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MAY • VOL. 4 • SERIES OF 2020

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).

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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.

 

What's Inside ...

  1. HIGHLIGHTS FOR MAY 2020
  2. REGULATORY ISSUANCES (Detailed Summary)
    1. BIR Issuances
    2. SEC Issuances 
    3. IC Issuances
    4. BSP Issuances

  3. INSIGHTS
    1. Published article "Digital Tax in the Philippines"
  4. OUR EXPERTS
    1. The Personalities
highlights
highlights
 
HIGHLIGHTS for MAY 2020
 
BIR Issuances
  • Revenue Regulation No. 12-2020, May 21, 2020 – This repeals the 15-day further extension of tax deadlines under RR No. 11-2020.
  • Revenue Regulation No. 14-2020, May 28, 2020 - This amends the pertinent provisions on Cash Conversion of Unutilized TCC under RR No. 5-2000.
  • Revenue Memorandum Circular No. 47-2020, May 11, 2020 – This prescribes the guidelines on temporary measures adopted by taxpayers relative to the receipting/invoicing requirements during the ECQ.
  • Revenue Memorandum Circular No. 48-2020, May 22, 2020 – This prescribes the manner of accepting payment of internal revenue taxes until June 14, 2020.
  • Revenue Memorandum Circular No. 49-2020, May 22, 2020 – This provides additional options in the acceptance and processing of the filed 2019 Income Tax Returns.
  • Revenue Memorandum Circular No. 52-2020, May 27, 2020 – This temporarily allows the filing via email of withdrawal of protest on Assessment Notices or Appeal on FDDA for purposes of Tax Amnesty.      

SEC Issuances

  • SEC Memorandum Circular No. 17 dated May 7, 2020: Extension of the Deadline for the Submission of 2020 Annual Reports and/or Audited Financial Statements of Companies with Fiscal Year Ending 31 January 2020 to 30 April 2020, Including the Applicable Quarterly Reports – This prescribes the extension of deadlines for the submission of specific reports.
  • SEC Memorandum Circular No. 18 dated May 11, 2020: Procedures in the Filing of Audited Financial Statements (“AFS”) and General Information Sheet (“GIS”) to the Securities and Exchange Commission (“SEC”) after the Community Quarantine – This provides for the different procedures allowed in the filing of the AFS and GIS with the SEC.
  • SEC Notice dated May 13, 2020 – This provides information on the covered period for the mandatory grace period for loans during the MECQ and GCQ period.
  • SEC Notice dated May 21, 2020 – This advises concerned entities of the opening of the SEC Express System and the SEC Nationwide Submission (“SENS”).

IC Issuances

  • IC Circular Letter No. 2020-56, May 14, 2020 – This provides guidelines on the issuance of certification pursuant to Republic Act No. 9184 during the period of community quarantine.
  • IC Legal Opinion No. 2020-04, May 05, 2020 – This clarifies that the imposition of GCQ is not contemplated under Circular Letter (“CL”) No. 2020-46 dated April 22, 2020. The CL merely extends the effectivity of CL No. 2020-29 ordering non-face to face (“non-F2F”) selling until any extension of the ECQ period or June 30, whichever comes later.
  • IC Ruling No. 2020-03, May 8, 2020 – This provides a case where the discovery date of adverse matters affecting the financial condition of a company falls within the ECQ period, an initial report is required to be submitted.
  • IC Ruling No. 2020-04, May 22, 2020 – This provides that in case the date for filing of Audited Financial Statements (“AFS”) in the IC comes first before the SEC deadline, the company may file a soft copy of its AFS “without stamp” to the IC on the filing date, in lieu of the AFS with stamped “Received” by the SEC.

BSP Issuances

  • BSP Memorandum No. M-2020-038, May 1, 2020 – This provides for a regulatory relief from the Exposure Limit Applicable to UITFs in relation to COVID-19.
  • BSP Memorandum No. M-2020-039, May 4, 2020 – This provides guidelines on the utilization of the Basel III Capital and Liquidity Buffers for all Covered Banks and Quasi-Banks.
  • BSP Memorandum No. M-2020-042, May 18, 2020 – This requires lending institutions to implement a thirty (30)-day grace period for loans with principal and interest falling due within the period of MECQ, without incurring interest on interest, penalties, fees, and other charges
  • BSP Circular No. 1086, May 06, 2020 – This provides amendments to the regulations of Foreign Currency Deposit System which aims to align the Manual for Regulations on Foreign Exchange Transactions (FX Manual) with the licensing and enforcement frameworks under the Manual of Regulations for Banks (MORB), and to provide flexibility in managing liquidity risk with simplified compliance with asset cover requirements of banks.
  • BSP Circular No. 1087, May 27, 2020 – This amends MORB and the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) by providing Alternative Compliance with the Reserve Requirements of Banks and Non-Bank Financial Institutions with Quasi-Banking Functions (NBQBs).
 
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bir_issuances

 

  • Revenue Regulation No. 12-2020, May 21, 2020 - This repeals the 15-day further extension of tax deadlines under RR No. 11-2020.
  • RMC 31-2019, March 7, 2019 - This revenue memorandum circular reiterates the tax compliance requirements of candidates, political parties/party list groups and campaign contributors on their registration, update and other tax compliance requirements following RMC No. 38-2018.
  • RMC 34-2019, March 4, 2019 - This revenue memorandum circular clarifies the treatment and reporting requirements on input tax of drugs and medicines exempt from VAT as of December 31, 2018.
  • RMC 37-2019, March 18, 2019 - This Circular prescribes the newly revised BIR Form No. 1701 [Annual Income Tax Return for Individuals (including mixed income earner), Estates and Trusts] January 2018 ENCS, which was revised due to the implementation of the TRAIN Law.
  • RMC 38-2019, March 25, 2019 - This revenue memorandum circular amends RMC No. 102-2018 as regards the deadline for the processing of pending VAT Refund/Credit claims filed prior to the effectivity of RMC No. 54-2014.

 

Revenue Regulation No. 12-2020, May 21, 2020 - This repeals the 15-day further extension of tax deadlines under RR No. 11-2020.

The 15-day further extension for filing and submission (in the event of an extension of the quarantine period) under RR No. 11-2020 has been repealed. The defined extended due dates under RR No. 11-2020 shall remain in effect regardless of any extension of modification of quarantine.

Revenue Regulation No. 13-2020, May 27, 2020 - This prescribes the rules and regulations to implement Republic Act (“RA”) No. 10699, otherwise known as the “National Athletes and Coaches Benefits and Incentives Act”.

Qualified National Athletes and Coaches shall be entitled to twenty percent (20%) sales discount, on sales amount exclusive of VAT, on transportation services, hotels, resorts and other similar lodging establishments, restaurants, recreation centers, medicine and drug purchases, sports equipment purchase, and admission fees charged by places of culture, leisure and amusement. However, National Athletes and Coaches who are at the same time a senior citizen or a Persons with Disability can only claim single 20% discount on a particular sale transaction.

Establishments granting sales discounts to National Athletes and Coaches on their sale of goods and/or services shall be entitled to deduct the said sales discount from their gross income.

Revenue Regulation No. 14-2020, May 28, 2020 - This amends the pertinent provisions on Cash Conversion of Unutilized TCC under RR No. 5-2000.

Amendments were introduced to RR No. 5-2000 wherein any TCC which remains unutilized for more than one (1) year at any given interval of time during its validity shall be converted into cash with prior written notice by the BIR, subject to the availability of funds in accordance with the procedural requirements that will be issued by the BIR for this purpose.

