TAX & BUSINESS-RELATED NEWS [AUGUST 23-28] DEPARTMENT OF FINANCE OPINIONS DIGEST SUPREME COURT CASES DIGEST BIR RULINGS DIGEST
| 1. TAX & BUSINESS-RELATED NEWS [AUGUST 23-28] | | PEZA defers extension of 30% WFH arrangements for BPOs Senate bill seeks to protect senior citizens from cybercrimes, scams DTI wants tax perks for small businesses ‘Shameful’ for archipelagic PH to import salt, says Villanueva Dennis Uy flipping DITO shares: Willing to unload everything except Phoenix, Chelsea Semirara Mining fined for ‘violating’ Antique site ECC Gerald Anderson opens his latest business, the Hayati River Kamp Site, in Zambales Jollibee paying US$16 an hour for their US service crew sparks comparisons on wages, cost of living in the Philippines FEU finalizes investment in Cabanatuan school Diokno overrules BIR: ‘Dasma’ Village association dues are tax exempt Tycoon Dennis Uy’s empire open to sale of crown jewels to pay debt California to end sales of gasoline-only cars by 2035 Call centers in the Philippines: Why it’s here to stay Netflix to offer P7 gas to mark 'Seoul Vibe' launch Lagman tells ABS-CBN, TV5: Be brave, seal investment deal as it is not illegal Education crisis a hurdle for BPO expansion, says Accenture COA: PS-DBM failed to withhold P3.27-B income tax from pandemic suppliers Philippines probes telecoms firms over anti-competition complaint Pickup truck prices to rise as House okays excise tax SEC says media deal is ‘disadvantageous’ to ABS-CBN investors as it reveals TV5 drowning in P5.3B red ink in last 3 years BIR loses P20M tax case for late filing JV interrupted: MVP, Lopez open to tweaking terms of TV5-ABS-CBN to assuage fears of lawmakers, NTC Marvin Agustin's Cochinillo, cakes now selling in first-ever mall stall Royal Caribbean increases gratuities for crew members on its cruise ships
| We saw these tax and business-related news on various news sites, and we thought you should see them. DMD is not responsible for the content of these news, and anything written thereon does not necessarily reflect DMD views or opinions. | PEZA defers extension of 30% WFH arrangements for BPOs [Philippine Daily Inquirer, August 28, 2022] PEZA Officer-in-Charge and Deputy Director General for Policy and Planning Tereso O. Panga announced it was deferred in ad referendum, along with another item which is the inclusion of ecozone logistics services activity in the Strategic Investment Priorities Plan (SIPP). Senate bill seeks to protect senior citizens from cybercrimes, scams [Inquirer.Net, August 28, 2022] The bill is aimed at creating an inter-agency centralized service that will provide seniors, their families, and carers with regular information to deter scammers from carrying out their schemes. DTI wants tax perks for small businesses [Inquirer Mobile, August 27, 2022] “For large investors, we are prepared to give them incentives, [such as a 10-year] tax holiday. How can we not consider giving the same thing to small businesses,” Trade Secretary Alfredo Pascual said. ‘Shameful’ for archipelagic PH to import salt, says Villanueva [Inquirer.Net, August 27, 2022] “This is quite shameful for an archipelagic country with more than 36,000 kilometers of shoreline,” Villanueva said in a statement. Dennis Uy flipping DITO shares: Willing to unload everything except Phoenix, Chelsea [Bilyonaryo, August 27, 2022] Davao-based businessman Dennis Uy is mulling the sale of part of his majority stake in DITO Telecommunity just three years after getting its permit to run a third telco from former President Rodrigo Duterte. Semirara Mining fined for ‘violating’ Antique site ECC [Inquirer Mobile, August 27, 2022] The DENR directed the Consunji-led company to settle the fine within 15 days “for alleged violation” of Presidential Decree No. 1586. The parties have yet to respond to queries on the firm’s offenses. Gerald Anderson opens his latest business, the Hayati River Kamp Site, in Zambales [Push, August 27, 2022] After opening the Hayati Private Beach Resort in Botolan, Zambales in 2020, Gerald Anderson recently announced that business has expanded with the opening of the Hayati River Kamp site as posted on his social media account last August 26. Jollibee paying US$16 an hour for their US service crew sparks comparisons on wages, cost of living in the Philippines [Yahoo News, August 26, 2022] His post originally only included a conversion of how much that dollar wage