ey - tax bulletin, may 2015

1Tax bulletin |

Tax bulletinMay 2015

2 | Tax bulletin

HighlightsBIR Rulings

• Abranchofficeofaforeignnon-stock,non-profitcorporationcannotqualifyasatax-exemptcorporationunderSection30oftheTaxCode. (Page 4)

• DividendspaidtoaresidentoftheNetherlandsaresubjecttothe10%preferentialfinalwithholdingtax(FWT)iftherecipientisacompanythecapitalofwhichiswhollyorpartlydividedintosharesandwhichholdsdirectlyatleast10%ofthecapitalofthePhilippinecompany. (Page 4)

• InterestarisinginthePhilippinesandpaidtoaresidentofFinlandisexemptfromPhilippineincometaxiftheinterestispaidinrespectofaloanmade,guaranteedorinsured,orcreditextended,guaranteedorinsuredbytheFinnishExportCreditLtd. (Page 5)

• InterestarisinginthePhilippinesandpaidtoaresidentofKoreaisexemptfromPhilippineincometax,iftheinterestispaidinrespectofaloanmade,guaranteedorinsured,orcreditextended,guaranteedorinsuredby,theExport-ImportBankofKorea.

Loanagreementsaresubjecttodocumentarystamptax(DST)attherateofP1.00foreveryP200.00(or0.5%)oftheissueprice,orfractionalpartthereof. (Page 5)

• CapitalgainsderivedbyaUSresidentfromthesaleofsharesinadomesticcorporationshallbetaxableonlyintheUS,providedtheassetsofthePhilippinecompanydonotconsistprincipallyofrealpropertyinterestslocatedinthePhilippines.Theterm“principally”meansthattheratiooftheimmovablepropertyoverthetotalassetsofthePhilippinecompanyintermsofvalueismorethan50%. (Page 6)

• AUSresidentwhoisinvitedtoteachinthePhilippinesbyaPhilippine

universityorothereducationalinstitutionshallbeexemptfromPhilippinetaxonhisincomefrompersonalteachingservicesforaperiodnotexceedingtwoyearsfromthedateofhisarrival. (Page 6)

• Acontractwhichdoesnotcallforthesupplyofexistinginformationorreproductionofexistingmaterial,butfortheprovisionofactualservicesintheareasofaccounting,financeandinformationtechnologyischaracterizedasacontractfortheperformanceofservicesratherthanasupplyofknow-howorotherintangibleproperty(royalty).

IncomederivedbyresidentofThailandfromservicesrenderedinthePhilippinesthroughitsemployeesforaperiodaggregatinglessthan183daysisnotsubjecttoPhilippineincometax.

ServicesrenderedinthePhilippinesbyanon-residentinfavorofaPEZA-registeredentityareexemptfromVATunderSection109(K)oftheTaxCode. (Page 7)

• AninternationalaircarrierorganizedintheUS(withlicensetodobusinessinthePhilippinesasaproviderofinternationalairservicestoandfromthecountry)issubjecttotheGrossPhilippineBillings(GPB)taxatthepreferentialrateof1½%,aswellasto3%taxoncarriageofcargo. (Page 7)

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BIR Issuances

• RevenueRegulations(RR)No.8-2015amendsthedefinitionof“rawcanesugar”asprovidedinRRNo.6-2015inrelationtotheimpositionofadvancebusinesstax(VATorpercentagetax). (Page 8)

• RevenueMemorandumCircular(RMC)No.23-2015furtherclarifiestherulesontheissuanceofawithdrawalcertificate(WC)foreveryremovalofpetroleumproductsfromtherefinery,depot,oranystoragefacilityasprescribedunderRMCNo.50-2014. (Page 11)

• RMCNo.24-2015clarifiesRRNo.2-2015,particularlyonthesubmissionbyconcernedtaxpayersofscannedcopiesoftheCertificateofCreditableTaxWithheldatSource(BIRFormNo.2307)andCertificateofCompensationPayment/TaxWithheld(BIRFormNo.2316). (Page 14)

• RMCNo.25-2015clarifiestheimpositionofadvancebusinesstax(VATorpercentagetax)onrawsugarandrefinedsugarunderRRNo.6-2015datedMarch31,2015. (Page 15)

• RMCNo.26-2015providesalternativemodesinthefilingofBIRFormNos.1601-C,1601-E,1601-F,1600,1602,1603,2551M,2551Q,2550M,2550Q,1700,1701,1702EX,1702MX,1702RT,1701Q,and1702QusingtheelectronicplatformsoftheBIR. (Page 15)

BOC Issuance

• CustomsMemorandumOrder(CMO)No.14-2015revokesCMONo.3-2015andprescribestherevisedrulesforBOCaccreditationofPEZAlocators. (Page 17)

PEZA Issuance

• MemorandumCircularNo.2015-015implementsPhase1ofthePEZAElectronicApplicationRegistrationSystem(e-ARS). (Page 17)

BSP Issuances

• CircularNo.877amendstheprovisionsoftheManualofRegulationsforBanks(MORB)ontheissuanceofLong-TermNegotiableCertificatesofTimeDeposits(LTNCTD). (Page 18)

• CircularNo.878amendstheMORBandtheManualofRegulationsforNon-BankFinancialInstitutions(MORNBFI)ontheimplementationofthePersonalEquityandRetirementAccount(PERA)Actof2008anditsimplementingrulesandregulations(IRR). (Page 18)

• CircularNo.879introducesAppendix34aofSubsectionX405.1oftheMORBandAppendixQ-21-atoSubsection4405Q.1oftheMORNBFI,ontheimplementationofthePERAActof2008andthePERAIRR. (Page 19)

• CircularNo.880amendsSection4192Q/4162NoftheMORNBFI;SubsectionX191.2oftheMORB;andSubsectionX425.2/4425Q.2andAppendix6/Q-3andN-1oftheMORBandMORNBFI,respectively,ontheimplementationofthePERAActof2008andthePERAIRR. (Page 19)

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BLGF Opinion

• ProfessionalswhohavepaidthecorrespondingprofessionaltaxareentitledtopracticetheirprofessioninanypartofthePhilippineswithoutbeingsubjectedtoanyothernationalorlocaltax,licenseorfee,includingmayor’spermits.

Dentalclinics,whichareestablishedasadirectconsequenceofthepracticeofthedentalprofession,areexemptfromlocalbusinesstaxes. (Page 24)

Court Decision

• ABIRcertification/rulingisnotapreconditiontoavailofataxexemptioninanexchangeofpropertyforsharesofstockunderSection40(C)(2)oftheTaxCode.

ThetransferoflandbyarealestatecompanytoanotherinexchangeforsharesofstockwherethetransferorgainscontrolofthetransfereeisnotsubjecttoVAT.*

Thenon-submissionofdocumentstosupportitsrefundclaimwiththeBIRisnotfataltoataxpayer’sclaimforrefundfiledwiththeCTA. (Page 25)

[*Editor’s Note: The property for share swap involved in this case occurred on April 30, 2011, before the effectivity of RR No. 10-2011, dated July 1, 2011. Under the amendment introduced by RR No. 10-2011, the exchange of goods or properties used in business or held for sale or for lease by the transferee is subject to VAT, whether resulting in corporate control or not.]

BIR Rulings

BIR Ruling No. 159-15 dated May 6, 2015

Facts:

ACo.,aUScorporation,wasdulylicensedtoestablishabranchinthePhilippinesforthepurposeofprovidingspiritualandphysicalaidtovictimsofwar,nationaldisasters,povertyandfamine.ThebranchrequestedforacertificateoftaxexemptionunderSection30oftheTaxCodeonnon-stock,non-profitcorporations.

Issue:

Canabranchofaforeignnon-stock,non-profitcorporationqualifyasatax-exemptcorporation?

Ruling:

No.Section5ofRevenueMemorandumOrder(RMO)No.20-2013specificallystatesthat“abranchofficeofaforeignnon-stock,non-profitcorporationcannotqualifyasatax-exemptcorporationunderSection30oftheNIRC,asamended.”

BIR Ruling No. ITAD 058-15 dated March 25, 2015

Facts:

ACo.,aDutchcompany,thecapitalofwhichisdividedintoshares,owns40%ofthetotalsharesinBCo.,adomesticcorporation.BCo.declaredcashdividendsinfavorofACo.onMarch2,2012andsubsequentlypaidsuchdividendsonMay9,2012.

Abranchofficeofaforeignnon-stock,non-profitcorporationcannotqualifyasatax-exemptcorporationunderSection30oftheTaxCode.

DividendspaidtoaresidentoftheNetherlandsaresubjecttothe10%preferentialFWTiftherecipientisacompanythecapitalofwhichiswhollyorpartlydividedintosharesandwhichholdsdirectlyatleast10%ofthecapitalofthePhilippinecompany.

