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 © 2023 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.

Section 254 of the Tax Code provides that the conviction or acquittal obtained under the same section shall not be a bar to the filing of a civil suit for the collection of taxes.

The taxpayers were charged with several violations of Sections 254 and 255 of the National Internal Revenue Code (“Tax Code”) with respect to deficiency income tax and value-added tax (VAT).

The taxpayers were acquitted of said violations. The Court, however, ruled that the acquittal of the crimes charged in this case would not result in the extinguishment of the taxpayer’s civil liability. The civil aspect of the criminal case can survive an acquittal when it is based on reasonable doubt, as in this case. This is also the express directive of Section 254 of the Tax Code, which provides that the conviction or acquittal obtained under this section shall not be a bar to the filing of a civil suit for the collection of taxes. (People of the Philippines v. Court of Tax Appeals-Third Division et. al., G.R. Nos. 251270 and 251291-301, September 5, 2022, Date Uploaded: February 1, 2023)

RMO No. 19-2007 which mandates that all amounts of compromise penalties incident to violations must be itemized in a separate assessment notice/ demand letter should be strictly observed.

The BIR issued BIR Form No. 0605, directing the taxpayer to pay penalties for the following alleged violations: a. no books of account; b. no official receipts; c. no back-end sales report; and d. unaccounted POS.

The taxpayer contends that BIR failed to observe the requirements under RMO No. 19-2007 with regard to the imposition of compromise penalties upon the taxpayer.

The Court ruled that RMO No. 19-2007 could not be any clearer in mandating that all amounts of compromise penalties incident to violations must be itemized in a separate assessment notice/ demand letter. In the present case, careful scrutiny of the records shows that the BIR did not issue any separate assessment notice/ demand letter after his investigation of the taxpayer’s alleged violations. Instead, the BIR immediately proceeded to issue BIR Form No. 0605 (Payment form) with no itemized amounts of compromise penalties relative to its violations.

Considering that the pertinent provisions of RMO No. 19-2007 were not strictly observed by BIR in assessing the taxpayer for the compromise penalties, the compromise penalties were illegally collected and the taxpayer’s payment thereof was erroneous. (Commissioner of Internal Revenue v. Henryville, Inc., CTA EB No. 2531, February 1, 2023)

A Motion for Reconsideration is not an available remedy in seizure proceedings involving a violation of the TCCP.

A warrant of seizure and detention was issued against the shipment of the taxpayer for violation of EO No. 156 in relation to Section 105 (No Dollar Importation of Personally Used Vehicle) of the Tariffs and Customs Code of the Philippines (TCCP). The taxpayer’s settlement was initially accepted by the Acting District Collector – POD. However, the same was reversed by the District Collector. Thus, the taxpayer filed a Motion for Reconsideration with the Commissioner of the Bureau of Customs (BOC) which was subsequently denied by the latter.

In resolving the case against the taxpayer, the Court notes that the filing of a motion for reconsideration is not an available remedy in seizure proceedings. In case of seizure proceedings, the only remedies provided by the TCCP and the Customs Modernization and Tariff Act (CMTA) are “Settlement of Case by Payment of Fine or Redemption of Forfeited Property”, “Review by Commissioner”, “Settlement of Pending Seizure Case by Payment of Fine or Redemption of Forfeited Goods” and “Automatic Review in Forfeiture cases pursuant to Section 2307 of the TCCP, Section 2313 of the TCCP, Section 1124 of the CMTA and Section 1127 of the CMTA, respectively. As such, the Petition for Review is denied for lack of merit. (ADELC Trading / Ryan Dominique L. Tanjutco v. Hon. Rey Leonardo B. Guerrero, in his capacity as Commissioner of the Bureau of Customs, CTA EB No. 2469. February 2, 2023)

An assessment cannot be made to rest on mere presumptions no matter how reasonable or logical said presumptions may be – third-party information should be verified.

The taxpayer received a Letter Notice (LN) from the BIR, stating that it has purported undeclared sales for CY 2010. The said amount was the resulting discrepancy between the sales per its tax returns and the purchases of a certain company from the taxpayer. The taxpayer contended that the BIR must obtain sworn statements from third-party information (TPI) sources, attesting to the veracity of such TPI, lest the TPI may not be considered for assessment purposes.

The Court, in granting the case, found that the assessments against the taxpayer were void because the assessments lack factual and legal basis. Item IV(E)(3)(B.3) of RMO No. 30-2003 states that if the taxpayer is refuting the data appearing in the LN, there must be a confirmation request(CR) on the TPI source. In turn, the TPI source should confirm the data through a confirmation certificate. Simply put, the BIR must send a CR of said TPI to the alleged customer who, in turn, must validate said TPI. Such requirement was not met.

The Court also reminded the BIR that an assessment cannot be made to rest on mere presumptions no matter how reasonable or logical said presumptions may be. (Grand Geo Spheres Construction Corp v. Commissioner of Internal Revenue, CTA Case No. 10207, February 6, 2023)

The certificate of creditable tax withheld at source is sufficient to prove that taxes were indeed withheld.

On April 6, 2018, the taxpayer filed with the BIR an administrative claim for refund or issuance of a tax credit certificate (TCC) for the excess and unutilized creditable withholding taxes (CWTs). The BIR argued that the taxpayer is not entitled to a refund because the presentation of certificates of creditable tax withheld at source (CWT certificates) solely do not constitute conclusive evidence of payment and remittance to the BIR and that the testimonies of the various payors and withholding agents are required to prove remittance of the taxes withheld.

