Business Mirror

 

APRIL • VOL. 4 • SERIES OF 2019

 

 

 

• The presence of zero-rated or effectively zero-rated sales is very critical for VAT refund. (Maibarara Geothermal Inc., vs. Commissioner of Internal Revenue, CTA Case Nos. 9119, 9201, 9254 and 933, March 4, 2019)
• Direct denial of receipt of PAN shifts the burden to the party favored by the presumption to establish that the subject mailed letter was actually received by the taxpayer. (Far East Seafood, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8909, March 4, 2019)
• A request for reconsideration is not the same as a request for reinvestigation which suspends the running of the statute of limitations. (WPP Marketing Communications Inc. (formerly known as J. Walter Thompson Company (Philippines) Inc.) vs. Commissioner of Internal Revenue, CTA Case No. 9778, March 5, 2019)
• The BIR must present evidence to justify the application of the ten-year prescriptive period. (Commissioner of Internal Revenue vs. Parity Packaging Corporation, CTA EB No. 1783 (CTA Case No. 8825), March 5, 2019)
• The taxpayer must receive the PAN, and the FAN to comply with the due process requirement. (Bostik Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 9019, March 05, 2019)
• The absence of a valid LOA originating from the CIR or the Revenue Regional Director renders the assessment void. (Central Luzon Drug Corporation vs. Commissioner of Internal Revenue, CTA Case No. 8952, March 6, 2019)
• In case the basic tax exceeds P1,000,000.00 or where the settlement offered is less than the said prescribed minimum rates, the compromise must be approved by the Evaluation Board. (C.F. Sharp Crew Management Inc., vs. Commissioner of Internal Revenue, CT A Case No. 9707, March 6, 2019)
• Under the VAT System, compliance with the 120+30 day is mandatory and jurisdictional. (Northwind Power Development Corporation vs. Commissioner Internal Revenue, CTA CASE NO. 9152, March 6, 2019)
• A BOI-registered entity with 100% exports is not entitled to refund of input VAT. Otherwise, the taxpayer would unjustly be enriched at the expense of the government. (Hinatuan Mining Corporation vs. Commissioner of Internal Revenue, CTA Case No. 9287, March 6, 2019)
• The presentation of the registry return receipt with an unauthenticated signature is not equivalent to proof of actual receipt of notices by Taxpayer. (People of the Philippines vs. Engr. Reynaldo A. Matanguihan, CTA Crim. No. A-5 (Criminal Case No. 01-194392), March 7, 2019)
• It is important for the taxpayer to prove that it has enough prior year's excess input VAT credits to cover its output VAT liability for the current taxable year. (Maxima Machineries Inc. vs. Commissioner of Internal Revenue, CTA Case No. 9358, March 11, 2019)
• In determining the BIR’s right to collect, the validity or invalidity of an assessment, in relation to the due process requirements; or prescription of the right to assess; or the fact of payment of said assessment; may also be reviewed by the Court and are properly included as "other matters". (Grand Plaza Hotel Corporation vs. Commissioner of Internal Revenue, CTA Case No. 8892, March 11, 2019)
• The prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious. In order to stand the test of judicial scrutiny, the assessment must be based on actual facts. (Northern Mindanao Sales Corporation vs. Commissioner of Internal Revenue, CTA Case No. 8959, March 11, 2019)
• The DST is actually an excise tax, because it is imposed on the transaction rather than on the document. (Liberty TelecomsHoldings, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 9311, March 11, 2019)
• It can inferred from RMC No. 61-05 and Section 4.108-3 (f) of RR No. 16-05 that generation and transmission charges, including the VAT thereon, although billed to the end-user by the distribution companies and electric cooperatives, are not part of their gross receipts; neither can they claim an input tax on such charges. (Toledo Power Company vs. Commissioner of Internal Revenue, CTA Case Nos. 8450, 8512, 8547 & 8596, March 15, 2019)
• Repeated acts of paying the principal deficiency taxes by installment and repeated requests for reduction, waiver and abatement of the interest and increments does not justify the suspension of the prescriptive period for collection.(Commissioner of Internal Revenue vs. Asia United Insurance, Inc., CTA EB NO 1725(CTA Case No. 8916), March 17, 2019)
• Unsupported under-declaration of expenses does not automatically result in recognition of income. (Lancaster Colors International, Inc. vs. Commission of Internal Revenue CTA Case No. 8933 dated March 28, 2019)

 

 

 