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ATaxTreatyReliefApplication(TTRA)foravailingofthepreferential10%FWTondividendsundertheRP-NetherlandsTaxTreatywasfiledwiththeBIR’sInternationalTaxAffairsDivision(ITAD)onMay9,2012,thesamedayasthedividendpayment. Issue:

Arethedividendsqualifiedforthepreferential10%FWTrate?

Ruling:

Yes.UndertheRP-NetherlandsTaxTreaty,dividendsarisinginthePhilippinesandpaidtoaresidentoftheNetherlandsaresubjecttothepreferential10%FWTonthegrossamountofdividends,iftherecipientofthedividendsisacompanythecapitalofwhichiswhollyorpartlydividedintosharesandwhichholdsdirectlyatleast10%ofthecapitalofthePhilippinecompanypayingthedividends.

[Editor’s Note: The ITAD initially denied the TTRA on the basis of RMO No. 72-2010, which requires filing the TTRA prior to the dividend payment. The matter was elevated to the Department of Finance (DOF) for review; the DOF subsequently endorsed the matter back to the ITAD for appropriate action, inviting attention to the Supreme Court’s decision in Deutsche Bank AG Manila Branch vs. CIR (G.R. No. 188550 dated August 1, 2013). The ITAD then reversed its initial denial without citing the Deutsche Bank case as basis for the reversal.]

BIR Ruling No. ITAD 116-15 dated April 30, 2015

Facts:

TheFinnishExportCreditLtd.,astate-ownedfinancingcompanyunderFinland’sMinistryofEmploymentandtheEconomy,enteredintoaloanfacilityagreementwithBCo.,adomesticcorporation.Undertheagreement,BCo.mayrequestforadvancesduringa6-monthavailabilityperiod,withsuchadvancesbeingrepayableinsuccessivehalf-yearlyinstallments,subjecttothepaymentofinterest.

Issue:

AretheinterestpaymentsexemptfromPhilippineincometax?

Ruling:

Yes.UndertheRP-FinlandTaxTreaty,interestarisinginthePhilippinesandpaidtoaresidentofFinlandisexemptfromPhilippineincometaxiftheinterestispaidinrespectofaloanmade,guaranteedorinsured,orcreditextended,guaranteedorinsuredbytheFinnishExportCreditLtd.


Facts:

TheExport-ImportBankofKorea,astatutoryjuridicalfinancinginstitutioninKorea,enteredintoaloanfacilityagreementwithBCo.,adomesticcorporation.Undertheagreement,BCo.mayrequestfordrawdownsrepayablewithinterest.

Issues:

1. AretheinterestpaymentsexemptfromPhilippineincometax?2. IstheloanfacilityagreementsubjecttoDST?

InterestarisinginthePhilippinesandpaidtoaresidentofFinlandisexemptfromPhilippineincometaxiftheinterestispaidinrespectofaloanmade,guaranteedorinsured,orcreditextended,guaranteedorinsuredbytheFinnishExportCreditLtd.

InterestarisinginthePhilippinesandpaidtoaresidentofKoreaisexemptfromPhilippineincometaxiftheinterestispaidinrespectofaloanmade,guaranteedorinsured,orcreditextended,guaranteedorinsuredby,theExport-ImportBankofKorea.

Loanagreementsaresubjecttodocumentarystamptax(DST)attherateofP1.00foreveryP200.00(or0.5%)oftheissueprice,orfractionalpartthereof.

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Ruling:

1. Yes.UndertheRP-KoreaTaxTreaty,interestarisinginthePhilippinesandpaidtoaresidentofKoreaisexemptfromPhilippineincometaxiftheinterestispaidinrespectofaloanmade,guaranteedorinsured,orcreditextended,guaranteedorinsuredbytheExport-ImportBankofKorea,amongothers.

2. Yes.TheagreementissubjecttoDSTattherateofP1.00foreveryP200.00(or0.5%)oftheissueprice,orfractionalpartthereof,underSection179oftheTaxCode.


Facts:

ACo.,anon-residentUScorporation,enteredintoaDeedofAbsoluteSalewithBCo.,anon-residentSwisscorporation,forthesaleofsharesheldbyACo.inCCo.,adomesticcorporation.TheauditedfinancialstatementsofCCo.showthatitsrealpropertyinterestsrepresent51.67%ofitstotalassets.

Issues:

1. IsthesaleoftheCCo.sharessubjecttoPhilippinecapitalgainstax(CGT)?2. IsthesalesubjecttoDST?

Ruling:

1. Yes.UnderArticle14(2)oftheRP-USTaxTreaty,capitalgainsderivedbyaUSresidentfromthesaleofsharesinadomesticcorporationshallbetaxableonlyintheUS,providedtheassetsofthePhilippinecorporationdonotconsistprincipallyofrealpropertyinterestslocatedinthePhilippines.RRNo.4-86providesthattheterm“principally”meansthattheratiooftheimmovablepropertyoverthetotalassetsofthePhilippinecompanyintermsofvalueismorethan50%.ConsideringthattheauditedfinancialstatementsofCCo.revealthattherealpropertyinterestsrepresentof51.67%ofthetotalassets,theCGTexemptionundertheRP-USTaxTreatywillnotapply.Hence,thesaleofsharesshallbesubjecttoCGTattherateof5%onthefirstP100,000ofnetgain,plus10%onthenetgainamountinexcessofP100,000,pursuanttoSection28(b)(5)(c)oftheTaxCode.

2. Yes.ThesaleofsharesissubjecttoDSTattherateofP0.75foreveryP200.00(or0.375%)oftheparvalueoftheshares,ofafractionthereof,underSection175oftheTaxCode.

BIR Ruling No. ITAD 137-15 dated May 4, 2015

Facts:

Mr.A,aUScitizenandresident,wasinvitedtorenderpersonalservicesasaprofessorinaPhilippineuniversity.HearrivedinthePhilippinesonJune6,2013andsubsequentlyperformedpersonalteachingservicesforafee.

Issue:

IsMr.AexemptfromPhilippinetaxonhisincomefromteachingservices?

CapitalgainsderivedbyaUSresidentfromthesaleofsharesinadomesticcorporationshallbetaxableonlyintheUS,providedtheassetsofthePhilippinecompanydonotconsistprincipallyofrealpropertyinterestslocatedinthePhilippines.Theterm“principally”meansthattheratiooftheimmovablepropertyoverthetotalassetsofthePhilippinecompanyintermsofvalueismorethan50%.

AUSresidentwhoisinvitedtoteachinthePhilippinesbyaPhilippineuniversityorothereducationalinstitutionshallbeexemptfromPhilippinetaxonhisincomefrompersonalteachingservicesforaperiodnotexceedingtwoyearsfromthedateofhisarrival.

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Ruling:

Yes.UnderArticle21oftheRP-USTaxTreaty,aUSresidentwhoisinvitedtoteachinthePhilippinesbyaPhilippineuniversityorothereducationalinstitutionshallbeexemptfromPhilippinetaxonhisincomefrompersonalteachingservicesforaperiodnotexceedingtwoyearsfromthedateofhisarrival,i.e.,fromJune6,2013toJune5,2015.


Facts:

ACo.,aresidentofThailand,enteredintoaComprehensiveServiceAgreementwithBCo.,adomesticcorporationregisteredwiththePEZA.Undertheagreement,ACo.agreedtorenderservicestoBCo.intheareasofaccounting,financeandinformationtechnologyforafee.Fortherenditionofservices,ACo.sentitspersonneltothePhilippinesforanaggregateperiodof28days.

Issues:

1. IstheincomederivedbyACo.characterizedasbusinessprofitsorasroyalties?2. IsACo.subjecttoPhilippineincometax?3. AretheservicesrenderedbyACo.inthePhilippinessubjecttoVAT?

Ruling:

1. Yes.SincetheAgreementdoesnotcallforthesupplyofexistinginformationorreproductionofexistingmaterial,butfortheprovisionofactualservicesintheareasofaccounting,financeandinformationtechnology,itischaracterizedasacontractforperformingofservicesratherthanasupplyofknow-howorotherintangibleproperty.Thus,thefeesundertheAgreementareinthenatureofbusinessprofitsratherthanpaymentsforknow-howorroyalties.

2. No.UndertheRP-ThailandTaxTreaty,anenterpriseofThailandshallbetaxableinthePhilippinesonlyonbusinessprofitstotheextentattributabletoapermanentestablishment(PE)situatedinthePhilippines.AThaienterprisemaybedeemedtohaveaPEinthePhilippinesifitfurnishesservices,includingconsultancyservices,throughemployeesorotherpersonnel,ifsuchactivitiescontinue(forthesameprojectoraconnectedproject)foraperiodorperiodsaggregatingmorethan183days.Accordingly,sincetheservicesperformedbyACo.inthePhilippineswereonlyforanaggregateperiodof28days,ACo.isnotdeemedtohaveaPEinthePhilippinesanditsincomeshallnotbesubjecttoPhilippineincometax.