The Court ruled that the taxpayer does not have to prove actual remittance of the taxes to the BIR. Sections 2.58 and 2.58.3 of Revenue Regulations No. 2-98 show that the taxpayer does not need to prove actual remittance of the taxes to the BIR. It is sufficient that the CWT certificate is presented in evidence to prove that taxes were indeed withheld. Here, it is not necessary for the person who executed and prepared the CWT certificate to be presented and to testify personally to prove the authenticity of the certificates. The CWT certificate is the competent proof to establish that taxes are withheld. (Commissioner of Internal Revenue v. Mckinsey & Co. (Phils), CTA EB No. 2540, February 7, 2023)

The CIR, DCIR-OG, ACIR, Regional Director, as the case may be, possesses the authority to deny administrative claims for input VAT refund.

On June 11, 2019, the taxpayer received a Letter dated May 30, 2019, issued by the OIC – Assistant Commissioner Large Taxpayers Service (OIC ACIR), denying its refund claim. In a resolution dated January 13, 2021, the Court upheld the decision of the BIR dismissing the judicial claim for refund filed by the taxpayer on January 10, 2020 for being filed out of time.

The taxpayer argues that Letter-Denial of the OIC-ACIR LTS is not appealable to the Court. Rather, it is the CIR’s adverse decision it received on December 11, 2019, which was appealable to the Court. The Court finds this contention unmeritorious.

The Court En Banc emphasized that Section 7 of the Tax Code, as amended, declares that the CIR may delegate to subordinate officials with the rank of division chief or higher the power to deny administrative claims for input VAT refund – CIR, DCIR-OG, ACIR, Regional Director, as the case may be. Indeed, the ACIR, like the OIC ACIR, possesses the authority to deny administrative claims for input VAT refund. (Nippon Philippines Corporation v. Commissioner of Internal Revenue, CTA EB No. 2506, February 15, 2023)

Sales made by a supplier in the Customs Territory to a purchaser in the Ecozone shall be treated as an 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 CIR argues that the sales of services rendered by the taxpayer outside the Ecozone are technically considered importations by the buyers from the Customs Territory and are subject to VAT under the Tax Code, as amended. On the other hand, the taxpayer counter-argues that the principle of technical importation does not apply to the taxpayer’s sales of services within the Customs Territory. The principle of technical importation applies only to the sale of goods and properties by the Freeport Zone-registered enterprise to a buyer from the Customs Territory.

The Court ruled in favor of the CIR. The Philippine VAT System adheres to the Destination Principle. In connection therewith, it is well-settled that export processing zones are to be managed as a separate Customs Territory from the rest of the Philippines, and thus, for tax purposes, are effectively considered as foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the Ecozone shall be treated as an 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’s sales of services to buyers within the Customs Territory or outside the Clark Freeport Zone or CFZ, even if less than or equal to 30% of its total income from all sources, are not included in the computation of the special 5% tax on GIE. Simply put, the said sales should be considered as importations by the buyer and exportation on the part of the taxpayer, which are subject to the 12% VAT under the Tax Code, as amended. (Commissioner of Internal Revenue v. Clark Water Corporation, CTA EB No. 2379, February 17, 2023)

The power of the CTA to exercise its appellate jurisdiction does not preclude it from considering evidence that was not presented in the administrative claim in the BIR.

The CIR states that since an FDDA was issued, the jurisdiction of the CTA shifts from a trial court to a court exercising judicial review, becoming strictly appellate in nature. Thus, it was erroneous for the CTA to rule on matters that were never substantiated at the administrative level. The CIR further claims that documents presented only at the judicial level should not be given any probative value by the CTA.

The Court ruled that the power of the CTA to exercise its appellate jurisdiction does not preclude it from considering evidence that was not presented in the administrative claim in the BIR. As such, parties are expected to litigate and prove every aspect of their case anew and formally offer all their evidence. No value is given to documentary evidence submitted in the BIR unless it is formally offered in the CTA. Thus, the review of the CTA is not limited to whether or not the CIR committed a gross abuse of discretion, fraud, or error of law, as contended by the CIR. As evidence is considered and evaluated again, the scope of the CTA’s review covers factual findings. (Commissioner of Internal Revenue v.Western Mindanao Power Corporation, CTA EB No. 2449, February 20, 2023)

For zero-rated sales, the term “zero-rated sale” shall be written or printed prominently on the invoice or receipt, including provisional invoices/commercial invoices/supplementary invoices.

The taxpayer filed its claim for refund of its alleged unutilized input VAT arising from the importation of goods, other than capital goods, and purchases of capital goods attributable to its zero-rated sales.

The Court denied the taxpayer’s claim and ruled that a claimant’s entitlement to a tax refund or credit of excess input VAT attributable to zero-rated sales hinges upon the following requisites: (1) the taxpayer must be VAT-registered; (2) the taxpayer must be engaged in sales which are zero-rated or effectively zero-rated; (3) the claim must be filed within two years after the close of the taxable quarter when such sales were made; and (4) the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax.