would be worth in pesos — a crew member would stand to earn PHP 899.58 an hour or PHP7,196.64 a day, amounting to a salary of PHP155,932 a month. FEU finalizes investment in Cabanatuan school [Inquirer Mobile, August 26, 2022] Far Eastern University Inc. has finalized a deal to buy a 34 percent stake in Good Samaritan Colleges Inc. (GSC), an educational institution in Cabanatuan City, Nueva Ecija. Diokno overrules BIR: ‘Dasma’ Village association dues are tax exempt [Philippine Daily Inquirer, August 26, 2022] Finance Secretary Benjamin Diokno is allowing the Dasmariñas Village Association Inc. (DVAI) to enjoy tax exemptions on its income from association dues and rental fees by reversing an earlier ruling of the Bureau of Internal Revenue (BIR). Tycoon Dennis Uy’s empire open to sale of crown jewels to pay debt [Yahoo News, August 26, 2022] Philippine tycoon Dennis Uy’s conglomerate is open to parting ways with its crown jewels as part of an asset-sale plan to pay down debt after it aggressively expanded from oil to casinos. California to end sales of gasoline-only cars by 2035 [Inquirer Mobile, August 26, 2022] California on Thursday moved to require all new vehicles sold in the state by 2035 to be either electric or plug-in electric hybrids, a landmark move that could speed the end of gasoline-powered vehicles. Call centers in the Philippines: Why it’s here to stay [SunStar Cebu, August 26, 2022] So, for the foreseeable future, contact centers in the Philippines aren’t going anywhere. And call center agents needn’t worry that a legion of robots will take their jobs. Here are a few reasons why call centers in the Philippines will continue to flourish. Netflix to offer P7 gas to mark 'Seoul Vibe' launch [The Philippine Star, August 26, 2022] According to Netflix, the Seoul Vibe gas station is located in Edsa near 7th avenue. Lagman tells ABS-CBN, TV5: Be brave, seal investment deal as it is not illegal [Inquirer.Net, August 26, 2022] Lagman also clarified in a statement on Thursday – a day after ABS-CBN and TV5 decided to delay the closing of their agreement to first answer questions stemming from lawmakers’ queries – that contrary to what was initially reported, there is no merger between the two networks. Education crisis a hurdle for BPO expansion, says Accenture [ABS-CBN News, August 26, 2022] "We do have an education crisis. We are lagging behind many of our counterparts, the other countries for example," said Manolito Tayag, Managing Director of Accenture Philippines. COA: PS-DBM failed to withhold P3.27-B income tax from pandemic suppliers [Rappler, August 26, 2022] The Commission on Audit also says the PS-DBM deducted P1.265-billion in VAT from the payment to foreign suppliers in 2021 but did not remit this to the BIR and treated the amount as savings Philippines probes telecoms firms over anti-competition complaint [Yahoo News, August 26, 2022] The Philippines' antitrust agency said on Friday it will investigate allegations that its major telecoms firms abused their dominant market positions to make it difficult for a China-backed newcomer to connect to their networks. Pickup truck prices to rise as House okays excise tax [Philippine Daily Inquirer, August 25, 2022] Pickup trucks were granted the special tax treatment for their utility as workhorses for small business owners and professionals in their livelihood,” Diokno’s letter to Salceda read. However, Diokno said that the DTI had observed that “manufacturers modify pickup trucks to serve as passenger, leisure or sport utility vehicles.” SEC says media deal is ‘disadvantageous’ to ABS-CBN investors as it reveals TV5 drowning in P5.3B red ink in last 3 years [Bilyonaryo, August 25, 2022] In his testimony to the House Committee on Legislative Franchises, SEC general counsel Romuald Padilla questioned why ABS-CBN wanted so badly to buy a stake in loss-making TV5 that it agreed to such a lopsided deal. BIR loses P20M tax case for late filing [Manila Bulletin, August 24, 2022] “The BIR’s right to file the instant criminal action has prescribed and the accused’s criminal liability is necessarily extinguished pursuant to Article 89 of the Revised Penal Code,” said Associate Justice Jean Marie A. Bacorro-Villenna who wrote the decision. JV interrupted: MVP, Lopez open to tweaking terms of TV5-ABS-CBN to assuage fears of lawmakers, NTC [Bilyonaryo, August 24, 2022] In a joint statement, the two