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DEC.
2016 Q U A L I T Y A S S U R A N C E B U L L E T I N
SECURITIES AND EXCHANGE COMMISSION (SEC) BUREAU OF INTERNAL REVENUE (BIR)
Memorandum Circulars
MC 7-2017. Limiting the Requirement for Group “C”
Accredited Independent Auditors/Certified Public
Accountants of Financing and Lending Companies per
Asset Size
Revenue Memorandum Orders
RMO No. 8-2017. Procedure for claiming tax treaty
benefits for dividend, interest and royalty income of
non-resident income earners
Revenue Memorandum Circulars
RMC No. 33-2017. Over-the-Counter Acceptance of
Certain Tax Returns/Payment of Internal Revenues
Due to Unavailability of eFPS
RMC No. 34-2017. Clarifies Paragraph 6 of RMC No.
28-2017 re: guidelines in the filing, receiving and pro-
cessing of 2016 Income Tax returns, including its
attachments.
RMC No. 35-2017. Clarifies the imposition of Capital
Gains Tax on Sale, Exchange and other disposition of
real properties.
APR.
2017
Notices
Rules and Regulations on the Implementation of the
Securities and Exchange Commission Oversight
Assurance Review Inspection Program
Issue 2017-4 Page 2
REVENUE MEMORANDUM ORDER NO. 8-2017 issued
on March 28, 2017 prescribes the procedures for claiming tax
treaty benefits for dividend, interest and royalty income of
non-resident income earners.
The mandatory Tax Treaty Relief Applications (TTRA)
shall no longer be filed with the International Tax Affairs
Division (ITAD). In lieu of the TTRA, preferential treaty rates
for dividends, interests and royalties shall be applied and used
outright by the withholding agents upon submission of a
Certificate of Residence for Tax Treaty Relief (CORTT) Form by
the non-resident. The use of the preferential rates shall be
done through Withholding Final Taxes at applicable treaty
rates.
Non-residents are allowed to use the prescribed
certificate of residency of their country of residence.
However, non-residents are still required to accomplish A, B
and C of Part I of the CORTT Form, for monitoring purposes. If
the prescribed certificate of residency is used, it shall be
attached to the CORTT Form.
For dividend income purposes, the CORTT Form shall
be valid for two (2) years from date of issuance. However, if a
prescribed certificate of residency of the country of residence
is used, the date of validity of the latter document will prevail
over the two (2) year period given. For interest and royalty
income purposes, the CORTT Form shall be valid per contract.
Withholding agents or income payors can withhold at
a reduced rate or exempt the non-resident based on the duly
accomplished CORTT Form to the withholding agent/income
payor would mean that the non-resident is not claiming any
Procedure for claiming tax treaty benefits for dividend,
interest and royalty income of non-resident income
earners
tax treaty relief and, therefore, such income shall be subject
to the normal rate provided under the National Revenue
Code (NIRC) of 1997, as amended.
The ITAD and Revenue District Office (RDO) No. 39
shall be in charge of appropriateness of receiving and
recording information stated in the CORTT. Compliance
check and post reporting validation on Withholding Tax
obligations and confirmation of appropriateness of
availment of treaty benefits shall be part of BIR’s regular
audit investigations conducted by the RDO where the do-
mestic withholding agent is registered.
Any violation of the provisions of this order shall be
subject to the penalties provided in Section 250 and other
pertinent provisions of the NRIC, as amended.
Failure to supply accurate and complete
information stated in the CORTT Form and BIR Forms 1601F
and 1604-CF will render the non-resident and withholding
agent non-compliant. Noncompliance shall be a ground for
the denial of the use of preferential treaty rates and the
disallowance of the pertinent expense/s of the withholding
agent.
Furthermore, withholding agents/income payors
that wilfully fail to pay any tax, make a return, keep any
record, or supply correct and accurate information or
withhold or remit taxes withheld, or aids or abets any man-
ner to evade any such tax or the payment thereof shall be
liable under Sections 251 and 255 of the NIRC.