In relation to the second requisite requiring the VAT-registered persons engaged in sales that are zero-rated or effectively zero-rated, a VAT invoice for every sale, barter, or exchange of goods or properties shall be issued. Hence, if the sale is subject to zero percent (0%) VAT, the term “zero-rated sale” shall be written or printed prominently on the invoice or receipt. The Court noted that the relevant provisional invoices do not have the word “zero-rated” prominently written or printed on them, in clear violation of the invoicing requirements set forth in the Tax Code, as amended, and RR No. 16-2005. Furthermore, nowhere in RR No. 18-2012, which provides the regulations for processing the ATP of official receipts, sales invoices, and other commercial invoices, was it stated that provisional invoices/commercial invoices/supplementary invoices need not contain the required information in a VAT invoice. (Oceangold (Philippines), Inc. v. Commissioner of Internal Revenue, CTA Case No. 10382, February 20, 2023)

Under the RP-US Tax Treaty, the capital gains from the sale of shares of stock may be exempt from Philippine tax if the interest being disposed of is in a corporation whose assets do not consist principally of a real property interest located in the Philippines.

This is a Petition for Review filed by the taxpayer wherein it seeks the refund of the allegedly erroneously paid capital gain tax (CGT) arising from the sale of its shares of stock. Taxpayer claims that it is entitled to refund or issuance of a TCC arising from its sale of Aclara PH share to Aclara US that is allegedly exempt from capital gains tax pursuant to Article 14 of RP-US Treaty in relation to Article 1 of its Reservation Clause. The BIR, on the other hand, claims that the taxpayer utterly failed to establish that it is entitled to a tax refund because the taxpayer did not submit the Audited Financial Statements of Aclara PH to comply with one of the requisites of GCT exemption (i.e. that it does not consist principally of real property interests located in the Philippines).

Under the RP-US Tax Treaty, the capital gains from the sale of shares of stock may be exempt from Philippine tax if the interest being disposed of is in a corporation whose assets do not consist principally of a real property interest located in the Philippines. In addition, Section z(A) and (b) and Section 4 of Revenue Regulations (RR) No. 4-8679 define the terms as generally used in tax treaties as the ratio of such immovable property over the total assets of the domestic corporation in terms of value is more than fifty percent (50%). Here, it has been established that the taxpayer is a non-resident foreign corporation and the shares transferred are of Aclara PH, a domestic corporation.

Aclara PH's real property interest (at the time of sale) did not exceed 50%; hence, it could not be deemed to have possessed assets consisting principally of a real property interest in the Philippines. As a result, the taxpayer’s capital gains derived from the sale of its shares of stock in Aclara PH should be exempt from CGT in the Philippines pursuant to the RP-US Tax Treaty. (Grid Solutions (U.S.) LLC., v. The Commissioner of Internal Revenue, CTA Case No. 10146, February 28, 2023)

RMC No. 21-2023, February 16, 2023 – This clarifies Section 5 of RR No. 18-2021 on the posting of export bond prior to the removal of tobacco products, heated tobacco products, and vapor products for export from place of manufacture.

This clarifies Section 5 of RR No. 18-2021 on the posting of export bond prior to the removal of tobacco products, heated tobacco products, and vapor products for the export from place of manufacture.

The option of posting for an export bond may be availed of by the manufacturers/exporters of tobacco products, heated tobacco products, or vapor products, subject to the following conditions:

a. The two (2) options (product replenishment and export bond) cannot be availed of at the same time to cover the Excise Tax due for the shipment;
b. The export bond amount must be at least equal to the applicable Excise Taxes due on the two (2) immediately preceding shipments;
c. The concerned manufacturers/exporters shall file and submit the export bond to the Excise Large Taxpayers Regulatory Division of the BIR and copy-furnish the Chief, Excise Large Taxpayers Field Operations Division.

RMO No. 7. 2023, February 23, 2023 – This prescribes the policies and guidelines in the processing and monitoring of One-Time Transactions (ONETT) and issuance of Electronic Certificate Authorizing Registration thru the eONETT System.

This prescribes the policies, guidelines, and procedures in the processing and monitoring of One-Time Transactions (ONETT) and issuance of Electronic Certificate Authorizing Registration thru the eONETT System.

I. Policies and Guidelines

1. The facilities of the eONETT System shall be used in the processing, review, and approval of online applications, as well as the generation and printing/ issuance of eCAR.
2. The existing procedures and guidelines in requesting for systems access shall be followed by the users in acquiring access to the eONETT System.
3. All concerned Revenue District Offices shall identify users and prepare requests for access to the eONETT System through the Revenue Data Center (RDC).
4. All issues encountered in using the eONETT System shall be immediately logged to the BIR Service Desk:

5. Only those applications with complete documentary requirements shall be processed by the Revenue Officer (RO)/Group Supervisor (GS).

6. In the absence of the RO/GS who processed and submitted an application for approval, another RO/GS may print and release the eCAR to the taxpayer, provided that the physical copies of original documents presented by the taxpayer have been validated against the uploaded attachments in the system.

7. For transactions involving multiple properties (multiple TCT/OCT/CCT, or improvements) the following shall be considered:
a. If Single Selling Price – Ensure that the “Multiple Selling Price” is unchecked/ unmarked, then encode the amount in the Total Selling Price field.
b. If Multiple Selling Price – Tick/mark the checkbox in the Multiple Selling Price field then encode the amount of selling price of each property/improvement, whichever is applicable.

8. In case of a lost eCAR issued thru the eONETT System within the validity period, the concerned RDO shall reprint and issue the same to the requesting taxpayer.