• The presence of zero-rated or effectively zero-rated sales is very critical for VAT refund. (Maibarara Geothermal Inc., vs. Commissioner of Internal Revenue, CTA Case Nos. 9119, 9201, 9254 and 933, March 4, 2019)
• Direct denial of receipt of PAN shifts the burden to the party favored by the presumption to establish that the subject mailed letter was actually received by the taxpayer. (Far East Seafood, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8909, March 4, 2019)
• A request for reconsideration is not the same as a request for reinvestigation which suspends the running of the statute of limitations. (WPP Marketing Communications Inc. (formerly known as J. Walter Thompson Company (Philippines) Inc.) vs. Commissioner of Internal Revenue, CTA Case No. 9778, March 5, 2019)
• The BIR must present evidence to justify the application of the ten-year prescriptive period. (Commissioner of Internal Revenue vs. Parity Packaging Corporation, CTA EB No. 1783 (CTA Case No. 8825), March 5, 2019)
• The taxpayer must receive the PAN, and the FAN to comply with the due process requirement. (Bostik Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 9019, March 05, 2019)
• The absence of a valid LOA originating from the CIR or the Revenue Regional Director renders the assessment void. (Central Luzon Drug Corporation vs. Commissioner of Internal Revenue, CTA Case No. 8952, March 6, 2019)
• In case the basic tax exceeds P1,000,000.00 or where the settlement offered is less than the said prescribed minimum rates, the compromise must be approved by the Evaluation Board. (C.F. Sharp Crew Management Inc., vs. Commissioner of Internal Revenue, CT A Case No. 9707, March 6, 2019)
• Under the VAT System, compliance with the 120+30 day is mandatory and jurisdictional. (Northwind Power Development Corporation vs. Commissioner Internal Revenue, CTA CASE NO. 9152, March 6, 2019)
• A BOI-registered entity with 100% exports is not entitled to refund of input VAT. Otherwise, the taxpayer would unjustly be enriched at the expense of the government. (Hinatuan Mining Corporation vs. Commissioner of Internal Revenue, CTA Case No. 9287, March 6, 2019)
• The presentation of the registry return receipt with an unauthenticated signature is not equivalent to proof of actual receipt of notices by Taxpayer. (People of the Philippines vs. Engr. Reynaldo A. Matanguihan, CTA Crim. No. A-5 (Criminal Case No. 01-194392), March 7, 2019)
• It is important for the taxpayer to prove that it has enough prior year's excess input VAT credits to cover its output VAT liability for the current taxable year. (Maxima Machineries Inc. vs. Commissioner of Internal Revenue, CTA Case No. 9358, March 11, 2019)
• In determining the BIR’s right to collect, the validity or invalidity of an assessment, in relation to the due process requirements; or prescription of the right to assess; or the fact of payment of said assessment; may also be reviewed by the Court and are properly included as "other matters". (Grand Plaza Hotel Corporation vs. Commissioner of Internal Revenue, CTA Case No. 8892, March 11, 2019)
• The prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious. In order to stand the test of judicial scrutiny, the assessment must be based on actual facts. (Northern Mindanao Sales Corporation vs. Commissioner of Internal Revenue, CTA Case No. 8959, March 11, 2019)
• The DST is actually an excise tax, because it is imposed on the transaction rather than on the document. (Liberty TelecomsHoldings, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 9311, March 11, 2019)
• It can inferred from RMC No. 61-05 and Section 4.108-3 (f) of RR No. 16-05 that generation and transmission charges, including the VAT thereon, although billed to the end-user by the distribution companies and electric cooperatives, are not part of their gross receipts; neither can they claim an input tax on such charges. (Toledo Power Company vs. Commissioner of Internal Revenue, CTA Case Nos. 8450, 8512, 8547 & 8596, March 15, 2019)
• Repeated acts of paying the principal deficiency taxes by installment and repeated requests for reduction, waiver and abatement of the interest and increments does not justify the suspension of the prescriptive period for collection.(Commissioner of Internal Revenue vs. Asia United Insurance, Inc., CTA EB NO 1725(CTA Case No. 8916), March 17, 2019)
• Unsupported under-declaration of expenses does not automatically result in recognition of income. (Lancaster Colors International, Inc. vs. Commission of Internal Revenue CTA Case No. 8933 dated March 28, 2019)

 

 

 

• RR No. 2-2019, March 19, 2019 - This revenue regulation prescribes the rules in implementing the imposition of excise tax on non-essential services introduced by TRAIN Law.
• 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.