media firms said the temporary suspension of “closing preparations” for their collaboration would allow them to address the issues raised by certain legislators and the National Telecommunications Commission on ABS-CBN’s purchase of a 35 percent stake in TV5. Marvin Agustin's Cochinillo, cakes now selling in first-ever mall stall [The Philippine Star, August 23, 2022] Last July, the actor opened Secret Kitchen at the Food Hall of Uptown Mall in Bonifacio Global City, Taguig. It had its soft opening last May. Royal Caribbean increases gratuities for crew members on its cruise ships [Royal Caribbean Blog, August 23, 2022] After four years, Royal Caribbean is increasing the gratuity rate cruise ship passengers will pay for the service they receive from crew members onboard its ships. | 2. DOF OPINIONS ON FWT EXEMPTION ON DIVIDENDS TRANSFERRED TO THE SURVIVING ENTITY IN CASE OF MERGER & INUREMENT PROHIBITION FOR NON-STOCK NON-PROFIT ENTITY | UNRESTRICTED RETAINED EARNINGS TRANSFERRED TO THE SURVIVING ENTITY, AS A RESULT OF TAX-FREE MERGER, ARE EXEMPT FROM FINAL WITHHOLDING TAX ON DIVIDENDS T Co. is requesting a review of the Bureau of Internal Revenue (BIR)'s earlier ruling that the statutory merger between TCI, as the absorbed corporation, and TMBC, as the surviving corporation, is subject to the final withholding tax on dividends constructively received by the shareholders to the extent of unrestricted earnings. In reply, the DOF opined that all the assets and liabilities of the absorbed corporation are transferred solely in exchange for shares of stock to the surviving corporation. Consequently, the transfer, pursuant to the statutory merger, necessarily includes all the accumulated earnings outstanding in the books of the absorbed corporation at the time of the merger. Hence, the retained earnings of TCI are considered in determining the number of shares to be issued by TMBC. Likewise, a tax-free merger merely defers the recognition of gain or loss such that the shareholders of the absorbed corporation keep the capital gains or losses on the transfer as unrealized upon receipt of the new shares from the surviving corporation. Only upon subsequent transfer of subject shares shall income tax be imposed on capital gains realized, if any. Therefore, the BIR made a reversible error when it declared that the unrestricted retained earnings of TCI were subject to final withholding tax on dividends. [DEPARTMENT OF FINANCE OPINION NO. 009.2022, MAY 16, 2022] [TO BE TAX EXEMPT, NO PART OF A NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTION’S NET INCOME OR ASSET SHALL INURE TO THE BENEFIT OF ANY INDIVIDUAL OR TRUSTEE UNLESS IT IS SUBJECTED TO PROPER LIQUIDATION OR REIMBURSEMENT PROCEDURES & IT IS REASONABLE & COMMENSURATE TO THE FUNCTIONS AND SERVICES RENDERED] J Institute of Technology (J Co.) is requesting a review of the Bureau of Internal Revenue (BIR)’ earlier ruling denying its request for tax exemption as a non-stock, non-profit educational institution under Section 4(3), Article XIV of the 1987 Constitution and Section 30(H) of the 1997 Tax Code, as amended. The denial was premised on the non-compliance of J Co. on the requirements that no part of its net income or assets shall inure to the benefit of any individual or a specific person and that its net income was not used actually, directly, and exclusively for educational purposes. In reply, the DOF opined that J Co. failed to prove that it is a non-profit educational institution and that the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. A perusal of J Co.’ Treasurer’s Affidavit certified under oath that its Board of Trustees received per diem. As held in previously issued opinions, per diem, per se, is not prohibited, provided the same is subjected to proper liquidation or reimbursement procedures, commensurate to the functions and services rendered, and legitimate and reasonable expenses incurred in furtherance of the duties and responsibilities of the trustees or officers, which all redound to the accomplishment of the objectives of the organization. To determine the reasonableness of such per diem or compensation, the taxpayer’s application for tax exemption must be accompanied by the list of documentary requirements under Revenue Memorandum Order (RMO) No. 44-2016; however, J Co. was unable to demonstrate through its submitted documents that the per diem of its trustees and the