BIR RMC No. 21-2023
This amends RMC No. 48-2018 on the Classification and Processing time of One-Time Transactions (ONETT).

The processing time for the issuance of ONETT Computations Sheet (OCS) and Electronic Certificate of Authorizing Registration (eCAR) is amended as follows:

The total processing time specified above is computed on a per application basis.

BIR RMO No. 6-2023
This prescribes the updated and consolidated policies, guidelines, and procedures for BIR Audit Program.

In general, all taxpayers are considered as possible candidates for audit. To cover such audit/investigation, electronic Letters of Authority (eLAs) or Tax Verification Notice (TVN), as applicable shall be issued.

Mandatory Cases are transactions to which an audit is required as a condition precedent for the issuance of Tax Clearance, processing of claims for tax credit/refund, and other cases as may be identified by the Commissioner of Internal Revenue (CIR) as a priority target for audit/investigation. The following shall be covered by this type of audit:

A. To be covered by eLAs:

a. Claims for tax credit/refund of the following tax types:
i. Excise Tax; or
ii. Income Tax (except Income Tax claims of Job Order personnel), including Final and Creditable Income Tax Withheld

b. Request for Tax Clearance of taxpayers whose gross sales/receipts for the immediately preceding year exceeds ₱3,000,000.00 or whose gross assets upon retirement exceeds ₱8,000,000.00
i. Due to death of taxpayer; or
ii. Taxpayers retiring from business; or
iii. Taxpayers undergoing merger/consolidation/split-up/spin-off and other types of corporate reorganizations

c. Cases returned to the Investigating Offices (IO) where the original Group Supervisor (GS)/ Revenue Officer (RO) who conducted the audit are no longer available due to transfer of work assignment or separation from service (e.g., retirement, resignation, AWOL, etc.)
i. For reinvestigation; or
ii. For compliance with review findings that resulted to deficiency tax or additional deficiency tax

d. Cases referred by other IO due to taxpayer’s transfer of business registration, where taxpayer agreed to have the audit continued by the new IO, provided the covered period is not yet prescribed.

e. One-Time Transactions (ONETT)
i. Cases which review findings resulted in a deficiency tax; or
ii. Real property transactions with findings in the Electronic Certificate Authorizing Registration (eCAR) System

B. To be covered by TVNs:
a. Persons requesting for Tax Clearance whose gross sales for the immediately preceding year is ₱1,000,000.00 but not exceeding ₱3,000,000.00 or whose total assets upon retirement is ₱3,000,000.00 but not exceeding ₱8,000,000.00.
i. Due to the death of the taxpayer; or
ii. Taxpayers retiring from business; or
iii. Taxpayers undergoing merger/consolidation/split-up/spin-off and other types of corporate re-organization.

b. Claims for Value Added Tax (VAT) Refund;

c. Income Tax Refund of Job-Order personnel; and d. Claims for refund/tax credit arising from erroneous payment of taxes, including double payment of taxes due to system error/glitch.

Upon the approval of the SEC and effectivity of the merger, all the assets of the constituent corporation are automatically transferred by operation of law to the surviving corporation. The cessation of the separate existence of the constituent corporations rendered it legally impossible for them to file an Amended Plan of Merger.

The Surviving Corporation and the Constituent Corporation submitted for approval of the SEC the Plan of Merger, whereby the net assets of the Constituent Corporation will be transferred to the Surviving Corporation and treated as additional paid-in capital. During this time, the BIR then issued a ruling whereby upstream mergers between a parent company and its subsidiary where no shares will be issued are considered not tax free but rather as a donation. Afterwards, the SEC approved the Plan of Merger. In order to effect a tax-free merger, the two corporations filed an application with the SEC for the approval of an amended Plan of Merger, which the SEC denied.

In denying the appeal of the two corporations, the SEC ruled that upon the approval and effectivity of the original merger, all the assets of the Constituent Corporation were automatically transferred by operation of law to the Surviving Corporation. Thus, the issuance by the Surviving Corporation of shares to itself is no longer necessary. The SEC was effectively prevented from acting on the amended merger on the ground that with the approval of the original merger, only the Surviving Corporation is legally existing, being the surviving corporation. Consequently, the cessation of the separate existence of the constituent corporations rendered it legally impossible for them to file the amended merger. (A Brown Energy Resources and Development, Inc. and Nakeen Corp. v. Company Registration and Monitoring Department, SEC En Banc Case No. 04-15-370, August 2, 2022)

An intra-corporate dispute is no longer within the jurisdiction of the SEC.

The stockholder filed a complaint with the SEC, alleging that his rights as a stockholder were violated when he was prevented from attending the annual stockholders’ meeting. The Enforcement and Investor Protection Department (EIPD) of the SEC ruled in favor of the stockholder and directed the corporation to pay the monetary penalty.

The SEC En Banc ruled that the SEC had no jurisdiction over the case as it is an intra-corporate dispute. The stockholder was asserting and seeking to enforce his right to participate in the annual stockholder’s meeting of the corporation. Hence, the controversy involves the enforcement of the rights of the stockholder and the corporation. An intra-corporate dispute is no longer within the jurisdiction of the SEC. (Alliance Select Foods International, Inc. v. Enforcement and Investor Protection Department (EIPD), SEC En Banc Case No. 11-14-350, September 29, 2022)

Circular Letter No. CL-2023-009
Anti-Money Laundering Council (AMLC) Resolution Nos. TF-63 and
TF-64, Series of 2023.