Also, all TCCs which are already expired upon the effectivity of RR No. 14-2020 shall be automatically cancelled by the BIR, except those TCCs which are with the BIR, for purposes of utilization thru Tax Debit Memo, conversion or revalidation, before the expiration of their respective dates of validity.

Revenue Memorandum Circular No. 47-2020, May 11, 2020 - This prescribes the guidelines on temporary measures adopted by taxpayers relative to the receipting/invoicing requirements during the ECQ.

In case the duly authorized or approved receipts/invoices shall be inaccessible or unavailable due to the implementation of the ECQ, the business taxpayers may opt to use any of the following:
a. BIR Printed Receipts/Invoices pursuant to RMC No. 28-2019, as amended; or,
b. Scanned copy of Receipt/Invoice with ATP (sent electronically in JPEG, PDF or any equivalent format); or,
c. Computer-aided Receipt/Invoice in Excel format not covered by an ATP and similarly transmitted electronically in JPEG, PDF or any equivalent format to the customer; or,
d. Supplementary Receipts/Invoices issued in lieu of the Principal Receipts/Invoices
e. Receipt/Invoice using the existing CAS or its Components with approved PTU or Acknowledgement Certificate (sent electronically in JPEG, PDF or any equivalent format); or,
f. Receipt/Invoice generated from a newly-developed receipting/invoicing software or CAS or its components without duly approved PTU or Acknowledgment Certificate (sent electronically in JPEG, PDF or any equivalent format).

Any taxpayer who adopted any of the cases/work-around procedures shall submit a letter to the BIR via specified e-mail, within three (3) days from the effectivity of this Circular indicating the following:
a. Name of the taxpayer;
b. Registered Address of the Taxpayer;
c. TIN with Branch Code;
d. Temporary measures to be used indicating the serial numbers of the receipts/invoices that will be issued;
e. Statement that taxpayer is amenable to a post-verification of the reported sales during the period covered whenever the Commissioner so orders; and
f. Signature of taxpayer or its authorized representative and designation.

Once the ECQ is lifted, the taxpayer/seller must immediately provide or issue the duly authorized receipts/invoices to their clients/customers to cover all sales transactions that were issued temporary receipts/invoices during the ECQ period. The actual date of transaction must be indicated in the authorized manual receipts/invoices to be issued and a copy of the temporary receipt/invoice shall be attached to the file copy, for audit purposes.

For those taxpayers/sellers using receipting/invoicing system or CAS where such system automatically indicates the date of the transaction, the actual date of transaction should appear on the face of such system generated receipts/invoices in any manner feasible. Such receipts/invoices shall not be considered "out of period" receipts/invoices.

A Summary of Temporary Receipts/Invoices Issued must be submitted to the concerned BIR offices specified in the Circular within ninety (90) days from the date of the lifting of the ECQ following the format in Annex "A" of the Circular.

Revenue Memorandum Circular No. 48-2020, May 22, 2020 - This prescribes the manner of accepting payment of internal revenue taxes until June 14, 2020.

The leniency in filing of returns and payment of taxes due as provided under RMC No. 43-2020 in relation to the tax amnesty program is extended until June 14, 2020.

Concerned taxpayers may:
1. file the tax return and pay the internal revenue taxes at the nearest Authorized Agent Banks (“AAB”), notwithstanding RDO jurisdiction; or
2. file the tax return and pay the corresponding tax due thereon to the concerned Revenue Collection Officers (“RCO”) of the nearest Revenue District Office (“RD”), even in areas where there are AABs.
Provided that payment of internal revenue taxes in cash should not exceed P20,000, while those for check payment will have no limitation if the same is made with RCO in the district office until June 14,2020; Provided further that all checks shall be made payable to BIR (with or without "IFO Name and TIN of the taxpayer" written on the check as previously required) and that the name and branch of the receiving AAB may no longer be indicated therein.

Revenue Memorandum Circular No. 49-2020, May 22, 2020 - This provides additional options in the acceptance and processing of the filed 2019 Income Tax Returns.

Taxpayers may opt to submit the filed 2019 Income Tax Returns (“ITR”) and its required attachments through the RCOs nearest them, notwithstanding the RDO jurisdiction, or through the online Electronic Audited Financial Statement (“eAFS”) System.

For ITRs with payments made through the online payment facility of the AAB, the RCOs/COs shall stamp “Received” the returns and its attachments on the page of the Balance Sheet, Income Statement and Audit Certificate, if applicable. The other pages of the financial statements and its attachments need not be stamped "Received".

In case of corporations and other juridical persons, at least two (2) extra copies of the Audited Financial Statements (for filing with Securities and Exchange Commission) should be stamped “Received”. The RCOs/COs shall batch the returns and their respective attachments and forward the same to the concerned Document Processing Division of the Revenue Region.

For ITRs filed electronically, the RCOs/COs shall accept and stamp “Received” only the copies of the Filing Reference Number generated from the eFPS/e-mail confirmation from the eBIRForms System and the Financial Statements following the abovementioned procedures.

For accepted out-of-district returns and required attachments, the RCOs shall forward the documents to the concerned RDOs.

Taxpayers may also submit their filed ITR and its required attachments thru the eAFS System that can be accessed through the BIR Website (www.bir.gov.ph). The required attachments will be grouped into three (3) document files specified in the Circular. Taxpayers must scan the documents and save them in PDF files (named accordingly) before uploading them in the eAFS.

The eAFS will acknowledge successful submission of the documents by issuing a system generated Transaction Reference Number and by sending an email to the system user. The Transaction Reference Number shall serve as the proof of submission by the taxpayer, in lieu of the manual “Received” stamping. Provided that the taxpayer shall keep the original copies of the digitally submitted documents and the same shall be presented, upon request, to the BIR.

Revenue Memorandum Circular No. 50-2020, May 27, 2020 - This is issued to reassure the tax incentives granted under RA No. 7686, otherwise known as the “Dual Training System Act of 1994”.

The BIR reassures that the tax incentives granted under Republic Act No. 7686 or the Dual Training System Act of 1994. Likewise, the BIR clarified that Sections 29 (h) and 94 (a) (3) of the National Internal Revenue Code (NIRC), as amended, respectively mentioned in subparagraphs (2) and (3) of Section 3 of Revenue Regulations No. 10-96 are now Sections 34 (H) and 101 (A) (2) of the NIRC of 1997.

Revenue Memorandum Circular No. 52-2020, May 27, 2020 - This temporarily allows the filing via email of withdrawal of protest on Assessment Notices or Appeal on FDDA for purposes of Tax Amnesty..

The BIR temporarily allowed the filing of the withdrawal of the protest on Final Assessment Notice (“FAN”)/Formal Letter of Demand (“FLD”) or appeal on Final Decision on Disputed Assessment (“FDDA”) via electronic mail (e-mail) for purposes of tax amnesty with the following guidelines:
1. The softcopy of the letter of withdrawal of the protest or appeal must be in PDF format, individually attached to the e-mail, signed by the taxpayer or his/her duly authorized representative, and shall contain the scanned copy of the first page of the protest or appeal sought to be withdraw, bearing the stamp “received” of the appropriate BIR Office and marked as Annex A of the said letter.
2. The said e-mail shall use the format prescribed in the Circular and shall be addressed to the appropriate BIR Offices specified in the Circular.
3. The document shall be deemed to have been filed on the date and time of receipt of the e-mail. In such case, the e-mail and the letter withdrawal of the protest or the appeal shall be printed and attached to the docket accordingly by the BIR personnel/processor.
4. The regular filing of papers or pleadings in connection with the protest or appeal pursuant to existing rules and revenue issuances shall resume as soon as the Enhanced Community Quarantine or the General Community Quarantine is lifted, and the option for online filing of withdrawal of any protest or appeal before the concerned BIR Offices shall no longer be allowed.