3. No.Asageneralrule,thesaleofgoodsandservicestoentitiesexemptfromVAT,suchasPEZA-registeredentities,iszero-rated.However,insteadofzero-ratingwhichisnotavailabletonon-residentsuppliers,thetransactionwillbetreatedasVATexemptpursuanttoSection109(K)oftheTaxCode.


Facts:

ACo.,aninternationalaircarrierorganizedintheUS,islicensedtodobusinessinthePhilippinesasaproviderofinternationalairservicestoandfromthecountry.

Acontractwhichdoesnotcallforthesupplyofexistinginformationorreproductionofexistingmaterial,butfortheprovisionofactualservicesintheareasofaccounting,financeandinformationtechnologyischaracterizedasacontractfortheperformanceofservicesratherthanasupplyofknow-howorotherintangibleproperty(royalty).

IncomederivedbyresidentofThailandfromservicesrenderedinthePhilippinesthroughitsemployeesforaperiodaggregatinglessthan183daysisnotsubjecttoPhilippineincometax.

ServicesrenderedinthePhilippinesbyanon-residentinfavorofaPEZA-registeredentityareexemptfromVATunderSection109(K)oftheTaxCode.

AninternationalaircarrierorganizedintheUS(withlicensetodobusinessinthePhilippinesasaproviderofinternationalairservicestoandfromthecountry)issubjecttotheGrossPhilippineBillings(GPB)taxatthepreferentialrateof1½%,aswellasto3%taxoncarriageofcargo.

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Issues:

1. IsACo.subjecttothepreferential1½%GPBtax?2. IsACo.subjectto3%percentagetax?3. IsACo.subjecttoVAT?

Ruling:

1. Yes.UnderArticle9oftheRP-USTaxTreaty,thePhilippinesmaytaxtheprofitsderivedbyaUSresidentfromtheoperationofaircraftininternationaltrafficinthePhilippines,providedtherateofincometaxthatmaybeimposedonsuchprofitsshallnotexceedthelesserof1½%ofthegrossamountthereof,orthelowestrateofincometaximposedbythePhilippinesonsuchprofitsderivedbyaresidentofathirdstateundersimilarcircumstances(alsoknownasthemost-favored-nation[MFN]clause).SincethePhilippineshasnotyetgrantedanMFNtreatmentonprofitsfromtheoperationofaircraftininternationaltraffic,theapplicabletaxshallbe1½%onGBP.

2. Yes.ACo.issubjecttothe3%taxongrossreceiptsderivedfromthetransportofcargofromthePhilippinestoanothercountryunderSection118oftheTaxCode.

3. No.ACo.isexemptfromVATbecause(i)itisalreadysubjecttopercentagetaxpursuanttoSection109(1)(E),and(ii)itisaninternationalcarrierengagedinthetransportofpassengerspursuanttoSection109(1)(S),bothoftheTaxCode.

BIR Issuances

Revenue Regulations No. 8-2015 dated May 22, 2015

• Definition of Terms

1. Raw Cane Sugarshallmeanthenaturalsugarextractedfromsugarcanethroughthesimplemechanicalprocessofpressingforthejuice;boilingtocrystalize;filteringusingacentrifugetoseparatethesecrystals,anddrying,resultingincrystallizedbrownsugar(browncolorduetothenaturalmolassescontentpresentinsugarcane):providedthatitshallrefertorawcanesugarproducedfromconductingonlyone(1)stageoffilteringandcentrifugalseparationwithoutanyotherprocess,suchasbutnotlimitedtowashing,bleaching,etc.,anditscolorisgreaterthan800ICU,anditscontentofsucrosebyweightinadrystatecorrespondstoapolarimeterreadingoflessthan99.5˚.

Thedefinitionincludesmuscovadowhichhasstandardspecificationsasproduced,namely:PowderClassA–polarizationof86˚minimum;PowderClassB–polarizationof77˚minimum;andLump–polarizationof57˚minimum.

Onlythosefallingundertheabovedefinitionofrawcanesugar,includingmuscovado,areexemptfromVATorpercentagetaxpursuanttoSection109(1)(A)oftheTaxCode.

TheSugarRegulatoryAuthority(SRA)representsthatitcollectsonabi-weeklybasiscompositesamplesfrommillsforroutinequalitytests.Forfurtherverificationthattheproductsproducedbymillsconformtothe

RevenueRegulations(RR)No.8-2015amendsthedefinitionof“rawcanesugar”asprovidedinRRNo.6-2015inrelationtotheimpositionofadvancebusinesstax(VATorpercentagetax).

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definitioncontainedherein,theSRAshallprovidetheBIRwithacopyoftheresultsofsaidtestshowingthepolarimeterandcolorreadingoftherawcanesugarproduced,within15daysfromtheendofthecalendarmonth.TheSRAshallalsoensurethattheyhaveinplacerulesandregulationsrequiringthat“RAWCANESUGAR”beclearlyplacedonquedansissuedforproductsfallingunderthisdefinition.

2. SugarreferstosugarotherthanRawCaneSugarasdefinedintheprecedingparagraph.Thisincludessugarwhosecontentofsucrosebyweight,inthedrystatecorrespondstoapolarimeterreadingof99.5°andaboveand/orwhosecoloris800ICUorless.

CaneSugarproducedfromthefollowingshallbepresumedtoberefinedsugar:

• Productofrefiningprocess;• Productsofasugarrefinery;or• ProductofaproductionlineofasugarmillaccreditedbytheBIRtobe

producingand/orcapableofproducingsugarwithpolarimeterreadingof99.5˚andabove,andforwhichthequedanissuedasverifiedbytheSRAidentifiesthesugartobeofapolarimeterreadingof99.5˚andabove.

Nonetheless,sugarproducedfromsugarproductionlinesaccreditedbytheBIRtobecapableofproducingsugarwithpolarimeterreadingof99.5°oraboveshallbepresumedtoberefinedsugar.

3. Sugar Refinery/Millreferstoanentity,naturalorjuridical,engagedinthebusinessofmillingsugarcaneintoraworintherefiningofrawsugar.

4. Sugar Ownersmayrefertopersonswhohavelegaltitleoverthesugarandmayincludeanyofthefollowing:

• Sugarplanters;• Traders;• SugarMillers;• Cooperative/s;• Associations.

• Requirement to Pay Advance Business Taxes

1. Thebusinesstax(VATorpercentagetax)onthesaleofsugarshallbepaidinadvancebytheowner/sellerbeforeanywarehousereceiptorquedansareissued,orbeforethesugariswithdrawnfromanysugarrefinerymill.

2. AnypersonwhoisnotaVAT-registeredpersonandwhosesalesorreceiptsareexemptfromVAT,shallpayanadvancepercentagetaxequivalentto3%ofthegrossmonthlysalesorreceiptsofsugar.

• Basis for Determining Advance Tax

1. Base Price.—TheadvanceVATshallbedeterminedbyapplyingthe12%VATrateonthebasepriceofP1,400.00per50kg.bagofsugar.

2. Subsequent Base Price Adjustments.—ThebasepriceuponwhichtheadvanceVATpaymentwillbecomputedundertheprecedingparagraphshallbeadjustedwhendeemednecessarybytheCommissioner,dependingontheprevailingmarketpriceofsugar.

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3. Advance Percentage Tax–FortaxpayerswhoareVAT-exemptandarenotVAT-registeredpersons,theadvancepercentagetaxshallbedeterminedbyapplyingthe3%percentagetaxtothegrosssalesorreceipts,providedthatcooperativesshallbeexemptfromthe3%tax.

• Exemptions from the Payment of the Advance VAT

1. Withdrawal of raw cane sugar–Saleofrawcanesugar,includingmuscovado,isalwaysexemptfromVATirrespectiveofthesellerandbuyer,pursuanttoSection109(1)(A)oftheTaxCode.

2. Withdrawal of sugar by a duly accredited and registered agricultural cooperative in good standing:

• Ifthesugarisownedandwithdrawnfromthesugarrefinery/millbyanagriculturalcooperativeingoodstandingdulyaccreditedandregisteredwiththeCooperativeDevelopmentAuthority(CDA),thewithdrawalofsugarforsaletomembersisnotsubjecttoadvanceVATorpercentagetax.

• Thewithdrawalofsugarforsaletonon-membersissubjecttopaymentofadvanceVATorpercentagetaxiftheagriculturalcooperativeisnottheproducerofsugar.

• Anyquedanorevidenceofownershipshowingthenameofthecooperativetogetherwithanotherentity,naturalorjuridical,shallnotbeconsideredsalesbytheagriculturalcooperativebutbytheotherentitynamedtherein,andarenotexemptedfromthepaymentofadvanceVATorpercentagetax.

• Toclaimexemption,acooperativemustbetheholderofavalid,currentandsubsistingCertificateofTaxExemptionissuedinaccordancewithRMONo.76-2010datedSeptember27,2010.