This is to disseminate the AMLC Resolution Nos. TF-631 and TF-642, both dated 25 January 2023, directing the issuance of Sanctions Freeze Order (SFO) to take effect immediately against certain designated individuals and organizations, pursuant to their designation as terrorists under the Anti-Terrorism Council (ATC) Resolution Nos. 35 and 36, and the freezing without delay of the following property or funds, including related accounts: (a) property or funds that are owned or controlled by the subject of designation, and are not limited to those that are directly related or can be tied to a particular terrorist act, plot, or threat; (b) property or funds that are wholly or jointly owned or controlled, directly or indirectly, by the subject of designation; (c) property or funds derived or generated from funds or other assets owned or controlled, directly or indirectly, by the subject of designation; and (d) property or funds of persons and entities acting on behalf or at the direction of the subject of designation.

BSFIs are reminded to submit to the AMLC: (a) a written return, pursuant to, and containing the details required under, Rule 16.c of the Implementing Rules and Regulations of Republic Act (R.A.) No. 10168, otherwise known as the Terrorism Financing Prevention and Suppression Act of 2012 (TFPSA); and (b) Suspicious Transaction Report on all previous transactions of the subject of designations within five (5) days from the effectivity of the SFO.

Any person, whether natural or juridical, including covered persons, among others, who (a) deals directly or indirectly, in any way and by any means, with any property or fund that he knows or has reasonable ground to believe is owned or controlled by the designated individuals or organization, including funds derived or generated from property or funds owned or controlled, directly or indirectly, by such designated individuals or organization; or (b) makes available any property or funds, or financial services or other related services to the said designated individuals or organization, shall be prosecuted to the fullest extent of the law pursuant to the TFPSA.

Memorandum No. M-2023-004
Submission of Prudential Reports Using Extensible Mark-up Language (XML) format through Application Programming Interface (API).

Banks are enjoined to complete the foregoing requirements in preparation for the live implementation of the API-based submission of prudential reports following the schedule below:

1. Parallel run of the new FRPv15, which shall be used for the API-based submission shall cover the March 2023 quarter-end reports and the April and May 2023 month-end reports. The FRPv15 shall be submitted within 20 (for solo basis) and 35 (for consolidated basis) banking days from the end of the reference period, as applicable.

2. The existing FRPv14.5 and covered FRP-related reports (Annex B) being submitted through the Financial Institutions Portal (FI Portal)/Email submission pursuant to existing submission guidelines shall continue to be considered as the official submission of banks for the March 2023 quarter-end and the April and May 2023 month-end reports.

3. The Live submission1 of the FRPv15 shall start with the June 2023 quarter-end and July 2023 month-end reports. The FRPv14.5 and covered FRP-related reports shall no longer be submitted beginning the said periods.

4. Banks may use the XML Converter Facility of the BSP under the BSP Relationship Management System – Integral Financial Supervision System (BRMS-IFSS) web portal for the submission of the FRPv15 subject to the following conditions:

a. Universal/Commercial banks (UKBs) and Digital Banks (DBs) and their subsidiary thrift and rural/cooperative banks may use the converter facility during the parallel run of the FRPv15. Beginning with the live implementation of the FRPv15 reports for the reporting period ending 30 June 2023, the BSP XML Converter Facility will no longer be available to U/KBs and DBs and their subsidiary thrift and rural/cooperative banks and, as such, they shall use their own XML facility and shall submit the same via the API facility.

b. The submission of the generated XML report using machine-to-machine modality by UKBs, DBs, and their subsidiary banks for both the parallel run and live implementation shall be done using the bank’s own process as coordinated with the BSP or via the approach introduced by the BSP using Postman protocol.

5. Other thrift/rural/cooperative banks may use the BSP XML Converter and submit their XML reports via the Web Auxiliary facility (BSP Relationship Management System or BRMS) provided by the BSP during the parallel run and live implementation until further notice.

6. Any changes to the abovementioned schedule or other related matters shall be communicated accordingly.

Circular No. 1168, Series of 2023
Amendments to the Regulations on Personal Equity and Retirement Account
(PERA).

Section 1. Section 1121/1121-Q of the MORB/MORNBFI is hereby amended to read, as follows:

1121/1121-Q PERSONAL EQUITY AND RETIREMENT ACCOUNT (PERA) MARKET
PARTICIPANTS AND PERA INVESTMENT PRODUCTS

XXX

Security for the faithful performance of administrators' duties. As security for the faithful performance of its duties under the PERA Act, an Administrator shall hold eligible government securities, equivalent to at least zero percent (0.0%) of the book value of the total volume of PERA assets administered, earmarked in favor of the Bangko Sentral starting 1 January 2023:xxx

For this purpose, eligible government securities shall consist of evidence of indebtedness of the Republic of the Philippines or of the Bangko Sentral or any other evidence of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines or such other kinds of securities which may be declared eligible by the Monetary Board: Provided, That, such securities shall be free, unencumbered, and not utilized for any other purpose.

a. Valuation of securities and basis of computation of the basic security deposit requirement.