compensation of its officers received were reasonable and commensurate to the performance of the tasks needed of them. As regards the applicability of the reduced rate of 10% for proprietary educational institutions, the DOF believes that this should be the subject of an audit by the BIR to determine whether the requisites under Section 27 (B) of the 1997 Tax Code, as amended, are met. Thus, the request for review was DENIED. [DOF OPINION 001.2021, JANUARY 27, 2021] | 3. SC CASES DIGEST ON THE COVERAGE OF TAX AMNESTY & LBT EXPOSURE OF ELECTRIC COOPERATIVES | [TAX AMNESTY DOES NOT COVER WITHHOLDING TAX] [A TAX AMNESTY, MUCH LIKE A TAX EXEMPTION, IS NEVER FAVORED OR PRESUMED IN LAW] [TREASURER CAN BE HELD CRIMINALLY LIABLE FOR VIOLATIONS OF THE TAX CODE] Petitioner Bureau of Internal Revenue (BIR) filed a Petition for Review on Certiorari seeking to reverse the Court of Appeals (CA)’s earlier Decision and Resolution, which annulled the Resolution of the Department of Justice. Petitioner posited that: (1) CEDCO, Inc. (CEDCO) is disqualified from availing of the tax amnesty under Republic Act (R.A.) No. 9480 (“2007 Tax Amnesty Law”) due to its existing withholding tax liabilities; and (2) there is probable cause to charge Respondent Samuel B. Cagang with violation of Section 255 of the 1997 Tax Code, as amended, insofar as he failed to cause the payment of the withholding taxes due. In ruling, the Court finds that the tax amnesty under R.A. No. 9480 does not extend to CEDCO with respect to its existing withholding tax liabilities, as explicitly provided in the said law. However, with respect to the deficiency taxes pertaining to Income Tax and Value-Added Tax (VAT), the Court held that CEDCO is entitled to avail of the tax amnesty considering that it had submitted the necessary documents and complied with the requirements. Regarding the 2nd issue, contrary to the contention of the Respondent that he cannot be held liable because he was never appointed as the CEDCO’s Treasurer, the Court was inclined to agree with the Petitioner that there exists probable cause to charge the Respondent with the violation of Section 255 of the 1997 Tax Code, as amended. A review of the records revealed that evidence exists that Respondent, albeit for short period, was appointed by CEDCO’s Board of Directors as Corporate Secretary/Treasurer. Hence, the Petition was GRANTED. Consequently, the CA’s earlier Decision and Resolution were SET ASIDE. [BUREAU OF INTERNAL REVENUE V. SAMUEL B. CAGANG, G.R. NO. 230104, MARCH 16, 2022, UPLOADED JULY 5, 2022] ELECTRIC COOPERATIVES UNDER NEA ARE WITHDRAWN WITH LOCAL TAX INCENTIVES UNLESS REGISTERED WITH CDA Petitioner Benguet Electric Cooperative filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution. Petitioner asserted that the CTA En Banc erred in sustaining the Decision of the CTA Division that Petitioner could not file a Petition for Prohibition before the Regional Trial Court (RTC) since the Petitioner failed to file a timely protest pursuant to Section 195 of the Local Government Code (LGC). In ruling, Prohibition is resorted to when the proceedings of any tribunal are without or in excess of its jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law. Here, Petitioner had 30 days from the receipt of the denial of its protest with the Local Treasurer to file an Appeal with the RTC, hence, it could not resort to the remedy of Prohibition. Considering that the Petitioner did not file any appeal with the RTC within the 30-day period provided under Section 195 of the LGC, the assessments for Local Business Taxes (LBTs) became conclusive and unappealable. As correctly held by the CTA Division and En Banc, considering that tax privileges granted to electric cooperatives registered with National Electrification Administration (NEA) under Presidential Decree (P.D.) 269 were validly withdrawn, and only those registered with the Cooperative Development Authority (CDA) under Republic Act (R.A.) No. 6938 may continue to enjoy the tax privileges under the Cooperative Code, Petitioner is liable to pay LBT, even if it is a nonstock and non-profit cooperative. Consequently, the Petition was DENIED. [BENGUET ELECTRIC COOPERATIVE VS. THE MUNICIPALITY OF LA TRINIDAD, BENGUET, G.R. NO. 229428, NOVEMBER 29, 2021, UPLOADED MAY 6, 2022] | 4. BIR RULINGS DIGEST ON TAX-RELATED CONSEQUENCES OF TERMINATION OF TRUST AGREEMENT, MISSIONARY SUBSIDY OF