3. Withdrawal of sugar by a duly accredited and registered agricultural cooperative and sale to another agricultural cooperative:

• Iftheownerofthesugarasreflectedinthequedanisanagriculturalcooperative,thesaleofthesugartoanotheragriculturalcooperativeisnotsubjecttoVATandadvancepercentagetax.

• Ifthesellerisnotanagriculturalproducer,butmerelypurchasesthesugarfromtheplanter,ortransfersthesugartoacooperativethroughassignment,itssaleoftheresultingsugartoanotheragriculturalcooperativeshallbesubjecttoVAT,anditswithdrawalfromthesugarrefinery/millwillonlybealloweduponpaymentoftheadvanceVATorpercentagetaxtotheRevenueDistrictOffice(RDO)havingjurisdictionovertheplaceofbusinessofthecooperative.

• Anyquedanorevidenceofownershipissuedtoacooperativetogetherwithanotherentity,naturalorjuridical,shallnotbeconsideredasalebythecooperative,butbytheotherentitynamedtherein,andisnotexemptfromtheadvancebusinesstaxes.

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• Withdrawal or Transfer of Ownership of Sugar

1. Theproprietorofasugarrefinery/millshallnotallowtheissuanceofquedan/warehousereceiptsorotherevidenceofownership,orallowanywithdrawalofsugarfromitspremiseswithoutproofofpaymentofadvanceVAT/percentagetaxes.

• Credit for Advance Tax Payments

1. InadditiontotheinputtaxcreditsallowedunderSection110oftheTaxCode,theadvanceVATpaidbysellersofsugarshallbeallowedasacreditagainsttheoutputtaxbasedontheactualgrosssellingpriceofsugar.

2. TheCertificateofAdvancePaymentoftheVAT/percentagetaxandacopyofthepaymentformshallbeattachedtotheMonthly/QuarterlyReturntosupporttheclaimforcreditofadvanceVAT/percentagetaxpayment.

• Unutilized Advance Tax Payment

1. Theadvancetaxpaidbytheseller/ownerofsugarwhichremainsunutilizedattheendoftaxpayer’staxableyearwhentheadvancepaymentwasmade,may,attheoptionoftheowner/seller,beavailablefortheissuanceofaTaxCreditCertificate(TCC)uponanapplicationdulyfiledwiththeBIRbytheowner/sellerwithin2yearsfromthedateoffilingofthe4thquarterVATreturnoftheyearsuchadvancepaymentsweremade,oriffiledoutoftime,fromthelastdayprescribedbylawforfilingthereturn.

2. UnutilizedadvancetaxpaymentswhichhavebeenthesubjectofanapplicationfortheissuanceofaTCCshallnotbeallowedasacarry-over,norcreditedagainsttheoutputtax/percentagetaxofthesucceedingmonth/quarter/year.

3. TheissuanceofaTCCshallbelimitedtotheunutilizedadvancetaxpaymentsandshallnotincludeexcessinputtax,suchasthoseattributabletozero-ratedsales,whichshallbecoveredbyaseparateapplicationforTCCfollowingapplicablepertinentrules.

• Penalty Clause

1. AnyviolationoftheprovisionsoftheseregulationsshallbesubjecttopenaltiesprescribedunderSections254and275,andotherpertinentprovisionsoftheTaxCode,asamended.

[Editor’s Note: See also related RMC No. 25-2015 on page 25 below.]

Revenue Memorandum Circular (RMC) No. 23-2015 issued dated May 5, 2015

• Thefollowinginformationorentriesshallbecompletelyindicatedinthewithdrawalcertificate(WC):

1. Nameofmanufacturer/importer;2. Fullnameandaddressofconsignee;3. Placeoffinaldestination;4. Carrier/trucknumber;5. Datewithdrawn;

RMCNo.23-2015furtherclarifiestherulesontheissuanceofaWCforeveryremovalofpetroleumproductsfromtherefinery,depot,oranystoragefacilityasprescribedunderRMCNo.50-2014.

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6. Duedateofpayment;7. Exactdescriptionoftheproduct;8. Volumeandamountofexcisetaxpaid;9. Whetherimportedorlocallymanufactured;10. Whetherproductisbonded,taxexemptortaxpaidunderthe“Remarks”

portion;11. Ifimported,theOfficialReceiptNo.,amountanddateofpayment;12. ProductReplenishmentDebitMemo(PRDM)No.withcorresponding

amountanddate,ifpaymentismadethruPRDM;13. Tanknumberifremovedfromastoragefacility.

• Forstoragedepots/facilitieswherenoRevenueOfficeronPremise(ROOP)isassigned,theissuanceofWCswithouttheattestationofROOPsmaybeallowed,providedthedepot/facilityshallsubmitamonthlyreport,togetherwiththeduplicatecopiesofallWCsissued,onorbeforethe8thdayofthefollowingmonth.

• Oildepots/facilitieswithinRevenueRegionsNos.4(Bataan)to9(SanPablo)shallsubmittheirmonthlyreporttotheExciseLargeTaxpayerFieldOperationsDivision(ELTFOD)atthe8thFloorofBIRNationalOfficeBuilding.

• Foroildepots/facilitieslocatedoutsideRevenueRegionNos.4to9,theirreportshallbesubmittedtotheExciseTaxArea(EXTA)Officehavingjurisdictionoverthefacility.

• Fordepots/facilitieswheretheassignedROOPsarenotavailable,theROOP’sZone-in-Charge(Supervisor)shallattesttoWCsissuedbydepots/facilitieslocatedwithinRevenueRegions4to9,whiletheROOP’sAreaSupervisororEXTAHeadshallattesttotheWCsissuedbydepots/facilitieslocatedoutsideofRevenueRegions4to9.

• Thephrase“for every removal of petroleum products”inSection36ofRRNo.13-77shallbeinterpretedtomeandeliverybybatch-thatis,eachremovalmaycontainmorethanonekindofpetroleumproducts.Therefore,asingleWCmaycovertheremovalofvariouspetroleumproductsunderasingleconsignee.

• Sincetheword“consignee”inSection36ofRRNo.13-77isinthesingularform,separateWCsshallbeissuedforeachandeveryconsignee,regardlessofwhethertheshipmentconsistsofsingleordifferentpetroleumproducts.

• TheissuanceoftheWCshallbeonaperremovalbasis;thus,eachlorryordeliverytankshallbecoveredbyaWC.

• Incaseofastoragefacility/depotusedbyasingleoilcompany,aWCisnolongernecessaryfortanktotanktransferofitspetroleumproductswithinthefacility/depot.

• Forafacility/depotusedbydifferentoilcompanies/lessees,atanktransferofpetroleumproductfromoneoilcompany/lesseetoanotherisconsideredaremovaland,hence,willrequireaWC.

• InextremecasesofataxpayerrunningoutofWCForms,thefollowingdocumentsmaybetemporarilyusedinlieuoftheWC:

1. ExciseTaxRemovalDeclaration(ETRD)FormsissuedtohimbyreasonofhisbeingamanufacturerofE-10gasoline;and

13Tax bulletin |

2. Anyinternaldocument,suchasDeliveryReceipts,whichshallbeattestedtobytheassignedROOP,providedsaidinternaldocumentsareregisteredwiththeBIRincompliancewithRRNo.18-2012.

Theforegoingdocumentsshallbeallowedforacontingencyperiodofnotmorethan5daysandnotmorethanonceayear.Subsequently,theDeliveryReceiptsoranyinternaldocumentsusedinlieuoftheWCshallbeassignedasingleWCwhentheFormsbecomeavailable.

• AnimporteroflubeadditivesisrequiredtoissueaWCtoaccompanytheremovalofsuchadditivesfromhiswarehousetothemanufactureroflubricatingoil,sincelubeadditivesareclassifiedaspetroleumproductssubjecttoexcisetaxunderSection148oftheTaxCode.

• AWCcoveringthedeliveryofpetroleumproductsforsaleshallbesupportedbyaSalesInvoiceandDeliveryInvoice.ForaWCcoveringthedeliveryofpetroleumproductsfortransfertoanotherdepotorstoragefacilityorgasstationownedbytheoilcompany,aDeliveryReceiptwillbesufficienttosupporttheWC,providedthatinbothinstances,theDeliveryReceiptandSalesInvoiceshouldberegisteredwiththeBIRincompliancewithRRNo.18-2012.

• AlltheinformationrequiredintheveryfirstWCissuedtoaccompanytheoriginalremovalofapetroleumproduct,fromtherefinerytoadepot,shallalsobeindicatedintheWCsofthesucceedingremovaloftheproducts(eithertoanotherdepotordeliverytoaretailstation/enduser),exceptinthefollowingcases:

1. Thenameofthedepotshallbeaddednexttothenameofthemanufacturer/consignorincaseofbulktransfer;and

2. Theduedateofpaymentmaybedispensedwith.

However,thestoragetanknumberfromwheretheproductistoberemovedshallbeindicatedintheWC.