(1) Government securities deposited with the Bangko Sentral shall be measured at fair value xxx
Section 2. Appendix 114/Q-69 of the MORB/MORNBFI is hereby amended to read, as follows:

OPERATIONAL GUIDELINES ON THE ADMINISTRATION OF THE PERSONAL EQUITY AND RETIREMENT ACCOUNT (PERA)
(Appendix to Sec. 1121/1121-Q)

Pursuant to R.A. No. 9505 also known as the Personal Equity and Retirement Account (PERA) Act of 2008 (PERA Act) and its Revised lmplementing Rules and
Regulations (Revised PERA Rules), the following operational guidelines on the
administration of PERA are hereby issued. Certain capitalized terms herein used shall have the definitions ascribed to them in the Revised PERA Rules unless the context otherwise requires.

xxx

II. ACCOUNT ADMINISTRATION

A. Contributions

1. The administrator shall -
(a) Secure proof of income when a contribution is made and ensure that the maximum allowable aggregate contribution per calendar year as prescribed under the Revised PERA Rules has not been exceeded. lf in case proof of income is already obtained for a contribution made during the calendar year, the same shall no longer be required for subsequent contributions made during the year.

For this purpose, prior to contribution, the status of an overseas Filipino (OF) shall be validated by securing from the OF a sworn certification on his continuing status as an OF for the calendar year;

xxx

Section 3. The submission of the Quarterly Report on Compliance with the Basic Security Deposit Requirement under Section 1121/1121-Q and Appendix 7/Q-3 of the MORB/MORNBFI shall no longer be required starting with the reference period of 31 March 2023. In this regard, the following provision shall be incorporated as a footnote to Section 1121/1121-Q (under item b.(2)(a) of the Security for the faithful performance of administrators' duties and Appendix 7/Q-3 of the MORB/MORNBFI on the references to the Quarterly Report on Compliance with the Basic Security Deposit Requirement that are required from PERA Administrators, as follows:
Starting with the reference period of 31 March 2023, this report shall no longer be submitted to the Bangko Sentral in view of the zero rates for the security for the faithful performance of PERA Administrators' duties.

AOCG Memo No. 98-2023 dated February 14, 2023
This provides for the payment of Ad Valorem Tax in the ATRIG of all importation of automobile.

This orders collection districts to ensure the payment of Ad Valorem Tax/Excise Tax as reflected in the BIR-ATRIG before the release of automobiles in customs custody in order to protect the collection of rightful duties and taxes for the government.

CAO No. 01-23 dated February 6, 2023
This provides for the amendments of the provisions on the rules and regulations in the implementation of the ATA System in the Philippines.

This amends provisions of CAO 02-22 on the rules and regulations in the implementation of the ATA System

Section 4.11 of CAO No. 2-22 is hereby amended to read as follows:

4.11 Regularization Fee shall be imposed if evidence of re-exportation is not provided by the re-exportation counterfoil duly completed, signed, stamped, and dated by the Bureau under the following schedule:

4.11.1 First Offense – Philippine Peso amount equivalent to 25 US Dollars; and
4.11.2. Second or Subsequent Offenses-Philippine Peso amount equivalent to 50 dollars

.

FIRB Advisory 004-2023 dated February 15, 2023
This provides answers to FAQs on the Supplemental Guidelines on the Registration of RBEs in the IT-BPM Sector with the BOI.

Clarifications to FAQs on the Supplemental Guidelines on the Registration of RBEs in the IT-BPM Sector with the BOI:

Coverage of FIRB Resolutions Nos. 26-2022 and 33-2022

1. Can IT-BPM projects registered with other IPAs and located in economic or freeport zones, from 15 September 2022 onwards, register with BOI under FIRB Resolution Nos. 26-2022 and 33-2022?

No. All registration of new or expansion projects from September 15, 2022, onwards shall be with BOI if the enterprises wish to avail of the 100% work-from-home (WFH) arrangements. Prior to this period, IT-BPM projects may register with the BOI based on FIRB Resolution Nos. 26-2022 and 33-2022.

2. What is the penalty if an IT-BPM project implements WFH arrangements in 2023, but fails to register with the BOI by 31 January 2023?

IT-BPM RBEs that implemented WFH arrangements in 2023 but failed to register with the BOI by 31 January 2023 shall be subject to a penalty on the regular corporate income tax (RCIT) as specified in FIRB Advisory No. 003- 2023, and Bureau of Internal Revenue (BIR) Revenue Memorandum Circular Nos. 23-2022, 39-2022, and 120-2022. This, however, is without prejudice to the suspension or withdrawal of tax incentives or cancellation of the corresponding Certificate of Registration, upon further assessment by the concerned IPAs or the FIRB.

3. How is the penalty on RCIT, in case of non-compliance with Section 309 of the tax code, as amended, computed?

Per FIRB Advisory No. 003-2023, any penalty shall be based on 100% or the entirety of the RCIT for the month/s of non-compliance and not merely on the percentage of non-compliance.

4. Can the BOI Certificate of Registration (BOI-COR) be amended after 31 January 2023 in order to include additional projects?

No, the BOI-COR cannot be amended after 31 January 2023 to include expansions or new projects in order to allow these new projects or expansions to implement WFH arrangements.

New or expansion projects or activities of IT-BPM RBEs should be separately registered with the BOI in order to avail of WFH arrangements.