Revenue Memorandum Circular No. 53-2020, May 27, 2020 - This circularizes Joint Memorandum Circular No. 002-2020 regarding the amendment to the Guidelines for the Availment of the SBWS Measure.

The application for the SBWS was extended until May 19, 2020 for (1) those who have appealed for pre-qualification with the BIR on or before April 30, 2020 and have records that are found compliant with the BIR rules; and (2) those that were already able to successfully submit applications with SSS within the May 8, 2020 deadline but have employees who lack or have invalid credentials (pre-payout) and are classified under non-essential industries in regions with the highest concentration of employer applicants.

The Secretary of Finance was given the power to extend the payout periods upon recommendation of the SBWS Program Task Force and under highly justifiable circumstances.

Revenue Memorandum Circular No. 54-2020, May 28, 2020 - This announces the availability of PayMaya for the payment of internal revenue taxes.

The mobile application facility of PayMaya Philippines, Inc. is now available for the acceptance of electronic/online payment of internal revenue taxes. All payments made through the said mobile application will be settled by PayMaya with the Development Bank of the Philippines (“DBP”), an AAB of the BIR, for remittance to the Bureau of the Treasury.

Taxpayers are required to file their corresponding tax returns using the electronic filing facilities of eBIRForms System and/or Electronic Filing and Payment System (“eFPS”).

Revenue Delegation Authority Order No. 2-2020, May 18, 2020 - This delegates to the Assistant Commissioner of Legal Service the authority to sign Certificates of Tax Exemption and Rulings on energy-related projects, in compliance with the Energy Virtual One-Stop Shop Act..

The authority to sign Certificates of Tax Exemption and Rulings on energy-related projects, in compliance with the requirement under RA No. 11234, otherwise known as the “Energy Virtual One-Stop Shop Act” is delegated to the Assistant Commissioner of Legal Service.

 

 

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sec_issuances

 

SEC Memorandum Circular No. 17 dated May 7, 2020: Extension of the Deadline for the Submission of 2020 Annual Reports and/or Audited Financial Statements of Companies with Fiscal Year Ending 31 January 2020 to 30 April 2020, Including the Applicable Quarterly Reports – This extension of the deadlines for the submission of specific reports..

For companies with fiscal years ending January 31, 2020 to March 31, 2020, the extension is for a period of sixty (60) calendar days from the regular filing deadlines; while for companies with fiscal year ending April 30, 2020, the extension is for a period of forty five (45) calendar days from the regular filing deadline. These specific reports are:

1. Annual Reports (SEC Form 17-A) and AFS of publicly-listed companies (“PLC”);
2. Annual Reports and AFS of issuers of registered securities (other than publicly-listed companies); and
3. AFS of all other companies other than items (i) and (ii) above.

Also, the deadline for the submission of the Quarterly Reports (SEC 17-Q) for the first quarter of the companies covered under the Memorandum Circular, is extended for a period of forty five (45) calendar days from the regular filing deadlines. This extension shall automatically be applied without the need for a request from the covered companies.

On the other hand, PLC and issuers of registered securities under the supervision of the Market and Securities Regulation Department that want to avail of the extended period for filing of the SEC Form 17-A and SEC Form 17-Q Reports mentioned in the Memorandum Circular should file the special disclosure form SEC Form 17-LC which should be filed not later than five (5) calendar days before the regular filing deadline.

SEC Memorandum Circular No. 18 dated May 11, 2020: Procedures in the Filing of Audited Financial Statements (“AFS”) and General Information Sheet (“GIS”) to the Securities and Exchange Commission (“SEC”) after the Community Quarantine – This provides for the different procedures allowed in the filing of the AFS and GIS with the SEC.

All corporations, including branch offices, representative offices, regional headquarters and regional operating headquarters of foreign corporations, shall file their AFS and GIS through the SENS to any courier of their choice and/or Philippine Postal Office (“PhilPost”). All corporations with principal office under the jurisdiction of any of our Extension Offices (“EO”), shall file their reports to the nearest EO.

Since all SEC Satellite Offices shall be temporarily closed for receiving of reports, all filings should be delivered to the SEC Head Office by the PhilPost and/or Courier.

The filing of the GIS and AFS through electronic mail (email) prior to the submission of the hard copy through the SENS is allowed. However, upon lifting of the Community Quarantine, corporations may directly file the hard copy of the reports through SENS (Courier/PhilPost).

The AFS, other than the consolidated financial statements, shall have the stamped “received” by the BIR or its AABs, unless the BIR allows an alternative proof of submission for its authorized banks (e.g. bank slips);

The Circular also covers the filing of AFS of corporations whose fiscal year ends November 30, 2019 and December 31, 2019. Those who are required to file Annual Reports with fiscal year end December 31, 2019 or on dates other than December 31, 2019, shall file their AFS/Annual Report, subject to the filing deadlines as stated in Memorandum Circular Nos. 5 and 17, series of 2020.

The Memorandum Circular likewise excludes the following from the number coding schedule since the filing deadline for filing their AFS/Annual Report was extended until June 30, 2020:

1. Publicly-Listed Companies;
2. Issuers of registered securities under the supervision of the Market and Securities Regulation Department; and
3. Investment Companies, Issuers of Proprietary and Non-proprietary Shares/Timeshares, and Public Companies.

For the filing of AFS, all corporations, including branch offices, representative offices, regional headquarters and regional operating headquarters of foreign corporations shall file their AFS through SENS using Courier or PhilPost, depending on the last numerical digit of their SEC registration or license number in accordance with the following schedule:

June 29, 30, July 1, 2, 3, 6, 7, 8, 9, 10 : 1 and 2
July 13, 14, 15, 16, 17 : 3 and 4
July 20, 21, 22, 23, 24 : 5 and 6
July 27, 28, 29, 30 : 7 and 8
August 3, 4, 5, 6, 7 : 9 and 0

On or before said dates, corporations may file their AFS through SENS regardless of the last numerical digit of their registration or license number. Late filings or filing after respective due dates shall be accepted starting August 10, 2020 through SENS (Courier or PhilPost) and shall be subject to the prescribed penalties which shall be computed from the date of the last day of filing schedule stated above.

For reports filed through courier/regular mail, the date of mailing of reports such as the GIS and AFS, as shown by the registry receipt of the courier, shall be considered as the reckoning date of submission of the GIS and AFS. For reports filed through registered mail in the Philippine Postal Corp., the reckoning date of receipt shall be the date of receipt by the PhilPost.

For reports filed through email during the CQ, the reckoning date of receipt shall be the date stated in the Acknowledgment Confirmation (“AC”) stated in the email as attached to the hard copy of the reports submitted.

SEC Notice dated May 13, 2020 – This provides information on the covered period for the mandatory grace period for loans during the MECQ and GCQ period..

Due to the imposition of either MECQ or GCQ across the country until May 31, 2020, the initial thirty (30)-day grace period for the payment of loans shall apply to all loans with principal and/or interest falling due within the MECQ/GCQ period, from 17 March 2020 to 31 May 2020.