 

 

 

• SEC Memorandum Circular No. 5 series of 2019, March 14, 2019 - This memorandum circular provides the guidelines on the implementation of ASEAN Capital Market Forum (ACMF) Pass under the ASEAN Capital Market Professional Mobility Framework.
• SEC Notice, March 15, 2019 - This notice requests for comments, not later than 29 March 2019, on the proposed amendments to the guidelines and procedures on the use of corporate and partnership names.
• SEC Notice, March 15, 2019 - This notice requests for comments, not later than 29 March 2019, on the proposed guidelines on the conversion of an ordinary stock corporation into One Person Corporation (OPC).
• SEC Notice, March 15, 2019 - This notice requests for comments, not later than 29 March 2019, on the proposed guidelines on the establishment of a One Person Corporation (OPC).
• SEC Notice, March 15, 2019 - This notice clarifies rules for the filing of Audited Financial Statements (AFS) pursuant to the Revised Corporation Code of the Philippines.
• SEC Notice, March 22, 2019 - This notice requests for comments, not later than 5 April 2019, on the proposed guidelines on corporate term.
• SEC Notice, March 26, 2019 - This notice requests for comments, not later than 10 April 2019, on the draft Rules on Material Related Party Transactions for Publicly-Listed Companies.
• SEC Notice, March 28, 2019 - This notice requests for comments, not later than 15 April 2019, on the draft Updated Anti-Money Laundering (AML) Module for the SEC Certification Examination.

 

 

 

• SEC Memorandum Circular No. 5 series of 2019, March 14, 2019 - This memorandum circular provides the guidelines on the implementation of ASEAN Capital Market Forum (ACMF) Pass under the ASEAN Capital Market Professional Mobility Framework.
• SEC Notice, March 15, 2019 - This notice requests for comments, not later than 29 March 2019, on the proposed amendments to the guidelines and procedures on the use of corporate and partnership names.
• SEC Notice, March 15, 2019 - This notice requests for comments, not later than 29 March 2019, on the proposed guidelines on the conversion of an ordinary stock corporation into One Person Corporation (OPC).
• SEC Notice, March 15, 2019 - This notice requests for comments, not later than 29 March 2019, on the proposed guidelines on the establishment of a One Person Corporation (OPC).
• SEC Notice, March 15, 2019 - This notice clarifies rules for the filing of Audited Financial Statements (AFS) pursuant to the Revised Corporation Code of the Philippines.
• SEC Notice, March 22, 2019 - This notice requests for comments, not later than 5 April 2019, on the proposed guidelines on corporate term.
• SEC Notice, March 26, 2019 - This notice requests for comments, not later than 10 April 2019, on the draft Rules on Material Related Party Transactions for Publicly-Listed Companies.
• SEC Notice, March 28, 2019 - This notice requests for comments, not later than 15 April 2019, on the draft Updated Anti-Money Laundering (AML) Module for the SEC Certification Examination.

 

 

 

• A company’s corporate purpose may not be expanded by the mere adding of activities. (SECOGC Opinion No. 19-04, March 4, 2019, Re: General Financing Activities)
• Under the SEC guidelines, a certificate of approval of increase of authorized capital stock may be revoked if there is (1) a failure to submit the proof of transfer of ownership within 90 days, and (2) an opportunity to be heard. (Pacific Star Properties, Inc. vs. Company Registration and Monitoring Department, SEC En Banc Case No. 10-10-216, March 7, 2019)
• Proper service of papers shall be done by tendering a copy of the same to an exclusive list of persons, an incorporator included, by leaving a copy at his dwelling house or residence with some person of suitable age and discretion residing therein; service to the last known or registered address with the Commission of the person being served shall suffice. (Kapa-Community Ministry International, Inc. vs. Enforcement and Investor Protection Department, SEC Admin. Case No. 02-19-181, March 14, 2019)

 

 

 

• IC Legal Opinion (LO) No. 2019-03, March 14, 2019 – This opinion deals with clarifications on certain issues regarding the Compulsory OFW Insurance
• IC LO No. 2019-04, March 19, 2019 – This opinion deals with whether or not Starr International Insurance Philippines Branch (SIIP) is subject to strict compliance of the Circular Letter by the Insurance Commission which pertains to rules on number of seats, qualifications and term limits of independent director.
• IC LO No. 2019-05, March 25, 2019 – This is an opinion in relation to the application/enrollment form of microinsurance.

 

 

 

• 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)

 

 

 

Ease In Paying Taxes

 By Benedicta 'Dick' Du-Baladad

 

WIth the onset of the tax-filing season, and in relation to the Ease of Doing Business (EODB) law mandating the efficient delivery of government services, let me stir thistalk again about ease in paying taxes.

As early as last month, the BIR launched the tax-filing season with an earnest appeal for taxpayers to file and pay their taxes early and correctly. In response, taxpayers made a counter-appeal for the government to please do something to make payment of taxes less costly, easy and a pleasant experience they would look forward doing again.

For years, April 15 has been a hurdle, ending one’s day with a sigh of “YES, I survived.” This, notwithstanding the availability of an electronic payment and filing system. Happy for those who can hire professional help, they are blessed, but sadly, not many can afford one.

And I blame this on the tax structure that we have—a complicated tax system that is complicated further by complicated implementing rules, guidelines and procedures. The result is a complex web of inefficiencies, making the life of a taxpayer difficult.