Availment of Incentives/Registration with BOI
1. How can we avail of the fiscal incentives if BOI has not yet issued the BOI- COR?
The BIR and Bureau of Customs (BOC) shall accept the official receipt as proof that the BOI-COR will be secured by the company. Generally, in lieu of the BOI-COR, the BOI-issued official receipt shall be accepted as an alternative.
2. If the official receipt evidencing BOI registration is secured on 1 December 2022, can we implement 100% WFH arrangements starting 1 December 2022?
Yes, the date indicated in the official receipt shall be the effective date of registration with the BOI. The effective date of BOI registration marks the beginning of the IT-BPM RBE’s eligibility to implement 100% WFH arrangements.

3. When filing tax returns with the BIR, what will be the IPA name that will be indicated?

In order to easily tag and isolate those under dual registration with the BOI and the concerned IPA, please use the syntax below:

“Concerned IPA-BOI”

To illustrate, if the concerned or original IPA is PEZA, the IPA field in the tax return will be filled out as “PEZA-BOI”.

Allocation of the five percent (5%) tax on gross income earned (GIE)

1. If the IT-BPM RBE allows permanent WFH for employees, which registered site should these employees be reported under, for the purpose of determining the rightful local government unit (LGU) where the corresponding LGU’s (e.g., 2% for PEZA) share shall be remitted?

There is no change in the corresponding share of the existing recipient-LGU, provided that the IT-BPM RBE does not change its registered address or registered location. Further, as provided under Department of Finance Local Finance Circular No. 001-2022, the employees under a WFH arrangement shall not be assessed by the LGU.

Movement of capital equipment and other assets within and outside the economic zones and/or freeport zones

1. If an IT-BPM RBE has multiple projects, will a blanket TEI be required to be secured for each project?
Since the blanket TEI shall be secured on a per-project basis, it follows that each project must secure a blanket TEI.

The term “project” means those supported by a separate COR or Supplemental Agreement (SA), as applicable.
2. Is a TEI also required for local purchases? What is the document to support the VAT zero-rating of these local purchases?
No, the TEI does not cover locally purchased goods. The TEI is designed to serve as proof of VAT and/or duty exemption of importations.

Locally purchased goods enjoying VAT zero-rating are supported by the VAT zero-rating certificate issued by the IPAs. In this regard, locally purchased goods can be freely moved in/out of the economic zone or freeport as long as the related supporting documentary requirements can be presented.

3. What will be the implication if some of the assets will not be covered by the TEI?
Imported assets that will not be supported by a TEI will be subject to the corresponding duties and taxes, as determined by the BOC.

4. If the count of laptops and/or other IT equipment exceeds the count of employees availing WFH arrangements, will the laptops and/or other IT equipment be subject to taxes?
As business models are constantly changing, the related laptops and other IT peripherals that operationalize the adjustments may also vary. In this regard, a justification must be provided for the change in the equipment-to-employee ratio. Such equipment, if imported and availed of import VAT and/or customs duty exemption, shall be covered by the TEI.

The justification shall be submitted to the concerned IPA. As existing internal control procedures are maintained, we suggest that the justification be included in the IPAs’ forms.

Transitory period for the movement of capital equipment and other assets within and outside the economic zones and/or freeport zones

1. Is the IT-BPM RBE still required to secure a surety bond on importations if the assets are already covered by a TEI?
Once the TEI has been secured for existing equipment and other assets, no bond requirement, in whatever form, shall be imposed upon the movement of assets outside the zone.

Allowable ratio of WFH arrangements for covered RBEs

1. Is there a limitation as to the period of enjoyment of WFH arrangement once an IT-BPM project is registered with the BOI?
There is no limit as to the period of enjoyment of the WFH arrangement once a project is registered with the BOI. Registration with the BOI under FIRB Resolution Nos. 26-2022 and 33-2022 is a permanent solution that enables RBEs located in economic zones or freeport zones to conduct 100% WFH arrangements indefinitely.

Processing of TEI for New Goods

1. If the TEI is not secured for assets expected to be imported starting February 2023 onwards, is there an alternative for the goods to be released at the port of entry?
The TEI is required to be secured for assets imported as of 1 February 2023. We recommend that IT-BPM RBEs review their importation timelines to ensure that TEI processing is duly considered in their plans and that adjustments in import lead times are made, as necessary.
2. When should RBEs secure the TEI? Prior to the arrival of goods in the Philippines or earlier?
We recommend the filing of the TEI at least ten (10) days before the arrival of the goods, to ensure the smooth processing and release of the imported goods. For new importations, kindly note that the DOF-RO shall only accept applications filed within one (1) year from the date of importation, based on the date indicated per airway bill or the bill of lading, as applicable.

3. If the TEI is not secured for assets expected to be imported starting February 2023 onwards, is there an alternative for the goods to be released at the port of entry?
The TEI is required to be secured for assets imported as of 1 February 2023. We recommend that IT-BPM RBEs review their importation timelines to ensure that TEI processing is duly considered in their plans and that adjustments in import lead times are made, as necessary.
4. When should RBEs secure the TEI? Prior to the arrival of goods in the Philippines or earlier?
We recommend the filing of the TEI at least ten (10) days before the arrival of the goods, to ensure the smooth processing and release of the imported goods. For new importations, kindly note that the DOF-RO shall only accept applications filed within one (1) year from the date of importation, based on the date indicated per airway bill or the bill of lading, as applicable.