SEC Notice dated May 19, 2020 – This advises concerned entities of the opening of SEC payment facilities.

The SEC opened the SEC Main Office – Cashier and the SEC Ortigas – Cashier starting Tuesday, 26 May 2020. However, the cashiers in SEC Satellite Offices remain closed until further notice.

SEC Notice dated May 21, 2020 – This advises concerned entities of the resumption of manual operations of the Company Registration and Monitoring Department (“CRMD”).

The CRMD will resume its manual operations in the Securities and Exchange Commission’s Main Office immediately until further pronouncements from the lifting of MECQ. The schedule for the manual operations will be Mondays to Thursdays from 9:00 am to 4:00 pm. The manual operations of the CRMD shall cater to the applications that have already been assessed and approved through online processing.

SEC Notice dated May 21, 2020 – This provides information on the online submission of requirements on the amendment, conversion and/or withdrawal of license and substitution of resident agents of foreign corporations.

SEC Notice dated May 21, 2020 – This advises concerned entities of the opening of the SEC Express System and the SEC Nationwide Submission (“SENS”).

The SEC will open the following services to the public starting June 1, 2020:

1. SEC Express System – for the request of SEC Documents (Plain/Authenticated copy) online and through Call Center
2. SEC Express Nationwide Submission (SENS) – for the submission of SEC reportorial requirements through Courier and/or Philippine Postal Corp.

Submission of reportorial requirements (AFS and GIS) in hard copy must be in three (3) sets through SENS. Filers will not be allowed to go to SEC Head Office or Satellite Offices to file their reports.

Companies with principal office address near any of the SEC Extension Offices (EO), shall file their reports to the nearest EO. The Satellite Offices of the SEC, on the other hand, will be temporarily closed for receipt of reports since all submissions shall be through SENS. Lastly, the submission of reports (AFS/GIS) through electronic mail (email) is allowed.

SEC Advisory dated May 20, 2020 – This is a reiteration of the directive to comply with Section 4(aa) of the Bayanihan To Heal As One Act, its implementing rules and regulations, and other applicable laws, rules and regulations.

The SEC reiterated its Advisory dated 16 April 2020 reminding financing companies and lending companies to strictly comply with Section 4(aa) of the Bayanihan Act, its IRR, and all other laws, rules, and regulations being implemented by the SEC.

 

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ic_issuances

 

IC Circular Letter No. 2020-50, May 04, 2020 – This disseminates the AMLC Regulatory Issuance (“ARI”) No. 2, Series of 2020, on extension of deadline for compliance with the Digitization of Customer Records (“DIGICUR”).

Deadline for compliance with the requirement of ARI A, B and C No. 2, Series of 2018, otherwise known as the DIGICUR is extended from April 13, 2021 to September 30, 2021.

IC Circular Letter No. 2020-51, May 05, 2020 – This provides supplemental guidelines governing the exemption of health insurance providers and HMO personnel in the implementation of the ECQ.

The supplemental guidelines governing the exemption of health insurance providers and HMO personnel in the implementation of the ECQ are as follows:

1. Health insurance providers and HMOs seeking exemption of their skeleton workforce in the implementation of ECQ in high-risk geographic areas must submit to the Insurance Commission a certified list of personnel who will comprise their skeleton workforce for claims processing and limited customer/backroom services which must not exceed ten percent (10%) of its total workforce.

2. All requests for Certifications shall submit a list (in Excel format) containing the following information:

a. Total number of regular workforce;
b. For branch offices, the number of regular workforce per branch must likewise be indicated. Only two persons per branch or ten percent (10%) of the branch workforce, whichever is higher, shall be allowed;
c. The names and position of personnel included in the Company's skeleton workforce, which shall not exceed ten percent (10%) of the total workforce. Alternate or relievers are likewise included in determining the ten percent (10%) threshold. Contracted services/personnel (e.g. janitorial, security, transportation, technical support) shall be allowed.
d. Justification for the relevance of the said positions in the processing of health insurance/HMO claims.

Said requests must be emailed to This email address is being protected from spambots. You need JavaScript enabled to view it.

3. Certifications previously issued by the Commission covering areas remaining under ECQ shall remain in effect, without prejudice to the submission of request for certification of additional personnel pursuant to this Circular.

IC Circular Letter No. 2020-52, May 07, 2020 – This extends the period to upload the covered companies’ duly accomplished ASEAN Corporate Governance Scorecard (“ACGS”) Response Forms to their respective websites.

The period to upload the covered companies’ duly accomplished ACGS Response Forms to their respective websites is extended until July 15, 2020 based on their 2019 operations including a copy of the documents supporting their responses to the ACGS questions/items. Covered companies shall also provide in their ACGS the corresponding links to the copy of the documents supporting their answers.

The Institute of Corporate Directors (“ICD”), which has been accredited by the Insurance Commission to conduct the assessment of the ACGS Response Form of the covered companies, shall complete the assessment proper not later than November 30, 2020.

IC Circular Letter No. 2020-53, May 12, 2020 – This provides privacy law implications of disclosure of certain personal information to the National Bureau of Investigation (“NBI”).

Disclosure of certain personal information to the NBI entails certain privacy law implications. As such, all entities regulated by the Insurance Commission are hereby enjoined to consider the following, to wit:

1. Requests for disclosure of personal information by the NBI in connection with investigations of government officials for graft and corruption fall squarely within NBl's mandate under Republic Act No. 10867;
2. Accordingly, the processing of requested personal information by the NBI does not constitute violation of the Data Privacy Act of 2012 ("DPA") as said processing of the personal information constitutes "lawful processing" under Section 12 (e) of the DPA;
3. While such disclosure may be allowed under the DPA, the same should be done in a secure manner and with strict adherence to all existing protocols and standard operating procedures; and
4. Under Section 7 of the DPA, the NPC is the sole and exclusive statutory authority that has the power to administer and implement the provisions of the DPA and to monitor and ensure compliance of personal information controllers with international standards set for data protection.

IC Circular Letter No. 2020-54, May 14, 2020 – This further extends the effectivity of Circular Letter No. 2020-36 in order to aid the Philippine non-life insurance industry respond to new global conditions engendered by the COVID-19 pandemic, otherwise known as the "New Normal.".

All non-life insurance companies shall be allowed to launch its Sales Initiatives until December 31, 2020 in order to sell their existing non-life insurance products by utilizing Information and Communication Technology or any other technology via Remote Communication, such as, but not limited to, teleconferencing, video conferencing, computer conferencing, or audio conferencing, without prior approval from the Insurance Commission; Provided, that said companies shall register its Initiatives by submitting the following:

1. A letter, signed by its president or its duly authorized representative advising the Insurance Commission of the proposed Initiatives (the “Letter”); and
2. The mechanics of the Initiatives, which shall describe in detail the covered period, areas where the company and/or its intermediaries will operate, and the names of products covered by the Initiatives (the “Mechanics”).

IC Circular Letter No. 2020-55, May 14, 2020 – This further extends the effectivity of Circular Letter No. 2020-29 in order to aid the Philippine life insurance industry respond to new global conditions engendered by the COVID-19 pandemic, otherwise known as the "New Normal.".