• Theforegoingrulealsoappliestothefirstremovalofanimportedpetroleumproduct,subjecttothefollowingexceptions:

1. Thenameofthedepotshallbeaddednexttothenameoftheimporter/consignor;

2. Theduedateofpaymentofexcisetaxmaybedispensedwith;and3. Theofficialreceipt(OR)no.,amountanddateofpaymentmayalsobe

dispensedwith.

• IncaseachangeinthepreparedWCisnecessary,RRNo.13-77expresslyrequirestheconsignortoissueanewWCinlieuoftheamendedWC.

• Contaminatedorbelowspecifications(“offspec”)petroleumproductsfordeliverybacktotheconsignorshallbeaccompaniedbythesameWCcoveringtheoriginalshipmenttogetherwiththeDeliveryReceipt.

• Incasecontaminatedor“offspec”petroleumproductsaretobedeliveredbacktotheplaceofproductionorrefineryforreprocessing,apriorpermitshallalsobesecuredbeforedelivery.

14 | Tax bulletin

Revenue Memorandum Circular No. 24-2015 dated May 6, 2015

• TheeffectivitydateoftheimplementationofRRNo.2-2015insofarasitrequiresthesubmissionofscannedcopiesofBIRFormNos.2307and2316isMarch21,2015(15daysafterthedateofpublicationintheManila Bulletin on March6,2015).

• FortheinitialimplementationofRRNo.2-2015,taxpayersadoptingacalendarorfiscal-yearaccountingperiodmayopttosubmittherequiredBIRFormNo.2307eitherinhardorinscannedcopies,togetherwiththequarterlyincometaxreturnsdueforfilingnotlaterthanApril30,2015.ForquarterlyfilingbeyondApril30,2015,taxpayersaremandatedtosubmitBIRFormNo.2307inscannedcopies.

• Section4ofRRNo.2-2006remainsinfullforceandeffect,particularlyontheretentionofhardcopiesoftheCertificatesofTaxesWithheldforauditpurposes.Assuch,thepresentationofthesecertificatesmayberequestedtovalidatethetaxcreditsbeingclaimedbyincomerecipientsintheirtaxreturns.

• ItisnotnecessarytoprepareseparatecopiesofBIRNo.2307incaseswheretherearetwoormoreincomepaymentsmadebyanincomepayor-withholdingagenttothesameincomerecipient/payeethataresubjectedtodifferentcreditablewithholdingtax(CWT)rates.

• AtaxpayermayfileawrittenrequestforacertifiedtruecopyofthescannedBIRFormNo.2307or2316fromtheconcernedBIRoffice,providedthecorrespondingcertificationfeeandDSTarepaid.

• Incaseofjuridicalpersonsorcorporateentities,anyoftheprincipalofficers,dulydesignatedthroughaBoardResolutionandsworntobysuchofficerandbythecorporatetreasurerorassistanttreasurer,isauthorizedtosignthenotarizedCertificationandthelabeloftheDVD-RcontainingthesoftcopiesofthescannedBIRFormNos.2307and2316.

• Forindividualtaxpayers,thepersondulyauthorizedtosignthenotarizedCertificationandDVD-Rshallbehisattorney-in-factasevidencedbyanotarizedSpecialPowerofAttorney(SPA)issuedforthepurpose.

• TheprintingoftheBIRortaxpayer’slogoonthelabeloftheDVD-Risoptional.

• Anynon-LargeTaxpayersService(LTS)taxpayerdulyregisteredwiththeRDOmay,asanoption,submitscannedcopiesofBIRFormNos.2307and2316;insuchacase,suchtaxpayershallnolongerbeallowedtosubmithardcopiesofsuchforms.

• FailuretocomplywiththerequirementsofRRNo.2-2015shallsubjecttheconcernedtaxpayertothepenaltiesprovidedundertheTaxCode,andthecompromisepenaltiesprescribedinRMONo.7-2015,ifapplicable.

• TheimagesofCertificatesofCreditableTaxWithheldshallbeseparatelystoredorsavedintheDVD-Rusingasequentialnumberannexedattheendofeachfilename,separatedbyanunderscore,aspreparedinaccordancewiththeformatprescribedunderRRNo.2-2015.

• ThereisnoprescribedspecificsizeofpaperforpurposesofprintingBIRFormNos.2307and2316,foraslongasallthedetailedinformationrequiredarecapturedinthepaper,andthesamecanbereadeasily.

RMCNo.24-2015clarifiesRRNo.2-2015,particularlyonthesubmissionbyconcernedtaxpayersofscannedcopiesoftheCertificateofCreditableTaxWithheldatSource(BIRFormNo.2307)andCertificateofCompensationPayment/TaxWithheld(BIRFormNo.2316).

15Tax bulletin |

• Ataxpayermayuseanydevice(flatbedscannerordigitalcamera)incapturingimagesofBIRFormNos.2307and2316,providedtheimagescanbestoredinsoftcopies,specificallyin“PDF”format.

• ForpurposesofreadabilityofscannedimagesofBIRFormNos.2307and2316,theminimumresolutionoftheimagesshouldbeatleast200dot-per-inch(dpi)settoblackandwhite.

• TheprescribedspecificationoftheDVD-Rtobeusedshouldbethesinglesidedandsinglelayered.


• Thephysicalinventoriesofrawsugarandrefinedsugarcoveredbyquedans whicharedatedbeforeMay1,2015arenotsubjecttotheimpositionoftheadvancebusinesstax.

• Ifthetaxpayerisengagedinintegratedoperationsofmillingandrefiningofsugar,theadvancebusinesstaxprescribedunderRRNo.6-2015shallbeimposedonrawsugarproducedinthemillingoperationsifsoldtoanotherpersonorentity.

• Iftherawsugarisjusttransferredtotherefineryoperationofthetaxpayerforpurposesofrefiningandconvertingthesameintorefinedsugar,onlytheadvancebusinesstaxontherefinedsugarshallbeimposed.Therewillbenoseparateimpositionofbusinesstaxonrawsugarandrefinedsugar,consideringthatnosaletransactionhastranspired,sincebothproductsareownedbyoneandthesametaxpayer.

• Underatollingorserviceagreementwhereinasugarrefinery(eg,ACo.)processesandconvertsintorefinedsugar,therawsugarownedbyasugarmiller(eg,BCo.),theadvanceVATdueontherefinedsugar,netoftheadvanceVATpaidontherawsugar,shallbepaidbyBCo.

• IfBCo.soldtherawsugartoACo.,theadvanceVATontherefinedsugarshallbepaidbyACo.withoutthebenefitofdeductingtheadvanceVATpaidbyBCo.,consideringthatownershiphasbeentransferredtoACo.TheadvanceVATpaidbyBCo.shallbeconsideredasordinaryinputVATbyACo.inthesalesinvoiceissuedbyBCo.

• Advancepaymentsofpercentagetaxesbynon-VATtaxpayersarenotallowedasinputtaxcreditsinthecomputationoftheVATliabilitiesoftheirclients-customers.


• ThiscirculardoesnotcovertaxpayerswhicharenotmandatedtouseElectronicFilingandPaymentSystem(eFPS)/ElectronicBIRForms(eBIRForms)andhavenotoptedtofileelectronically;insuchacase,theexistingproceduresonmanualfilingshallapply.

• TaxpayersfilingwithpaymentornopaymentusingtheOfflineeBIRFormsshallfollowthesameproceduresinAnnexDofRMCNo.14-2015andeFilebyattachingthe.xmlfiletotheemail.

RMCNo.25-2015clarifiestheimpositionofadvancebusinesstax(VATorpercentagetax)onrawsugarandrefinedsugarunderRRNo.6-2015datedMarch31,2015

RMCNo.26-2015providesalternativemodesinthefilingofBIRFormNos.1601-C,1601-E,1601-F,1600,1602,1603,2551M,2551Q,2550M,2550Q,1700,1701,1702EX,1702MX,1702RT,1701Q,and1702QusingtheelectronicplatformsoftheBIR.

16 | Tax bulletin

• Taxpayersmustclick“FINALCOPY”andopenthedirectory“C:\eBIRForms\IAF_RDO_Copy\”aftervalidatingthetaxreturn.Thetaxpayersshould,then,lookforthe.xmlfileoftheencodedtaxreturnformwiththefollowingnamingconvention:

FILENAME=<999999999999-XXXXXX-99999999.xml>,

Wherein:

999999999999 Representsthefirst12digitsoftheTaxpayerIdentificationNumber(TIN)includingthebranchcode

XXXXXX Representsthenextdigits(maximumof6)oftheBIRFormNumber

99999999 Representsthereturnperiodorthetaxableyear(maximumof8digits)

.xml Representsthefiletypeextension

• Afterlocatingthe.xmlfileoftheencodedtaxreturn,taxpayersmustattachthesametoanemailandsendtotheBIRusingthefollowingformat:

Form Number Email Subject Email Address

1601-C RDO_1601C_TIN_taxable_period [email protected]

1601-E RDO_1601E_TIN_taxable_period [email protected]

• TaxpayersmustprinttheemailNotificationfromtheBIRasevidenceoftheeFiledreturnaswellasthetaxreturn,andproceedtotheAABsorcollectionagentsformanualpayment.