This year could be different, especially for individuals engaged in business and with income of P3 million and below (the micro, small and medium enterprises). Taxpayers in this category are given the option of paying a single flat rate of 8 percent of gross sales or receipts in lieu of paying the regular multi-rated income tax and the 12-percent value-added tax. We call this a presumptive
income tax.

Thanks to Tax Reform for Acceleration and Inclusion (TRAIN) 1, which introduced this simplified taxation precisely to encourage the MSMEs to surface, join the tax net, pay their taxes regularly and timely and without fear of being penalized.

With this simplification, the BIR is expected to simplify implementation, as well, to ensure achieving the intent and purpose of TRAIN 1. But, I would say, it is not just about simplification in the payment of taxes that this sector needs. It is a lot more than that.

What MSMEs need is a wholistic management approach where policies are specifically designed for them—a separate taxpayer segment with special needs, having its own peculiarities and behavior. A wholistic approach that runs the whole gamut of tax compliance—from registration, bookkeeping, invoicing, tax filing and payment, tax audit, collection procedures, up to closure of the business—is what this sector needs.

The MSMEs need assistance more than anyone else. Thus, policies should be directed more on tax assistance such as tax education, information, campaign to register and the like. Not strict tax enforcement, or they will hide more.

For example, assistance desks dedicated solely to MSMEs should be set up in all Bureau of Internal Revenue (BIR) payment centers and frontline offices ready to assist in registration, printing of invoices, filling up tax returns, payment of taxes, etc. Basic training on proper bookkeeping is also important. Simplifying tax forms is a must. TRAIN 1 mandates that tax returns should not exceed four pages. For MSMEs, perhaps a one-page simplified tax return can be done.

For a long time, this sector has not been paid much attention to by the BIR, perhaps because it is more costly to run after them compared to the revenue potential to be generated. Instead, the BIR concentrated on large taxpayers already in the net, auditing them yearly, squeezing them for more payments and monitoring them regularly.

MSMEs comprise 99.56 percent of all businesses in the country, according to the 2017 data of the Philippine Statistics Authority (PSA). Compared to only more than 4,000 large businesses, their number runs close to a million, dominating the wholesale and retail trade sector (e.g., the sari-sari stores, parlor shops, tricycle repair, canteens and the like) and concentrated in the National Capital Region, Central Luzon, Calabarzon and Central Visayas. Of this number, 89 percent are micro enterprises.

Is there really no revenue prospect from MSMEs? There is, and its not peanuts. My sense is, the almost a million figure from the PSA pertains only to those registered. The sari-sari stores alone are already more than a million, I heard. In which case, we are talking here of a lot bigger number of MSMEs.

The PSA report says that in terms of value added, the MSME sector contributes 35.7 percent of the total value added generated in the country. They account for 25 percent of the country’s total exports revenue, normally through subcontracting arrangement with large firms, or as suppliers to exporting companies. This means that this taxpayer segment should be contributing at least 35 percent of the total revenue collection. A P1,000 monthly payment from each, for example, easily translates to P12-billion revenue collection.

The MSMEs have been crying for help, wanting to contribute their share. And so, we did our share.

Our firm, Du-Baladad and Associates, recently released a 10-pager handy pamphlet on “A Quick and Easy Tax Guide for MSMEs.”

This was translated in Tagalog by the Women Business Council of the Philippines (Womenbiz) to cater to those who may find difficulty in English: “Isang Madali at Mabilis na Gabay sa Pagbabayad ng Buwis para sa MSMEs.”

This booklet is given for free to MSMEs who may need a copy. It is our contribution to the tax education and assistance of MSMEs, a part of our firm’s corporate social responsibility, which we have seriously taken upon ourselves to champion.

Any organization or association assisting or dealing with MSMEs may e-mail us for free copies. You can also download this from our web site at www. bdblaw.com.ph.

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For inquiries on the article, you may call or email

ATTY. BENEDICTA “Dick” DU-BALADAD
Founding Partner & CEO
T: +63 2 403 2001 loc. 300
This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

Ceremonial Turnover at Fundado Elementary School

 

The students and teachers of Fundado Elementary School in Libmanan, Camarines Sur can now dream bigger and look forward to a bright new environment more conducive for learning with the turnover of a new classroom building and the newly renovated comfort rooms donated by BDB Law Foundation Inc. The classroom building is fully-equipped with armchairs, teachers’ desks, blackboards, wall fans and toilets. This is the 6th classroom building built in partnership with Children’s Hour Foundation. The ceremonial turnover was graced by BDB Law Foundation’s Chairman Atty. Benedicta Du-Baladad and Director Atty. Irwin C. Nidea, Jr., Fundado Elementary School teaching staff headed by their School Principal, and from Children’s Hour, Ms. Ovy Jimenez and Mr. Eric Name. (March 22, 2019, Fundado Elementary School, Libmanan, Camarines Sur)