All life insurance companies shall be allowed to launch its Sales Initiatives until December 31, 2020 in order to sell their existing life insurance products by utilizing Information and Communication Technology or any other technology via Remote Communication, such as, but not limited to, teleconferencing, video conferencing, computer conferencing, or audio conferencing, without prior approval from the Insurance Commission; Provided, that said companies shall register its Initiatives by submitting the following:

1. A letter, signed by its president or its duly authorized representative advising the Insurance Commission of the proposed Initiatives (the “Letter”); and
2. The mechanics of the Initiatives, which shall describe in detail the covered period, areas where the company and/or its intermediaries will operate, and the names of products covered by the Initiatives (the “Mechanics”).

IC Circular Letter No. 2020-56, May 14, 2020 – This provides guidelines on the issuance of certification pursuant to Republic Act No. 9184 during the period of community quarantine.

The guidelines on the issuance of certification pursuant to Republic Act No. 9184 during the period of community quarantine are as follows:

1. The 3-working day requirement for the processing and issuance of Certifications is temporarily suspended during the ongoing Community Quarantine until further notice;

2. Limitations on the number of liaison officers inside the Insurance Commission (“IC”):
a. Only one (1) authorised liaison officer per company shall be allowed entry to the IC;
b. Only one (1) liaison officer at a time will be allowed to transact inside the Suretyship Unit;
c. The Suretyship Unit may designate a separate area where all issued Certifications will be placed for pick-up;
d. Only one (1) authorized liaison officer at a time will be allowed to check availability of Certifications requested.

3. While inside the premises of the IC, the authorized liaison officer shall be restricted to the submission of requests for Certification and payment of corresponding fees and pick-up of the completed Certifications. Alterations to request letters already submitted and duly paid for are not allowed.

4. Only urgent request for Certification will be accommodated to be released on the following business day. Companies are allowed to make only one (1) urgent request per day.

5. The Suretyship Unit shall operate from 9:00 AM to 3:00 PM, Mondays to Thursdays. Requests for Certifications will be received for processing from 9:00 AM to 1:00 PM only.

IC Circular Letter No. 2020-57, May 14, 2020 – This provides guidelines on the operations of regulated entities under the Modified Enhanced Community Quarantine (“MECQ”).

The guidelines on the operations of regulated entities under the MECQ are as follows:

1. Regulated entities may resume operations of its business in areas covered by MECQ provided at least fifty percent (50%) of its operations are under work-from-home arrangements. Regulated entities may allow up to a maximum of fifty percent (50%) of their total workforce to work on-site. Such on-site operations shall be subject to the strict observance of safety protocols, safe distancing, and return-to-work protocols for private companies as mandated by IATF-EID and other concerned government agencies.
2. Regulated entities seeking to resume on-site operations in areas under MECQ shall not be required to secure a certification to that effect from the Insurance Commission.

IC Circular Letter No. 2020-58, May 14, 2020 – This provides regulatory relief to non-life insurance and professional reinsurance companies on the admittance of Premiums Receivable account (direct agents, general agents and insurance brokers) due to the Covid-19 pandemic to ensure that they are considered solvent and compliant with the Net Worth requirements of Insurance Commission (“IC”).

Regulatory relief is provided to non-life insurance and professional reinsurance companies on the admittance of Premiums Receivable account covering policies within ninety (90) days from inception as of the cut-off date provided that these receivables are supported by an aging schedule showing details per policy, and copy of policies and other pertinent documents are made available to the examiners for verification. Otherwise, unverified accounts will be disallowed. As such, admittance of Premium Receivable account for said companies shall be adjusted from ninety (90) days to one hundred eighty (180) days from the date of issuance of the policies.

It shall be applied to annual and quarterly financial reports for the year 2020 unless extended or changed as deemed necessary by the IC.

IC Circular Letter No. 2020-59, May 14, 2020 – This mandates the submission of Annual Statements, Audited Financial Statements and various attachments for regulated companies for the reporting periods starting 2019 onwards through electronic means.

Submission of Annual Statements, Audited Financial Statements and various attachments for regulated companies for the reporting periods starting 2019 onwards shall be through electronic means in order to minimize contact rate and the risk of transmission/infection of Covid-19.

Nevertheless, the IC may require the company to submit and examine the original hard copy of the electronically submitted documents.

IC Circular Letter No. 2020-60, May 15, 2020 – This provides regulatory relief on net worth requirements and guidelines on the implementation of amended Risk-Based Capital (“RBC2”) Framework for calendar year 2020 in order for insurance companies to better utilize their capital as they continue to work on their recovery vis-a-vis the Philippine economy.

Net worth requirements and guidelines on the implementation of amended Risk-Based Capital (“RBC2”) Framework for calendar year 2020, as follows:

1. All insurance companies already compliant with the net worth requirements as of December 31, 2019 under Section 194 of the Amended Insurance Code before the declaration of ECQ and adversely affected by the crisis are:

a. Relieve from the quarterly compliance of the net worth requirements of Php900,000,000.00; and
b. Required to comply with CL No. 2016-68 (Amended Risk-based Capital Framework) and revised regulatory intervention (RBC ratio) as follows:


RBC Ratio (Y) Event Action

100% and above                     

  No regulatory action needed.
75% </- Y < 100%
Trend Test

Company required to submit linear extrapolation of the RBC ratio for the next period. If the RBC ratio falls below 75%, move to Company Action Event.

50% </- Y < 75% Company Action

Company required to submit RBC plan and financial projections and implement the plan accordingly.

25% </- Y < 50% Regulatory Action

IC authorized to issue Corrective Orders

Y < 25%                                                                               

Authorized and Mandatory Control                                                                                 

IC authorized and required to take control of the company.


2. All insurance companies which are not compliant with the net worth requirements as provided in Section 194 of the Amended Insurance Code before the declaration of the ECQ are required to make fulfil their respective commitments to the IC to put up additional funds to cover the net worth deficiency before availing the relief as discussed in (1) above.

3. Submission of 2020 RBC2 reports for the following periods shall be required.

Period Covered Submission Date
As of June 30, 2020 August 31, 2020
As of September 30, 2020 November 30, 2020
As of December 31, 2020 April 30, 2021

IC Circular Letter No. 2020-61, May 15, 2020 – This provides supplemental guidelines in the Revised Framework on the selection of External Auditors (“EAs”).

Supplemental guidelines in the Revised Framework on the selection of EAs are as follows:

1. All reportorial requirements as required in Section 4 of CL No. 2019-39 shall be submitted to the IC's Financial Examination Group on or before January 31 of the following year.

2. The accredited EAs shall submit a report containing the following:
a. EA's IC-regulated Client List which contains, at a minimum, the following:
i. Name of IC-regulated clients
ii. Name of the engagement partner/s in case of Auditing Firms
iii. Number of years of engagement/assignment in case of signing partners, if any;
b. Copy of each engagement contracts in compliance with Section 4.2 of CL No. 2019-39;
c. Matter/s discovered that adversely affect the financial condition of the regulated entity as enumerated under Section 4.3 of CL No. 2019-39, if any; and
d. Summary of external auditor's clients that have pre-terminated engagement contracts during the audit period stating the reasons of such pre­ termination.

The documents shall be submitted in a digital/ electronic format together with a signed certification provided in "Annex A."

IC Circular Letter No. 2020-62, May 18, 2020 – This provides for the amendment of Section 1 of Circular Letter No. 2018-69 deferring IFRS 17 implementation.

Amendment is made to Section 1 of CL No. 2018-69 wherein full implementation of IFRS 17 for life and non-life insurance industries is deferred to two (2) years after its effective date as decided by the IASB.