• ForunsuccessfuleFiling,taxpayersmustfollowthefollowingguidelinestoavoidpenalties:

1. Printevidence/proof(PrintScreenontheMessagegivenbythesystem)thatEFPSwastriedseveraltimesbutunsuccessful;

2. Report/callhelpdeskandgettroubleticketlog;or3. ReporttoBIRContactCenterandgetreferencenumberofthecall

• TaxpayersmandatedtouseeFPSwhowereunsuccessfulintheeFilingmustprintevidence/proofofattemptstoeFile.However,theyshouldmanuallyfileandmanuallypayonorbeforetheduedatefollowingexistingprocedures.

• TaxpayersshouldfilenotlaterthantheduedatesoftherespectivereturnsandattachproofofunsuccessfuleFPSattempts,thenre-fileelectronicallywithin15daysafterthestatutorydeadlinesetfortherelevantreturnsstartingwiththereturnperiodApril,2015,whichwillbefiledinMay2015.

• Penaltiesimposedonfiling/usingamode/venuedifferentfromthatprescribedshallbewaivedprovidedthesubjectreturnshavebeenre-filedelectronicallyintheBIR’ssystems.

17Tax bulletin |

BOC Issuance

Customs Memorandum Order No. 14-2015 dated May 29, 2015

• TheBOCshallnolongerimposeadditionaldocumentaryrequirementsfortheaccreditationofPEZAlocators.

• AllPEZAlocators(corporations,partnerships,cooperativesorsoleproprietorships)thathavealreadybeenregisteredandapprovedbyPEZAthroughtheClientProfileRegistrationSystem(CPRS)-E2MSystemshallbeactivatedimmediatelybytheBOC-ManagementInformationSystemandTechnologyGroup(MISTG),afterpaymentofanactivationfeeofP1,000.00attheBOC-CashDivision,andpresentationofthecorrespondingofficialreceiptandcopyoftheCPRSCertificateofRegistrationtoMISTG.

• CMONo.14-2015expresslyrevokesCMONo.3-2015onregulationsforaccreditationofPEZALocators.

PEZA Issuance

Memorandum Circular No. 2015 – 015 dated May 8, 2015

• AllPEZAapplicationsforregistrationandrelatedattachmentscannowbefilledoutandsentelectronicallystartingMay1,2015.

• Thee-ARScanbeaccessedthroughthePEZAwebsitehttp://www.peza.gov.phorthroughtheURLhttp://ears.peza.gov.ph

• Thee-ARSmaybeusedforthefollowingPEZAapplicationsforregistration:

1. Newandexistingregisteredecozonedevelopers–foralltypesofecozonesincludingapplicationsofexistingregisteredecozonedevelopersforinclusionofadditionalareastoanexistingecozone;

2. Newandexistingregisteredecozoneenterprises–forExport,InformationTechnology,Agro-Industrial,LogisticsServices,Tourism,MedicalTourismEnterprises,includingapplicationsofsuchexistingregisteredecozoneenterprisesfor“NewProject,”“ExpansionProject,”and“AmendmentofRegisteredActivity”.

• TheapplicationfeecanbepaidinthePEZAHeadOfficeorinthePEZAofficeinanyPEZAeconomiczone.ThePEZA-issuedOfficialReceiptcanbescannedandsentbye-mailtothee-mailaddressesabove.

• TheapplicantshallsubsequentlysubmittoPEZAthehardcopyofthescanneddocumentsandpresenttheoriginalOfficialReceiptfortheapplicationfeeasfollows:

1. ForEcozoneDevelopers–Within30daysfromdateofapprovaloftheapplicationbythePEZABoard;

2. ForEcozoneEnterprises–Priortosigningofthecompany’sRegistration/SupplementalAgreementwithPEZA.

CMONo.14-2015revokesCMONo.3-2015andprescribestherevisedrulesforBOCaccreditationofPEZAlocators.

MemorandumCircularNo.2015-015implementsPhase1ofthePEZAElectronicApplicationRegistrationSystem(e-ARS).

18 | Tax bulletin

BSP Issuances

BSP Circular No. 877 dated May 22, 2015

• Item“b”ofSubsectionX233.9oftheMORBonapplicationforauthorityoftheissuingbankisamendedbyremovingtheforfeitureclauseifanyportionofanapprovedLong-TermNegotiableCertificatesofTimeDeposits(LTNCTD)isnotissuedwithin6monthsoftheapprovaloftheMonetaryBoard.

• Items“b,”“c,”“d,”“f,’“g,”“I,”“k”and“o”removedtheexistence,relevanceandnecessityofdisclosing“marketmakers.”

• Item“d”ofthesamesubsectionremovedtherequirementtosubmitacertificationbythepresident/countrymanagerthatthepre-qualificationrequirementsunderitem“c(1)”havebeencompliedwithuptothetimeofoffering.

• Item“e”ofthesamesubsectionremovedthe30-dayrequirementforbankstolisttheLTNCTDsontheaccreditedexchange,andremovedthepenaltyforbeingunabletoissuetheLTNCTDsiftheyremainunlistedaftersuchperiod.

• Item“p”isaddedtothesamesubsectionoftheMORB,andwillreadasfollows:

“p.SupervisoryEnforcementActions.TheBSPreservestherighttodeployitsrangeofsupervisorytoolsprovidedinCircularNo.875dated15April2015toensurecompliancewiththeprovisionsofthisSubsection.”

• CircularNo.877shalltakeeffect15daysafteritspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.

[Editor’s Note: Circular No. 877 was published in ThePhilippineStar on May 29, 2015.]


• SubsectionX901.1/X901Q.1onannualfeesonbanks/quasi-banksshallnowincludePersonalEquityandRetirementAccount(PERA)accountsadministeredbythebankandquasi-bank,respectively.

• SubsectionX405.1/4405Q.1onthebasicsecuritydepositshallnowincludethefollowingprovisionsasitsthird(3rd)paragraph:

“ThesecurityforthefaithfulperformanceofthePERAAdministratorshallbeseparatelyaccountedforandcalculatedasprescribedunderSectionX960/4960QandAppendix34a/Q-21aofthisManual.”

• SubsectionX405.5/4405Q.5onReservesagainstPeso-denominatedCommonTrustFundsandTrustandOtherFiduciaryAccounts-OthersisamendedbyaddingPERAasthe12thexceptionforthemaintainingofreservesonTOFA-Others.

• CircularNo.878shalltakeeffect15daysfollowingitspublicationintheOfficialGazetteorinanynewspaperofgeneralcirculationinthePhilippines.

[Editor’s Note: Circular No. 878 was published in ThePhilippineDailyInquirer on May 29, 2015.]

CircularNo.877amendstheprovisionsoftheMORBontheissuanceoftheLTNCTD.

CircularNo.878amendstheMORBandtheMORNBFIontheimplementationofthePERAActof2008anditsIRR.

19Tax bulletin |


• TheintroductionofthesesubsectionsaimstoprovidecoherentguidelinesontheuseofscriplesssecuritiesassecurityforthefaithfulperformanceofthePERAAdministrator;thecrucialpointsofthesesubsectionsareasfollows:

1. DefinitionofTermsandAcronyms;2. BasicRequirements;3. ProceduresforAssigningInitial/AdditionalRoSSSecuritiesasSecurityfor

theFaithfulPerformanceofthePERAAdministrator;4. ProceduresforWithdrawingRoSSSecurities;5. ProceduresforReplacingRoSSSecurities;and6. ProceduresforCreditingInterestandMaturityProceedsofSecurities.

• CircularNo.879shalltakeeffect15daysfollowingitspublicationintheOfficialGazetteorinanynewspaperofgeneralcirculation.

[Editor’s Note: Circular No. 879 was published in TheManilaBulletin on May 29, 2015.]


• TheFinancialReportingPackage(FRP)prescribedunderSubsectionX191.2oftheMORBisherebyamendedtorevise(a)ContingentAccounts,(b)LineItemInstructions,and(c)specificreportingtemplatesofFRPforBanksandSimplifiedFRPforRuralandCooperativeBanks,asfollows:

a. ContingentAccounts

“xxx

“9.Others

(a) LateDeposit/PaymentReceived–xxx

(e) SecuritiesHeldunderCustodianshipbyBankProper–xxx

(i)PERASecuritiesHeldUnderCustodianshipbyBankProper–ThisreferstosecuritiesheldunderPERACustodyagreementbytheBankProperunderthePERAActof2008.

Xxx

(i) TrustDepartmentAccounts–Thisreferstothetotalaccountabilitiesofthebankfromitstrustoperations.