Issue 2017-4 Page 3
Over-the-Counter Acceptance of Certain Tax Returns/
Payment of Internal Revenues Due to Unavailability of
eFPS
REVENUE MEMORANDUM CIRCULAR NO.33-2017
issued on April 26-2017 allows all taxpayer who are mandated
to use the Electronic Filing and Payment System (eFPS) to file
their BIR Form Nos. 2550Q, 2550M and 2551M thru the
eBIRForms facility, as well as to pay the corresponding taxes
due therefrom, if any, thru “over-the-counter” transaction
with any Authorized Agent Bank falling under the jurisdiction
of the Revenue District Office where the taxpayers are
registered without the corresponding payment of penalties for
late filing, until April 26, 2017.
Non-residents who already filed TTRAs with the BIR on
dividend, interest and royalty income prior to the effectivity of
this Order will be allowed to use the tax treaty rates invoked
based on effective tax treaties of the Philippines with other
countries. However, the same will be subjected to compliance
check.
For existing TTRAs with the BIR with supporting
documents, ITAD will use the submitted information in creating
a database for purposes of tax treaty relief availment. If the
requisite certificate of residency is not available in the
submitted documents, the withholding agents/income payor
will be requested to submit the same.
This order shall take effect 90 days upon signing to
afford non-resident income earners time to secure the required
CORTT Form or prescribed certificate of residency from their
respective countries of residence.
Clarifies Paragraph 6 of RMC No. 28-2017
re: guidelines in the filing, receiving and processing
of 2016 Income Tax returns, including its
attachments.
REVENUE MEMORANDUM CIRCULAR NO.34-
2017 issued on April 27-2017 clarifies Paragraph 6 of
RMC No. 28-2017 re: guidelines in the filing, receiving
and processing of 2016 Income Tax returns, including its
attachments.
The required attachments (Annexes “B1 to B5”)
and accompanying schedules shall be submitted to the
Large Taxpayers Division (LTD/Revenue District Office
(RDO) or Authorized Agent Banks located within the
territorial jurisdiction of the LTD/RDO where the taxpayer
is registered.
Taxpayers who electronically-filed shall also
submit a copy of electronically filed ITR with Filing
Reference Number thru eFPS facility or an email Tax
Return Receipt Confirmation and a copy of
electronically-filed ITR thru eBIRForms Facility, together
with the required attachments within fifteen (15) days
from the deadline of filing or date of electronic filing or
date of electronic filing of the return, whichever comes
later.
The Summary Alphalist of Withholding Tax
(SAWT) using the Data Entry Module of the BIR shall be
emailed to [email protected], if applicable.
Issue 2017-4 Page 4
Clarifies the imposition of Capital Gains Tax on Sale, Exchange and other disposition of real properties. REVENUE MEMORANDUM CIRCULAR NO. 35-2017 issued on April 27, 2017 clarifies the imposition of Capital Gains Tax on the sales, exchanges or transfer of real properties classified as capital asset. A final tax of six percent (6%) is imposed on capital gains presumed to have been realized by the seller from the sale, exchange or other disposition of real properties located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales based on the gross selling price or fair market value, whichever is higher. This implies that in order to be liable for the payment of Capital Gains Tax, there must be presumed gain from the sale, exchange or disposition of the real property. The mere issuance of tax declaration in the absence of any sale, exchange or other form of conveyance is not subject to Capital Gains Tax. The payment of Capital Gains Tax is dependent and is a direct consequence of the sale, transfer, or exchange. It is not the transfer of ownership or possession per se that subjects the sale/transfer/exchange to the 6% Capital Gains Tax, but the profit or gain that was presumed to have been realized by the seller by means of said transfer.
Issue 2016-1 Page 6
Issue 2017-4 Page 5
Limiting the Requirement for Group “C” Accredited
Independent Auditors/Certified Public Accountants
of Financing and Lending Companies per Asset Size
WHEREAS, Part I (3) (A) (i) of the Securities Regulation Code (SRC) Rule 68, as amended, states that the Financial Statements required to be submitted by the corporations covered by the said Rule shall be accompanied by an auditor’s report issued by an independent auditor and presented in accordance with the requirements of the said Rule.