All other provisions of CL No. 2018-69 and Section 2 of CL No. 2019-66 disclosure requirements shall remain effective.

IC Circular Letter No. 2020-63, May 18, 2020 – This provides regulatory relief from the exposure limit applied to financial assistance program of insurance companies.

Financial assistance is granted to officers, employees and sales assistants of all insurance companies authorized to do business in the Philippines by adjusting the threshold from six percent (6%) to twelve percent (12%) of the net worth of the company as shown in its latest approved synopsis.

This is only allowed for financial reporting periods covering the year 2020, unless extended or changed as deemed necessary by the IC.

IC Circular Letter No. 2020-65, May 20, 2020 – This directs the discontinuance of certain appropriated programs, projects, or activities (“P/A/Ps”) in the FYs 2019 and 2020 General Appropriations Act (“GAAs”), including unreleased appropriations and unobligated released allotments.

Various P/A/Ps are to be discontinued amounting to Twelve Million Four Hundred Eighty-Three Thousand One Hundred Two Pesos and 20/100 (Php 12,483,102.20), or 10.16% of its allotment for Maintenance and Other Operating Expenses (“MOOE”) and Capital Outlay (“CO”) for FY 2020 in accordance with the instructions of the DBM under NBC No. 580.

Said regulated entities and stakeholders may refer to the enclosed Certification of P/A/Ps for Proposed Discontinuance per DBM National Budget Circular No. 580 attached to this Circular Letter and made an integral part hereof as Annex "A" for information on the particular P/A/Ps for proposed discontinuance and the amount of proposed estimated savings per P/A/P.

IC Circular Letter No. 2020-66, May 21, 2020 – This provides interim guidelines on the declaration and/or distribution of dividends with the end in view of conserving capital due to the projected economic impact of the Covid-19 pandemic.

This provides interim guidelines on the declaration and/or distribution of dividends with the end in view of conserving capital due to the projected economic impact of the Covid-19 pandemic, as follows:

All regulated entities authorized to do business in the Philippines shall meet the following regulatory measures at all times, without regulatory relief, before declaration and/or distribution of dividends out of the unrestricted retained earnings:

For insurance and professional reinsurance companies
1. Unimpaired paid-up capital stock;
2. The net worth requirements as prescribed by Circular Letter (CL) No. 2015-02-A and Section 194 of the Amended Insurance Code;
3. The solvency requirements defined by Section 200 of the Amended Insurance Code;
4. In the case of life insurance companies, the legal reserve fund required by Section 217;
5. In the case of corporations other than life, the legal reserve fund required by Section 219; and
6. A sum sufficient to pay all net losses reported, or in the course of settlement, and all liabilities for expenses and taxes.

For pre-need companies
1. Unimpaired paid-up capital stock;
2. Unimpaired trust fund;
3. The reserve liability and liquidity reserve requirements required by Sections 35 and 37, respectively, of the Pre-Need Code; and
4. A sum sufficient to pay all net losses reported, or in the course of settlement, and all liabilities for expenses and taxes.

For HMOs
1. The minimum paid-up capital, risk-based capitalization and net worth requirements as prescribed by CL No. 2016-41;
2. The liquidity requirement as prescribed by CL No. 2016-41; and
3. A sum sufficient to pay all net losses reported, or in the course of settlement, and all liabilities for expenses and taxes.

All regulated entities authorized to do business in the Philippines that will declare and/or distribute dividends for the year 2020 shall be required to secure prior approval from the Commission together with the following documents subject for evaluation, to wit:

1. Approved Annual Statement as of 31 December 2019;
2. Interim unaudited financial statements certified under oath by the President and Finance Officer;
3. Notarized Secretary's Certificate of the Board resolution as of the reversal of restricted retained to unrestricted retained earnings, if applicable; and
4. Notarized Secretary's Certificate of no pending case of intra-corporate dispute;

Additional requirement in case of cash dividend:
1. List of assets to be converted, in case of insufficient cash available for distribution, certified under oath by the Treasurer;

Additional requirements in case of stock dividend:
1. List of stockholders with their respective subscribed capital stock together with the allocation of stock dividend certified under oath by the Corporate Secretary; and
2. Analysis of Capital Structure certified under oath by the Treasurer;

Additional requirements in case of property dividend:
1. List of stockholders with their respective subscribed capital stock together with the allocation of property dividend certified under oath by the Corporate Secretary;
2. Detailed Schedule of the property account appearing in the Annual Statement; and
3. Certification by the President that the property/ies for dividend declaration is/are no longer needed in the operation of the company.

IC Circular Letter No. 2020-68, May 22, 2020 – This further extends the period to comply with Section 29 of CL No. 2019-65 and submit duly accomplished and certified under oath AML and CTF compliance questionnaire under CL No. 2020-08.

This further extends the period to comply with Section 29 of CL No. 2019-65 and submit duly accomplished and certified under oath AML and CTF compliance questionnaire under CL No. 2020-08, as follows:

Regulatory Requirement Old Deadline New/Extended Deadline
Making of Necessary Form and System Changes and Updating of the Regulated Entities' Money Laundering and Terrorism Financing Prevention Programs (“MTPPs”) under Section 29 of CL No. 2019-65 June 30, 2020 July 30, 2020

Submission of Duly Accomplished and Certified Under Oath AML and CTF Compliance Questionnaire under CL No. 2020-08

June 30, 2020                                                           

July 30, 2020                                              

IC Legal Opinion No. 2020-04, May 05, 2020 – This clarifies that the imposition of GCQ is not contemplated under Circular Letter (“CL”) No. 2020-46 dated April 22, 2020. The CL merely extends the effectivity of CL No. 2020-29 ordering non-face to face (“non-F2F”) selling until any extension of the ECQ period or June 30, whichever comes later.

CL No. 2020-46 dated April 22, 2020 is a mere extension of the effectivity of CL No. 2020-29, which orders non-F2F selling of life insurance, until any extension of the ECQ period or June 30, whichever comes later. If during the said period, the ECQ has been lifted and replaced by GCQ, it shall be entirely within the discretion of the companies to adopt and implement its Initiatives which must be in accordance with the laws, circular letter/s and existing rules and regulations implemented by lawful authorities. Otherwise, said companies will be ordered to recall the Initiatives without prejudice to administrative sanctions which may be imposed.

IC Ruling No. 2020-03, May 8, 2020 – This provides a case where the discovery date of adverse matters affecting the financial condition of a company falls within the ECQ period, an initial report is required to be submitted.

In case where the discovery date of adverse matters affecting the financial condition of a company falls within the ECQ period, an initial report is required to be submitted, so there is no need for an extension of the period of submission. Unnotarized certification is not applicable. Only in the case when there is no adverse matters to report shall an external auditor submit directly a notarized certification that there is none to report within 15 calendar days after the close of the audit engagement.

IC Ruling No. 2020-04, May 22, 2020 – This provides that in case the date for filing of Audited Financial Statements (“AFS”) in the IC comes first before the SEC deadline, the company may file a soft copy of its AFS “without stamp” to the IC on the filing date, in lieu of the AFS with stamped “Received” by the SEC.

In case the date for filing of AFS in the IC comes first before the SEC deadline, the IC will still accept the submission of the AFS, provided that the company will file the soft copy of its AFS “without stamp” to the IC on the filing date. The AFS with stamped “Received” can be submitted 15 days after the submission to the SEC and BIR, whichever comes later.

