to be extended peso consumer loans without prior BSP approval.

This circular was issued in relation to Resolution No. 1729 dated November 7, 2019 which approved the amendments to the regulation on peso consumer loans to Overseas Filipino Workers, eligible non-immigrant visa holders, and embassy officials and employees under Section 301 of MORB, in order to address their financing needs. Hence, banks are allowed to extend peso consumer loans to the following individuals without prior BSP approval:

1. Overseas Filipino Workers (OFWs) as defined under existing labor laws and regulations;
2. Embassy officials and employees (foreign diplomats and career consular officials and employees) based in the Philippines; and
3. Foreign nationals holding valid visas issued by relevant Philippine authorities, subject to the following conditions:
a. That the peso consumer loans that may be extended shall not include real estate or housing loans; and
b. That the lending bank shall ensure that the borrower has resided in the Philippines for a period reasonable enough to allow the bank to make prudent credit decisions.

BSP Circular No. 1060, Series of 2019, November 15, 2019 – This circular provides that the public offering and listing of bank shares for UBs shall be governed by the rules of the SEC and PSE.

This circular was issued in relation to Resolution No. 1728 dated November 7, 2019 which approved the amendments to the prudential requirements on the public offering and listing of bank shares for universal banks (UBs) as provided under Sec. 102 and Appendix 1 of the MORB.

The public offering required to be conducted as a condition for the approval of the application for UB authority shall be accordance with the rules of the SEC on minimum public ownership (MPO) and the listing rules of the PSE. For banks whose shares of stock are already listed, a certification signed by the president or compliance officer that a bank has complied with the MPO requirement of the SEC must be submitted. Domestic banks already granted a UB authority must list their shares in the PSE within one (1) year from the date the authority to operate as a UB was granted.

As regards the public offering requirement, a domestic bank applying for a UB authority shall submit to BSP for evaluation, an offering prospectus prepared pursuant to the requirements of the Securities Regulation Code and its IRR, and the PSE listing rules. The bank shall cause the publication of the public offering in a newspaper of general circulation at least twice within a period of one (1) month prior to the offering. The bank must also comply with the investor relation program required by the PSE.

BSP Circular No. 1061, Series of 2019, November 26, 2019 – This circular provides for the relaxation of the rules on the issuance of LTNCTDs, bonds and commercial papers, specifically on the qualifications of the underwriter/arranger.

This circular was issued in relation to Resolution No. 1730 dated November 7, 2019 which approved the amendments to the MORB and MORNBFI to relax certain requirements on the issuance of LTNCTDs, bonds and commercial papers.

Under the circular, UB/commercial bank or investment house that is a related party of the issuing bank, may serve as the underwriter/arranger of the issuance of an LTNCTD, bond, or commercial paper, subject to the following conditions: (i) That there are other third party underwriters/arrangers that are not related in any manner to the issuing bank or quasi bank; (ii) That the objective conduct of the due diligence review is not undermined; and (iii) That the appropriate safeguards and controls as provided under Sec. 136 on related party transactions shall be instituted to prevent conflict of interest on the said arrangement.

The underwriter/arranger that is a related party of the issuing bank may likewise be a holder of the LTNCTDs, bonds, or commercial papers, provided, that it is part of the underwriting agreement.

BSP Circular Letter No. 2019-083, November 15, 2019 – This circular letter was issued to disseminate the AMLC’s FAQs on the DIGICUR Guidelines.

This Circular letter was issued to inform all BSFIs of the issuance of the Frequently Asked Questions (FAQs) on the Guidelines on Digitization of Customer Records (DIGICUR Guidelines) by the AMLC as Regulatory Issuance A, B, and C, No. 2, Series of 2018.

This circular likewise emphasized that non-compliance with the DIGICUR Guidelines is considered a grave violation under the AMLC's list of administrative offenses which shall be subject to fines provided under the AMLC’s Rules of Procedure in Administrative Cases.