(i) SecuritiesHeldUnderCustodianshipbyTrustDepartment–xxx

(i.a)PERASecuritiesHeldUnderCustodianshipbyTrustDepartment–ThisreferstothesecuritiesheldunderPERACustodyagreementbytheBank’sTrustDepartmentunderthePERAActof2008.

CircularNo.879introducesAppendix34aofSubsectionX405.1oftheMORBandAppendixQ-21-atoSubsection4405Q.1oftheMORNBFI,ontheimplementationofthePERAActof2008andthePERAIRR.

CircularNo.880amendsSection4192Q/4162NoftheMORNBFI;SubsectionX191.2oftheMORB;andSubsectionX425.2/4425Q.2andAppendix6/Q-3andN-1oftheMORBandMORNBFI,respectively,ontheimplementationofPERAActof2008andPERAIRR.

20 | Tax bulletin

(ii) PERAAssetsAdministeredbyTrustDepartment–ThisreferstoallassetsheldbytheBank’sTrustDepartmentasPERAAdministratorunderthePERAAct.

(j) PERAAssetsAdministeredbyBankProper–ThisreferstoallassetsheldbytheBankProperasPERAAdministratorunderthePERAActof2008.

(k) OtherContingentAccounts–Thisreferstotheitemswhichcannotbeappropriatelyclassifiedunderanyoftheforegoingcontingentaccounts.

b. LineItemInstructions

“xxx

Schedule22–DepositLiabilities–ClassifiedastoTypeofDeposit

xxx

AdditionalInformation

(1) SavingsDepositwithAutomaticTransfer–Reporttheamountofsavingsdepositswithautomatictransfertodemanddepositagreements.

(2) Non-Taxable–Reporttheamountofnon-taxabledeposits.

(a) PersonalEquityandRetirementAccount–Reporttheamountofdepositsthatare eligible PERA Investment Products covered by the PERA Act of 2008.

(b) Other Non-taxable - Report the amount of non- taxable deposits which are not covered by the PERA Act of 2008.

xxx

Schedule25-BondsPayable,UnsecuredSubordinatedDebtandRedeemablePreferredShares

xxx


(1) Taxable-Reporttheamortizedcostoftaxablebondspayableandunsecuredsubordinateddebt.

(2) PersonalEquityandRetirementAccount-Reporttheamortizedcostofnon-taxablebondspayableandunsecuredsubordinateddebtthatareeligiblePERAInvestmentProductscoveredbythePERAActof2008.

xxx

21Tax bulletin |

Schedule38—OffBalanceSheet

ReporttheamountoftheindicatedcontingentaccountsasdefinedintheManualofAccounts.

Schedules38a,38a1,38a3and38a4-ReportbythePERAAdministratoronPersonalEquityandRetirementAccount

ReportthetotalPERAassetsandaccountabilitiesofthePERAAdministratorundertheappropriatecolumns.Fortheseparticularschedules,theaccountsasdefinedintheManualofAccountsoftheFinancialReportingPackageforTrustInstitutionsshallbeused.


(1) TotalNumberofPersonalEquityandRetirementAccounts-ReportthetotalnumberofPERAundertheappropriatecolumns.

(2) TotalNumberofContributors-ReportthetotalnumberofContributors.

(a) TotalNumberofContributorswhoareOverseasFilipinos(OFs)

i. NumberofAccounts-ReportthetotalnumberofPERAownedbyoverseasFilipinos.

ii. TotalAssets-ReportthetotalcarryingamountofPERAassetsownedbyoverseasFilipinos.

OverseasFilipinosaredefinedunderthePERAActof2008anditsimplementingrulesandregulations.

(b) TotalNumberofContributorswhoarenon-OFs

i. NumberofAccountsReportthetotalnumberofPERAownedbynon-overseasFilipinos.

ii. TotalAssets-ReportthetotalcarryingamountofPERAassetsownedbynon-overseasFilipinos.

(3) BasicSecurityDeposit-Reportthevalueofsecurity/iesforthefaithfulperformanceofPERAAdministratorasprescribedunderSectionX960/4960QandAppendix34a/Q-21aoftheMORBandMORNBFI,respectively.

Xxx”

• Reportingtemplates

ThereportingtemplatesoftheFRP(AnnexA)forschedules22,25,38,38a,38a1,38a3and38a4;andtheSFRP(AnnexB)schedules22,25,38,and38a1arerevisedtoincludethePERA-relatedactivitiesofbanks.

22 | Tax bulletin

• TheFinancialReportingPackageforTrustInstitutions(FRPTI)prescribedunderSubsectionX425.2/4425Q.2oftheMORB/MORNBFIisherebyamendedtorevisethe(a)ContractualRelationshipsofTrustInstitutions,(b)LineItemInstructions,and(c)specificreportingtemplatesoftheFRPTIasfollows:

a. ContractualRelationshipsofTrustInstitutions

“xxx

II. OtherFiduciaryServices—Thisreferstotrust/agencyagreementsotherthanthoseclassifiedunderItemIwhereinthetrustinstitutionmayactasthedepositoryoftheassetsandpropertiesandshallmanagethesameinaccordancewiththeprovisionsofthetrustagreement.

Thisshallbecomprisedofthefollowing:

xxx

(7) Custodianship—xxx

(a) PERACustodianship-ThisreferstocustodyagreementbetweenthetrustinstitutionandthePERAContributorasprescribedunderthePersonalEquityandRetirementAccount(PERA)Actof2008.

xxx

(10)PERAAdministratorshipThisreferstoadministrationagreementbetweenthetrustinstitutionandthePERAContributorasprescribedunderthePersonalEquityandRetirementAccount(PERA)Actof2008.

(11)Others—Thisreferstootherfiduciaryservices,whichcannotbeappropriatelyclassifiedunderanyoftheforegoingaccounts.

xxx

IV. Advisory/Consultancy-Thisreferstoanengagementwheretrustinstitutionsofferadvisory/consultancyservicesprimarilyaimedtocreatewealtheitherthroughinvestmentsorothervehicles.Trustinstitutionsofferingadvisory/consultancyservicesarepresumedtopossesstheexpertiseontechnicalareassuchasbutnotlimitedtotax,estateandretirementplanning.Advisory/Consultancyservicesexcludeexecution,settlementandaccountadministrationofadvisedtransactionunlesscoveredbyaseparateengagementestablishedforsuchpurpose.Thisalsocoverstheinvestmentmanagement(advisory)agreementbetweenaPERAContributorandhisdesignatedInvestmentManager(Advisor).

Xxx”

23Tax bulletin |

b. LineItemInstructions

“xxx

SchedulesEl,EtaandElb—OtherFiduciaryServices-UnitInvestmentTrustFund(UITF)

xxx

SchedulesE2,E2aandE2b-ReportbythePERAAdministratoronPersonalEquityandRetirementAccount

ReportthetotalPERAassetsandaccountabilitiesofthePERAAdministratorundertheappropriatecolumns.


(1) TotalNumberofPersonalEquityandRetirementAccounts-ReportthetotalnumberofPERAundertheappropriatecolumns.

(2) TotalNumberofContributors-ReportthetotalnumberofContributors.

(a) TotalNumberofContributorswhoareOverseasFilipinos(OFs)

i. NumberofAccounts-ReportthetotalnumberofPERAownedbyoverseasFilipinos.

ii. TotalAssets-ReportthetotalcarryingamountofPERAassetsownedbyoverseasFilipinos.

OverseasFilipinosaredefinedunderthePERAActof2008anditsimplementingrulesandregulations

(b) TotalNumberofContributorswhoarenon-OFsi. NumberofAccounts-ReportthetotalnumberofPERA

ownedbynon-overseasFilipinos.ii. TotalAssets-ReportthetotalcarryingamountofPERA

assetsownedbynon-overseasFilipinos.

(3) BasicSecurityDeposit-Reportthevalueofsecurity/iesforthefaithfulperformanceofPERAAdministratorasprescribedunderSectionX960/4960QandAppendix34a/Q-21aoftheMORBandMORNBFI,respectively.

Xxx”

• Section4192Q/4162NoftheMORNBFIisalsoamendedtorevisethereportingtemplateoftheConsolidatedStatementofCondition(CSOC)(AnnexD)toreflectthePERAassetsadministeredbythequasi-banks/non-bankfinancialinstitutions.

24 | Tax bulletin

• Appendices6/Q-3andN-1oftheMORBandMORNBFI,respectively,onlistofreportsrequiredfrombanks/quasi-banksandnon-bankfinancialinstitutions,respectively,areamendedtoincludetheReportbythePERAAdministrator,asfollows:

Category Schedule Frequency Submission Deadline

ForBanks

Schedules(SoloReport)

A-1 Schedules38a,38a1,38a3and38a4

Quarterly 15bankingdaysafterendofreferencequarter

Schedules(ConsolidatedReport)

A-1 Schedules38a Quarterly 30bankingdaysafterendofreferencequarter

ForTrustInstitutions

A-2 SchedulesE2,E2aandE2b Quarterly 20bankingdaysafterendofreferencequarter

• ThedisseminationofrevisedschedulesoftheFRP,SFRP,FRPTIandCSOCshallbecoveredbyaseparatememorandumissuance.