 
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  • Bangko Sentral ng Pilipinas (BSP) Circular Letter (CL) No. 2019-019, March 4, 2019 – This letter provides for an advisory for all BSP-Supervised Financial Institutions (BSFIs) to comply with the amendments to the foreign exchange transactions under Circular No. 1030.
  • BSP Memorandum No. 2019-006, March 14, 2019 – This memorandum provides for the registration of operators of Automated Teller Machines (ATMs) that allow the purchase or exchange of Virtual Currencies (for example, Bitcoin) or other devices with similar functions and
    capabilities.
  • BSP Circular No. 1034, March 15, 2019 – This circular approves the amended subsections X176.5/4176Q.5 of the Manual of Regulations for Banks (MORB)/Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) pertaining to the extension of observation period for the Basel III Framework on Liquidity Standards – Net Stable Funding Ratio (NSFR) for subsidiary banks/quasi-banks (QBs) of universal and commercial banks.
  • BSP Circular No. 1035, March 15, 2019 – This circular approves the amended subsections X176.1/4176Q.1 of the Manual of Regulations for Banks (MORB)/Manual of Regulations for Non-Bank Financial Institutions (MORNBFI)

 

BSP Memorandum No. M-2020-038, May 1, 2020 – This provides for a regulatory relief from the Exposure Limit Applicable to UITFs in relation to COVID-19.

Due to the implementation of the ECQ, which is considered as an ordinary circumstance, a Trusted Entity (TE) may experience operational difficulties in servicing the requirements of its clients, and as a result, incur breaches in respect of its Unit Investment Trust Funds’ (“UITF”) exposures to depositary banks.

In this regard, a TE is expected to conduct its own risk assessment and set internal thresholds for such breaches. Any breaches must be corrected within thirty (30) calendar days from the time the ECQ is lifted. A TE that incurs breaches shall report its internal thresholds and the details of any breaches to the appropriate supervising department of the BSP on a weekly basis, until the exposures are brought back to within the regulatory limit.

BSP Memorandum No. M-2020-039, May 4, 2020 – This provides guidelines on the utilization of the Basel III Capital and Liquidity Buffers for all Covered Banks and Quasi-Banks.

The BSP expects a covered bank/Quasi-Bank (“QB”) to integrate the following regulatory flexibilities into its internal policies and processes to ensure that the regulatory capital and liquidity buffers maintained are efficiently utilized.

1. As to Capital Conservation Buffer- A covered bank/QB which draws down its 2.5 percent minimum capital conservation buffer will not be considered in breach of the Basel III risk-based capital adequacy framework. If it utilizes its buffer, it is restricted from making distributions such as dividends, profit remittance, etc., consistent with the provisions of Appendix 59/Q-45 of the MORB/MORNBFI.
2. As to Liquidity Coverage Ratio- A covered bank/QB that has a recorded shortfall in the stock of its High-Quality Liquid Assets for 3 banking days within any 2-week rolling calendar period must notify the BSP of such breach on the baking day immediately following the occurrence of the third liquidity shortfall.

Covered banks/QBs will be given a reasonable time to restore their Basel III capital and liquidity buffers after the COVID-19 crisis.

BSP Memorandum No. M-2020-040, May 5, 2020 – This laid down the revised submission schedule of the FX Form 1 Report to the BSP.

Considering the extension of the ECQ to May 15, 2020, the revised submission schedule of the FX Form 1 Report (Main Report, Schedules 1 to 13) for May 2020 is as follows:

Date of Report Date of Submission
May 4-8, 2020 On or before May 27, 2020
May 11-15, 2020 On or before June 1, 2020
May 18-22, 2020 On or before June 5, 2020
May 25-29, 2020 On or before June 10, 2020

The submission of the weekly FX Form 1 Report (Main Report, Schedules 1 to 7 and 9 to 12) covering period March 9- April 30, 2020 shall follow the submission schedule as seen in the BSP Memo No. M-2020-026, while schedules 8 and 13 shall be submitted on or before May 29, 2020.

Starting June 1, 2020, FX Form 1 Report (Main Report, Schedules 1 to 13) shall be submitted to the BSP following the existing submission guidelines.

BSP Memorandum No. M-2020-042, May 18, 2020 – This requires lending institutions to implement a thirty (30)-day grace period for loans with principal and interest falling due within the period of MECQ, without incurring interest on interest, penalties, fees, and other charges.

The mandatory grace period shall still apply to all loans extended by all covered financial institutions, irrespective of their place of operation, while under MECQ. Hence, lending institutions shall implement a 30-day grace period for loans with principal and interest falling due within the period of MECQ, without incurring interest on interest, penalties, fees, and other charges.

The mandatory grace period as stated above shall apply only if there are still areas in the country under ECQ or MECQ. Its application shall cease once the ECQ and MECQ are lifted in the entire country.

BSP Memorandum No. M-2020-043, May 18, 2020 – This extends the temporary measures implemented in the BSP Rediscount Facilities.

Under Monetary Board (MB) Resolution No. 647 dated May 14, 2020, the following are extended for an additional sixty (60) days or until July 17, 2020, subject to further extensions as may be approved by the MB:

1. Reduction of the term spread on Peso rediscounting loans relative to the BSP’s overnight lending rate to zero, regardless of maturity; and

2. Acceptance of the following eligible credit instruments for rediscounting to the BSP:
a. United States Dollar (USD) and Japanese Yen (JPY)-denominated credit instruments to end-user borrowers operating during the ECQ, related to the economic activities enumerated in Department of Trade and Industry MC No. 20-08 dated March 20, 2020, provided they are booked under the regular bankint unit of the rediscounting bank and are compliant with the requirements on eligible papers and collaterals under Section 282 of the MORB, except for loans to banks and capital markets.

b. USD and JPY- denominated credit instruments and Credit instruments compliant with the requirements on eligible papers and collaterals under Section 282 of the MORB, which were granted mandatory 30-day grace period pursuant to Memorandum No. M-2020-017, subject to submission of the required certification by authorized officer of the bank.

BSP Memorandum No. M-2020-044, May 29, 2020 – This provides for the extension of PhilPaSS arrangements under the GCQ over the NCR until June 11, 2020.

The original extended date under Memorandum No. M-2020-041 dated May 15, 2020, is until May 29, 2020, considering that NCR was under MECQ that time.

In view of the GCQ in the NCR, the arrangements of the PhilPaSS under the following guidelines are extended until June 11, 2020:

Operating timelines and cut-off times PhilPaSS Advisory No. BPU-2020-048 dated March 17, 2020
Procedures for submission of documents to the Payments and Settlements Office PhilPaSS Advisory No. BPU-2020-041 dated April 13, 2020
Temporary waiver of fees PhilPaSS Advisory No. BPU-2020-027 dated April 21, 2020

 

BSP Circular Letter No. CL-2020-026, May 10, 2020 – This requires BSFIs to consider Democratic People’s Republic of Korea (DPRK) and Iran as high-risk jurisdiction, and to apply enhanced due diligence (EDD) measures, Targeted financial sanctions and other appropriate counter-measures against them.

This is to inform the BSP-Supervised Financial Institutions (BSFIs) of the significant strategic deficiencies in the counter money laundering (ML), terrorist financing (TF) and proliferation financing (PF) regimes of the Democratic People’s Republic of Korea (DPRK) and Iran, based on the issued updated statement of the Financial Action Task Force (FATF).