Availment of Incentives/Registration with BOI
1. How can we avail of the fiscal incentives if BOI has not yet issued the BOI- COR?
The BIR and Bureau of Customs (BOC) shall accept the official receipt as proof that the BOI-COR will be secured by the company. Generally, in lieu of the BOI-COR, the BOI-issued official receipt shall be accepted as an alternative.
2. If the official receipt evidencing BOI registration is secured on 1 December 2022, can we implement 100% WFH arrangements starting 1 December 2022?
Yes, the date indicated in the official receipt shall be the effective date of registration with the BOI. The effective date of BOI registration marks the beginning of the IT-BPM RBE’s eligibility to implement 100% WFH arrangements.

3. When filing tax returns with the BIR, what will be the IPA name that will be indicated?

In order to easily tag and isolate those under dual registration with the BOI and the concerned IPA, please use the syntax below:

“Concerned IPA-BOI”

To illustrate, if the concerned or original IPA is PEZA, the IPA field in the tax return will be filled out as “PEZA-BOI”.

Allocation of the five percent (5%) tax on gross income earned (GIE)

1. If the IT-BPM RBE allows permanent WFH for employees, which registered site should these employees be reported under, for the purpose of determining the rightful local government unit (LGU) where the corresponding LGU’s (e.g., 2% for PEZA) share shall be remitted?

There is no change in the corresponding share of the existing recipient-LGU, provided that the IT-BPM RBE does not change its registered address or registered location. Further, as provided under Department of Finance Local Finance Circular No. 001-2022, the employees under a WFH arrangement shall not be assessed by the LGU.

Movement of capital equipment and other assets within and outside the economic zones and/or freeport zones

1. If an IT-BPM RBE has multiple projects, will a blanket TEI be required to be secured for each project?
Since the blanket TEI shall be secured on a per-project basis, it follows that each project must secure a blanket TEI.

The term “project” means those supported by a separate COR or Supplemental Agreement (SA), as applicable.
2. Is a TEI also required for local purchases? What is the document to support the VAT zero-rating of these local purchases?
No, the TEI does not cover locally purchased goods. The TEI is designed to serve as proof of VAT and/or duty exemption of importations.

Locally purchased goods enjoying VAT zero-rating are supported by the VAT zero-rating certificate issued by the IPAs. In this regard, locally purchased goods can be freely moved in/out of the economic zone or freeport as long as the related supporting documentary requirements can be presented.

3. What will be the implication if some of the assets will not be covered by the TEI?
Imported assets that will not be supported by a TEI will be subject to the corresponding duties and taxes, as determined by the BOC.

4. If the count of laptops and/or other IT equipment exceeds the count of employees availing WFH arrangements, will the laptops and/or other IT equipment be subject to taxes?
As business models are constantly changing, the related laptops and other IT peripherals that operationalize the adjustments may also vary. In this regard, a justification must be provided for the change in the equipment-to-employee ratio. Such equipment, if imported and availed of import VAT and/or customs duty exemption, shall be covered by the TEI.

The justification shall be submitted to the concerned IPA. As existing internal control procedures are maintained, we suggest that the justification be included in the IPAs’ forms.

Movement of capital equipment and other assets within and outside the economic zones and/or freeport zones

1. If an IT-BPM RBE has multiple projects, will a blanket TEI be required to be secured for each project?
Since the blanket TEI shall be secured on a per-project basis, it follows that each project must secure a blanket TEI.

The term “project” means those supported by a separate COR or Supplemental Agreement (SA), as applicable.
2. Is a TEI also required for local purchases? What is the document to support the VAT zero-rating of these local purchases?
No, the TEI does not cover locally purchased goods. The TEI is designed to serve as proof of VAT and/or duty exemption of importations.

Locally purchased goods enjoying VAT zero-rating are supported by the VAT zero-rating certificate issued by the IPAs. In this regard, locally purchased goods can be freely moved in/out of the economic zone or freeport as long as the related supporting documentary requirements can be presented.

3. What will be the implication if some of the assets will not be covered by the TEI?
Imported assets that will not be supported by a TEI will be subject to the corresponding duties and taxes, as determined by the BOC.

4. If the count of laptops and/or other IT equipment exceeds the count of employees availing WFH arrangements, will the laptops and/or other IT equipment be subject to taxes?
As business models are constantly changing, the related laptops and other IT peripherals that operationalize the adjustments may also vary. In this regard, a justification must be provided for the change in the equipment-to-employee ratio. Such equipment, if imported and availed of import VAT and/or customs duty exemption, shall be covered by the TEI.

The justification shall be submitted to the concerned IPA. As existing internal control procedures are maintained, we suggest that the justification be included in the IPAs’ forms.

3. If the TEI is not secured for assets expected to be imported starting February 2023 onwards, is there an alternative for the goods to be released at the port of entry?
The TEI is required to be secured for assets imported as of 1 February 2023. We recommend that IT-BPM RBEs review their importation timelines to ensure that TEI processing is duly considered in their plans and that adjustments in import lead times are made, as necessary.

4. When should RBEs secure the TEI? Prior to the arrival of goods in the Philippines or earlier?
We recommend the filing of the TEI at least ten (10) days before the arrival of the goods, to ensure the smooth processing and release of the imported goods. For new importations, kindly note that the DOF-RO shall only accept applications filed within one (1) year from the date of importation, based on the date indicated per airway bill or the bill of lading, as applicable.