BSP-supervisedfinancialinstitutionsshalladopttherevisedreportingtemplateseffectivereportingperiodending30July2015.

• CircularNo.880shalltakeeffect15daysfollowingitspublicationintheOfficialGazetteorinanynewspaperofgeneralcirculationinthePhilippines.

[Editor’s Note: Circular No. 880 was published in Malaya on May 29, 2015.]

BLGF Opinion

BLGF Opinion dated April 29, 2015

Facts:

OnDecember6,1999,thenDOFSecretaryEdgardoB.Espirituissuedanopinionstatingthat:

(1) UsingasbasisSections139(b)and147oftheLocalGovernmentCode(LGC),professionalsrequiringgovernmentexamination,likedentists,areliabletopayprofessionaltaxtotheprovincewheretheypracticetheirprofessionwithoutbeingsubjectedtoanyothernationalorlocaltax,licenseorfee,includingtheMayor’sPermitorlicensefee,forthepracticeofsuchprofession;

(2) Dentalclinicsareestablishedasadirectconsequenceofthepracticeofthedentalprofession;theyarenecessarilyfortheexerciseofsuchaprofession;

(3) Therefore,toimposeagraduatedtaxonadentalcliniconthepremisethatitisa“businessestablishmentrenderingorofferingtorenderprofessionalservices”wouldbetoimposealocaltaxonthepracticeofprofession.ThiswouldbeincontraventionoftheLGC.

Professionalswhohavepaidthecorrespondingprofessionaltax,areentitledtopracticetheirprofessioninanypartofthePhilippineswithoutbeingsubjectedtoanyothernationalorlocaltax,licenseorfee,includingmayor’spermits.

Dentalclinics,whichareestablishedasadirectconsequenceofthepracticeofthedentalprofession,areexemptfromlocalbusinesstaxes.

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OnMarch10,2003,theBLGFissuedanopinionthat:

“AgainusingbasisSections139(b)and147oftheLGC,professionalslikedentistsanddoctors,whomaintainclinics,aresubjecttothepaymentofMayor’sPermits,businesstaxesaswellasregulatoryfeesandservicechargesimposedbyCitiesandMunicipalities.

BLGFOICRegionalDirector,RegionIV,soughtclarificationontheseconflictingrulings.

Issues:

1. Areprofessionalssubjecttothepaymentofmayor’spermit,localbusinesstax(LBT)aswellasotherregulatoryfeesandservicechargesforthepracticeoftheirprofessioninanypartofthePhilippinesafterpaymentoftherequiredprofessionaltax?

2. AredentalclinicssubjecttotheLBTbasedongraduatedrateasbusinessestablishmentsrenderingorofferingtorenderprofessionalservices?

Ruling:

1. No.ApplyingSections139(b)and147oftheLocalGovernmentCode,aprofessionalshallbeentitledtopracticehisprofessioninanypartofthePhilippineswithoutbeingfurthersubjectedtoanyothernationalorlocaltax,licenseorfee,includingmayor’spermitorlicensefeeaslongashehasalreadypaidtheprofessionaltaxtotheprovincewherehepracticeshisprofession.

2. No.ToimposeagraduatedtaxondentalclinicswhichareestablishedasadirectconsequenceofthepracticeofthedentalprofessionwouldbetantamounttotheimpositionoflocaltaxonthepracticeoftheprofessionwhichisincontraventionoftheLGC.

Court Decision

Commissioner of Internal Revenue vs. Dakudao & Sons, IncorporatedCTA(En Banc)Case1150promulgatedMay12,2015

Facts:

RespondentDakudao&Sons(D&S),acompanyengagedintherealestatebusiness,subscribedtosharesofstockofMetroSouthDavaoPropertyCorporation(MSDPC),alsoarealestatecompany.OnApril30,2011,D&StransferredtwoparcelsoflandtoMSDPCaspaymentforitssubscriptionofsharesandpaidVATtotheBIR.

OnMay2,2012,D&SfiledaclaimforrefundwiththeBIRforerroneously-paidVAT,arguingthatthetransferoflandbyarealestatecompanytoanotherinexchangeforsharesofstockwherethetransferorgainscontrolofthetransfereeisnotsubjecttoVATunderSection4.106-8ofRRNo.16-2005,asamendedbyRRNo.4-2007.

ABIRcertification/rulingisnotapreconditiontoavailofataxexemptioninanexchangeofpropertyforsharesofstockunderSection40(C)(2)oftheTaxCode.

ThetransferoflandbyarealestatecompanytoanotherinexchangeforsharesofstockwherethetransferorgainscontrolofthetransfereeisnotsubjecttoVAT.*

Thenon-submissionofdocumentstosupportitsrefundclaimwiththeBIRisnotfataltoataxpayer’sclaimforrefundfiledwiththeCTA.

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UpontheCIR’sdenialofitsapplication,D&SfiledaPetitionforReviewwiththeCTA.TheCIRarguedthatD&Sisnotentitledtotherefundclaimbecause(a)D&SfailedtoapplyforaBIRrulingtoconfirmthattheexchangeofpropertyforsharesofstockisexemptfromVAT,asrequiredunderRRNo.18-2001;(b)thesubjecttransferisnotoneoftheexempttransactionsenumeratedunderSection109oftheTaxCode;and(c)D&SfailedsubmitwiththeBIRthecompletedocumentstosupportitsclaim.

TheCTASecondDivisiongrantedtherefundclaim,promptingtheCIRtoappealtotheCTAEn Banc.

Issues:

1. IstheBIRcertification/rulingmentionedinRRNo.18-01requiredtoavailofataxexemptioninanexchangeofpropertyforsharesofstockunderSection40(C)(2)oftheTaxCode?

2. IsthesubjecttransferoflandforsharesofstockexemptfromVAT?

3. IstheallegedfailureofD&StosubmitcompletesupportingdocumentswiththeBIRfataltothejudicialclaim?

Ruling:

1. No.TheBIRruling/certificationmentionedinRRNo.18-2001isnotapreconditiontoavailoneselfofthetaxexemptionunderSection40(C)(2)oftheTaxCode.

RRNo.18-2001doesnotdealwithVATasitspeaksofexchangeofpropertyforthepurposeofdetermininggainorloss.

RRNo.18-2001merelyprescribestheguidelinesinmonitoringtax-freeexchangeofproperty,inorderthatinsubsequenttransfersofsaidproperties,theyshallbetaxedaccordingly.Theissuancedoesnotstatearequirementtoapplyforarulingasaprerequisitefortheentitlementoftaxexemption.ThereisnothinginRRNo.18-2001thatexplicitlyrequiresaparty,inexchangingpropertyforsharesofstock,tofirstsecureaBIRconfirmatorycertificationortaxrulingbeforeitcanavailofataxexemptionorrefund.

Thus,securingaBIRrulingunderRRNo.18-2001isnotaconditionsine qua nonforavailingataxexemption.

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2. Yes.Section4.106-8ofRRNo.16-2005,asamendedbyRRNo.4-2007,providesthatthetransferoflandbyarealestatedealertoanotherinexchangeforsharesofstockwherethetransferorgainscontrolofthetransfereeisnotsubjecttoVAT.*

TheArticlesofIncorporationofD&SandMSDPCshowthatbothcompaniesareengagedintheconstruction,development,improvementofallproperties,includingbutnotlimitedtorealestate.D&Ssubscribedto75%oftheoutstandingcapitalstockofMSDPCandtransferredthe2parcelsoflandaspaymentforitssubscription.

3. No.JudicialclaimsshouldnotbedeniedonthesolegroundthatthetaxpayerallegedlyfailedtosubmitbeforetheBIRthe“completedocuments”insupportofitsadministrativeclaimforrefund.Thenon-submissiontotheBIRofsupportingdocumentsisnotfataltoajudicialclaimforrefund.

Inanycase,theterm“completedocuments”shouldbeunderstoodtorefertothosedocumentsthatarenecessarytosupporttheapplication,asdeterminedbythetaxpayer.TheBIRcanrequirethetaxpayertosubmitadditionaldocumentsbutitcannotdemandwhattypeofsupportingdocumentsshouldbesubmitted.Otherwise,thetaxpayerwillbeatthemercyoftheBIR,whomayrequiretheproductionofdocumentsthatthetaxpayercannotsubmit.

[*Editor’s Note: The property for share swap involved in this case occurred on April 30, 2011, before the effectivity of RR No. 10-2011, dated July 1, 2011. Under the amendment introduced by RR No. 10-2011, the exchange of goods or properties used in business or held for sale or for lease by the transferee is subject to VAT, whether resulting in corporate control or not.]

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© 2015 SyCip Gorres Velayo & Co.All Rights Reserved.APAC No. 10000061Expiry date: no expiry

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ey - tax bulletin, may 2015

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