1. On DPRK- DPRK’s failure to address the significant deficiencies in its anti-money laundering/countering the financing of terrorism (AML/CFT) regime and the serious ML/TF/PF risks poses serious threats to the integrity of the international financial system. Thus, the FATF called on countries to inform financial institutions (FIs) to give special attention to business relationships and transactions, directly or indirectly, with the DPRK. It also urges application of effective counter-measures, and targeted financial sanctions (TFS) in accordance with applicable United Nations Security Council (UNSC) Resolutions. BSFIs shall consider DPRK as a high-risk jurisdiction, apply enhanced due diligence (EDD) measures, and likewise terminate correspondent relationships with DPRK banks, where required by relevant UNSC Resolutions.
2. On Iran- Given Iran’s failure to enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, the FATF fully lifts the suspension of counter-measures and calls on its members and urges all jurisdictions to apply effective counter-measures against Iran. BSFIs shall consider Iran as a high-risk jurisdiction, apply EDD procedures as well as appropriate counter-measures and shall likewise effectively implement TFS in accordance with applicable UNSC Resolutions.

The BSFIs should immediately submit a report to the Anti-Money Laundering Council on the actions taken as well as known information, if any, regarding the designated individuals and entities referred to in all applicable UNSC Resolutions.

BSP Circular No. 1086, May 06, 2020 – This provides amendments to the regulations of Foreign Currency Deposit System which aims to align the Manual for Regulations on Foreign Exchange Transactions (FX Manual) with the licensing and enforcement frameworks under the Manual of Regulations for Banks (MORB), and to provide flexibility in managing liquidity risk with simplified compliance with asset cover requirements of banks.

The FCDU/EFCDU operations is now classified as Type A License under the Licensing provision of the MORB.
The FX Manual is revised to align with the licensing and enforcement framework of the MORB. Section 71 on Qualification Requirements, now includes Thrift Banks, Rural and Cooperative Banks to operate an FCDU or EFCDU upon complying certain criteria.

Section 72 on Authorized Transactions, and Section 73 on Foreign Currency Cover Requirements are also amended to affect specific provisions of the two. Section 82 on Taxes is also amended in order to reflect the changes introduced by TRAIN Law, removing the tax rate stated therein at seven and one-half percent (7.5%). The rate now is at fifteen percent (15%).

The Standard Pre-Qualification Requirements for the Grant of Banking Authorities contained in MORB shall no longer include the authority to operate an FCDU/EFCDU.

BSP Circular No. 1087, May 27, 2020 – This amends MORB and the Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) by providing Alternative Compliance with the Reserve Requirements of Banks and Non-Bank Financial Institutions with Quasi-Banking Functions (NBQBs).

Subject to certain requirements provided by the MORB, the following alternative compliance with the required reserves against deposit and deposit substitute liabilities shall be allowed:
1. Peso-denominated loans that are granted to micro-, small-, and medium enterprises (“MSME”), excluding banks and NBQBs that meet the definition of a small and medium enterprise;
2. Peso-denominated loans that are granted to large enterprises, excluding banks and NBQBs that meet the definition of a large enterprise.

The required reserves and the alternative modes of compliance with the required reserves in the current period shall be computed based on the corresponding levels of deposit substitute liabilities of the prior week.

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Digital Tax in the Philippines

By Atty. Irwin C. Nidea Jr.

 

The new normal makes us all realize that the digital economy is slowly becoming the new economy. This realization has its pros and cons depending on who you ask. The government now discovers that it can generate incredible revenue streams from this untapped parallel universe, especially now that amid the pandemic, the digital economy is thriving. But on the part of startups, it may be the end of an era of hide and seek with the tax man.

Just recently, Congressman Joey Salceda, introduced House Bill (“HB”) No. 6765, otherwise known as the “Digital Economy Taxation Act.” The HB recognizes digital economy as a rising component of overall commerce in the country and it proposes ways to better capture the value created into the tax system.

It imposes a mix of direct and indirect taxes on transactions made through electronic platforms. It mandates “network orchestrators” like Grab, Angkas, Lazada, FoodPanda, to name a few, to withhold tax from the income of the drivers of the Grab car and Angkas, withhold tax from the income of the restaurant where the food has been ordered through FoodPanda, withhold tax from the income of the supplier of goods that sells through Lazada.

It also proposes that VAT must be imposed on sale of services by any local or foreign entity that is engaged in digital advertising services. VAT must also be imposed on companies engaged in subscription- based services, like Netflix. Unfortunately, we all know that VAT will be passed on and is ultimately shouldered by the end-consumer. It means that you and me who are subscribers of Netflix will ultimately pay the VAT.

Under Congressman Salceda’s bill, a foreign company is allowed to do business in the Philippines as a network orchestrator and/or as an electronic commerce platform exclusively through a representative office or an agent which shall be a resident corporation. In other words, these foreign digital companies must create a company in the Philippines first before they can operate in the country. This aims to simplify the efforts of the tax authorities as to which entity to tax for income generated within the Philippines. But it is not a secret that the internet world knows no boundaries. This requirement of prior registration might limit rather than expand the country’s tax revenue base.

Although the House Bill covers most transactions conducted through electronic platforms, it has left out a crucial revenue stream, that is, the selling or sharing of compiled user-data. Other countries have molded their digital economy taxation laws to include the trading of user data. In a country of more than 100 million individuals with a known proclivity to actively engage in social media, the Philippines is a gold mine of user data which may be monetized.

In crafting our own digital tax law, it may be wise to learn how other countries do it. Unfortunately, there is currently no consensus among nations as to how to uniformly apply digital tax. There are contentious cross-border tax issues. For example, Facebook’s headquarters is in the United States. But it has subscribers in the Philippines, and it runs a wide array of local and international advertisements in this platform. How much must the Philippines’ share be in the tax pie vis a vis the United States? Of course, both countries will argue that they deserve the greater share.
With the aim of having a unified system, the OECD released a new work program specifically addressing the tax challenges of digitalization. It proposes Pillar 1 which basically says that businesses must pay more taxes where their consumers are located. As of now, multinational corporations usually pay more tax where production is located rather than where sales are consummated. Since there is still no international consensus as to this OECD proposal, it remains to be a recommendation for countries to apply on their own.

In Europe, a digital service tax (“DST”) is imposed. It is a kind of tax on selected gross revenue streams of large digital companies. On April 1, 2020, the United Kingdom on the other hand, introduced a 2% DST on revenues from search engines, social media platforms, and online marketplaces. The revenue thresholds are set at GBP 500 million (USD 638 million) globally and GBP 25 million (USD 32 million) domestically. The first GBP 25 million in revenues would be exempt.

In these measures, only companies that reach a certain revenue threshold will be taxed. Startups, small and medium enterprise sellers are spared from DST. These countries want to allow individual digital innovations and creativity to grow without being hampered by tax burdens. I hope our lawmakers will see the wisdom behind this policy and impose tax on startups only when they have already reached a certain revenue threshold.

The House Bill on digital tax is a welcome development. But hopefully, our policy makers will find a way to strike a balance by imposing tax on large digital companies only and allow small digital companies to grow with minimal or no tax.

Like the “industrial revolution”, where machines have catapulted humanity to where it is now, we should support the growth of this “digital revolution” not only because it will lift our future to new heights but because out of necessity. Digital is and will be our new way of life.

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For inquiries on the article, you may call or email

ATTY. IRWIN C. NIDEA, JR.
Senior Partner 
T: +63 2 403 2001 loc. 330
This email address is being protected from spambots. You need JavaScript enabled to view it.

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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.

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