WHEREAS, Part I (3) (B) (i) (c) and (3) (b) (iii) (f) of the same Rule require that independent auditors of financing companies (FCs) and lending companies (LCs) shall be those accredited by this Commission under category “C” or higher.
WHEREAS failure to comply with this requirement subjects be concerned company to a Twenty Five Thousand Pesos (P25,000.00) penalty per year as provided under Section 12.4 of SEC Memorandum Circular No. 13, Series of 2009.
WHEREAS, there have been several cases where financing companies and lending companies were penalized for this violation because of the limited number of accredited external auditors under Group “C” category compared to huge number of financing and lending companies in particular areas.
WHEREAS, because of apparent disparity between the number between the number of FCs and LCs with valid CA and the number of accredited auditors under group “C” category who can accommodate only so many number of said companies, more and more FCs and LCs fail to comply with subject requirement.
WHEREAS, most of the FCs and LCs which are penalized for this violation are those whose asset size is so small that requiring them to pay out of whatever asset is left will jeopardize their continuous operations.
WHEREAS, there is a need to limit the unnecessary burden imposed upon these financing companies and lending companies so as to promote further investments and economic contributions by them.
IN VIEW OF THE FOREGOING, the mandatory requirement for Group “C” accredited External Auditors/Certified Public Accountants for the following shall no longer be required:
1. Financing companies whose asset in the preceding fiscal year is Ten Million Pesos (Php10,000,000.00) and below;
2. Lending companies whose asset in the preceding fiscal year is Five Million Pesos (Php5,000,000.00) and below.
Rules and Regulations on the Implementation of the
Securities and Exchange Commission Oversight Assurance
Review Inspection Program
Notice is hereby given that the Commission intends to
roll out another initiative this June 2017 which is the SEC
Oversight Assurance Review (SOAR) Inspection Program. The
program is an investor protection initiative by the SEC in
connection with the declared State policy under the Securities
Regulation Code (SRC) to protect investors and to ensure full
and fair disclosures about securities and pursuant to the powers
and functions vested to the Commission under Section 5 of the
SRC and its authority to make, amend, and rescind such
accounting rules and regulations as may be necessary to carry
out the provisions of the SRC as provided for under Section 68
thereof. This is also in line with one of the International
Organization of Securities Commissions’ principles on securities
regulations, i.e. auditors should have adequate levels of
oversight.
All interested parties are invited to submit their
comments/ recommendations/ suggestions on the attached
proposed Rules and Regulations on the Implementation of the
Securities and Exchange Commission Oversight Assurance
Review (SOAR) Inspection Program not later than May 10, 2017.
Comments/ recommendations/ suggestions can be
submitted to the Office of the General Accountant at 3rd Floor,
Secretariat Building, Philippine International Convention Center
Complex, Pasay City or can be emailed at [email protected]
Issue 2016-1 Page 6
Issue 2017-4 Page 6
In summary, the SOAR Inspection Program is the initiative of the SEC to do an on-site review of the quality control
policies and procedures of accredited firms auditing publicly listed companies (PLCs) and review of portions of the audit
work of their selected audit engagements from time to time. It will be conducted by the Office of the General Accountant
and will follow “risk based” approach in the selection of firm and engagements to be inspected.
Initially accredited auditing firms engaged by the Philippines PLCs and portions of the audit work of their selected
audit engagements shall be reviewed and covered under the SOAR Inspection Program.
The auditing firms and engagement partners shall be subjected to the SOAR Inspection. Both Office Level and
Engagement Level Review shall be conducted by the Commission.
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Pasong Tamo St., Barangay Pio del Pilar,
Makati City
Phone: +63 2 950-9854
Fax: +63 2 950-9854
E-mail: [email protected]
We are a team of Certified Public Accountants, who
aim to be the accounting firm of choice for business
entities in terms of:
Audit and Assurance
Taxation
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Editorial Board
Floyd C. Paguio
Managing Partner
This bulletin is a compilation of relevant issuances, rulings and memoranda from various government agencies to en-
hance the technical skills of the professional staff of Paguio, Dumayas and Associates, CPAs and is not intended to
replace the original issuances of the related government agencies.
Ken John B. Asadon
Senior Tax Specialist
Aileen P. Melchor
Tax Specialist