NAPOCOR TO ELECTRIC COOPERATIVES & JOINT VENTURE | CONVEYANCE OF PROPERTY AS A RESULT OF TERMINATION OF TRUST IS NOT SUBJECT TO TAX Spouses C are requesting a ruling on whether the conveyance of properties, as a result of the termination of a Trust Agreement with B Co., is exempt tax. In reply, the transfer of title of properties under Trust Agreement in favor of the Trustors, Spouses Chua, who are the actual owners is not subject to Capital Gains Tax (CGT) nor to the Creditable Withholding Tax (CWT) considering that the transfer and reconveyance are not motivated by valuable consideration and merely acknowledges, confirms, and consolidates the legal title and actual ownership over the Trust Properties in the name of the Trustors. The conveyance is not to be treated as another transfer separate and distinct from the sale between the original owner and the Trustee, but instead it is merely treated as a continuation and confirmation of title in favor of the ultimate and real beneficiaries of the Trust Properties. Also, the transfer is not subject to the 12% VAT because the aforesaid properties are not held primarily for sale to customers or for lease in the ordinary course of trade or business. Further, the transfer is not subject to Gift Tax since there is no intention to donate on the part of the Trustee. [BIR RULING NO. 346-2022, JUNE 30, 2022] MISSIONARY SUBSIDY OF NATIONAL POWER CORPORATION TO ELECTRIC COOPERATIVE IS NOT SUBJECT TO VAT Palawan Power Generation, Inc. (PPGI) is requesting confirmation that the Missionary Electrification (ME) Subsidy being disbursed by National Power Corporation (NPC) to PPGI from the Universal Charge for Missionary Electrification (UCME) Fund pursuant to the Subsidy Agreements between PPGI, Palawan Electric Cooperative, Inc. (PALECO), and NPC executing Republic Act No. 9136 or the Electric Power Industry Reform Act of 2017 (EPIRA Law), as a result of its sale of electricity in an area that is not connected to the transmission system to PALECO is not subject to the 12% Value-Added Tax (VAT) and, consequently, to the 5% Final Withholding VAT. In reply, the grant of ME Subsidy from the UCME Fund, being disbursed by NPC as the administrator of the disbursement of the fund, is not a taxable income being a mere grant or gift of money in favor of PALECO as an incentive from the government. Also, there must be a sale, barter, or exchange of goods or properties before any VAT may be levied. Here, the transaction between PPGI and NPC does not involve any sale of goods or services but a mere cash disbursement from the UCME Fund. Considering that the transaction between PPGI and NPC does not fall within the purview of the term gross income, and the disbursements of ME Subsidy by NPC to PPGI is not NPC’s own purchase of goods or services because it is a mere administrator of the distribution of the ME Fund, it follows that the ME Subsidy should not be subject to the VAT and that NPC is not required to withhold the 5% VAT thereon. Thus, PPGI shall have to issue a VAT-exempt receipt to NPC with respect to the ME Subsidy. In addition, PPGI should maintain subjecting the Electricity Fee, which is part of the ME Subsidy, to the income tax and VAT. [BIR RULING NO. 345-2022, JUNE 30, 2022] A JOINT VENTURE NOT REGISTERED WITH PCAB & CO-VENTURERS THAT ARE NOT ENGAGED IN CONSTRUCTION BUSINESS IS A TAXABLE CORPORATION E Co. is seeking confirmation on the tax implications of forming two (2) joint venture agreements for the purpose of constructing an industrial ecozone and a residential subdivision project. In reply, to be a tax-exempt Joint Venture engaged in a construction project, it must satisfy all the conditions set forth in Section 3 of Revenue Regulations (RR) No. 10-2012. After the evaluation, the JVA entered into by E Co. shall be considered a taxable corporation since E Co. and all its co-venturers are not engaged in the construction business and have no Contractor's License issued by the Philippine Contractors Accreditation Board (PCAB) of the Department of Trade and Industry (DTI). Consequently, the Joint Venture shall be subject to corporate income tax and other applicable internal revenue taxes imposed by the 1997 Tax Code, as amended. [BIR RULING NO. 128-2022, APRIL 5, 2022] | DOWNLOAD OUR PAST EDITIONS & FULL TEXT OF REFERENCES https://weeklytaxupdates.getresponsesite.com/ | |
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