TAX & BUSINESS-RELATED NEWS [JULY 18-26] BIR RULINGS DIGEST ON INHERITED PROPERTY AS CAPITAL ASSET, TAXABILITY OF HONORARIA OF ELECTION POLL WORKERS & ELECTRONIC GIFT CERTIFICATES COURT OF TAX APPEALS CASES DIGEST DEPARTMENT OF FINANCE OPINION REVERSING THE EARLIER BIR RULING ON VAT IMPOSITION ON PCSO RECEIPT OF PAYMENT FOR THE STL TICKETS PRICE
| 1. TAX & BUSINESS-RELATED NEWS [JULY 18-26] | | Deloitte Guam to exit "Big 4" auditing network next year Dennis Uy avoids default after payment of Clark project debt Valuation, TV Patrol remaining issues: MVP group to retain majority in planned TV5-ABS-CBN alliance SIPP Cebu roadshow well-received – BOI Wilcon brings home of big ideas in culture-rich Ilocandia Bank of Commerce joins ranks of top fund managers FDA joins DOH in seeking veto of vape bill Ace Hardware Philippines wins at Retail Asia Awards 2022 Ukraine, Russia sign grain export deal with UN, Turkey UnionBank gets BSP nod for P 55-B Citi PH takeover Ex-PDEA exec is new Customs chief Senate resolution seeks review of parts of 1987 Constitution impeding growth Foreign, local business groups list 24 priority bills BSP recorded more dollar outflows from PH in June PH, Japan join hands to enhance vegetable value chain PLDT urges consumers to report intentional cable cutting Country’s first globally-accredited cyber security school launched Elon Musk says remote workers are just pretending to work. Turns out he’s (sort of) right Attack of a new ransomware called “BlackCat” Probe underway as Microsoft Teams suffers outage Sandro takes action vs Ilocos Norte’s soaring power rates Airfares continue to go up Abacore seals Surigao del Sur coal mining deal CLI’s P 8-B bond sale a go despite challenging environment Coming soon: higher mall occupancy rates Office space demand unlikely to return to pre-Covid level in 2022 P924-M desiccated coconut project gets tax incentives Pangasinan mountain-volcano resort now drawing tourists Prime Infra offers 500-MW stored power to Meralco
| 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. | Deloitte Guam to exit "Big 4" auditing network next year [Pacific Daily News, July 25, 2022] The local office of Deloitte & Touche, LLP, one of the premier accounting firms on island, will be closing its doors sometime next year, representatives from the firm confirmed last week. Dennis Uy avoids default after payment of Clark project debt [The Philippine Star, July 25, 2022] Udenna Corp., the holding company of Davao-based businessman Dennis Uy, said Monday, July 25, that it has settled the debt it incurred for its Clark project ahead of deadline, avoiding the possibility of a massive default. Valuation, TV Patrol remaining issues: MVP group to retain majority in planned TV5-ABS-CBN alliance [Bilyonaryo, July 24, 2022] The group of bilyonaryo Manny V. Pangilinan is adamant on retaining majority control in the planned alliance between his media outfit TV5 and ABS-CBN Broadcasting. SIPP Cebu roadshow well-received – BOI [The Philippine Star, July 24, 2022] The Board of Investments (BOI) said its recent Strategic Investment Priority Plan (SIPP) roadshow in Cebu City was well-received, as over 100 company representatives and business chamber members participated. Wilcon brings home of big ideas in culture-rich Ilocandia [Inquirer Mobile, July 23, 2022] On Friday, Wilcon Depot opened its 78th store at the municipality of Bantay in Ilocos Sur, a province known for its rich cultural heritage, owing to its well preserved ancestral houses, centuries-old churches, and its famous cobblestone streets. Bank of Commerce joins ranks of top fund managers [The Philippine Star, July 23, 2022] According to a recent industry survey conducted by UITF resource center www.uitf.com.ph, the Diversity Money Market Fund (DMMF) of Bank of Commerce was the third best-performing in its category for the past 12 months, besting 33 others. FDA joins DOH in seeking veto of vape bill [The Philippine Star, July 23, 2022] Regulation of vapes and other heated tobacco products (HTPs) must remain with the Food and Drug Administration (FDA) and not be transferred to the Department of Trade and Industry (DTI) because these products concern public health. Ace Hardware Philippines wins at Retail Asia Awards 2022 [Manila Bulletin, July 22, 2022] Like other retailers, Ace ramped up its online activities by revamping its website, opening flagship stores in e-commerce marketplaces, growing its Facebook following beyond one million, and partnering with online aggregators for same-day delivery. Ukraine, Russia sign grain export deal with UN, Turkey [Inquirer.Net, July 22, 2022] Russian Defense Minister Sergei Shoigu and Ukrainian Infrastructure Minister Oleksandr Kubrakov each signed separate but identical agreements with UN and Turkish officials on reopening blocked Black Sea delivery routes, at a ceremony witnessed by AFP. UnionBank gets BSP nod for P 55-B Citi PH takeover [Inquirer Mobile, July 21, 2022] The BSP’s approval on July 18 comes after UnionBank secured the go ahead from the Philippine Competition Commission last April. Ex-PDEA exec is new Customs chief [Manila Bulletin, July 21, 2022] President Ferdinand “Bongbong” Marcos Jr. has named Yogi Filemon Ruiz as the new Bureau of Customs (BOC) acting commissioner, Malacañang confirmed. Senate resolution seeks review of parts of 1987 Constitution impeding growth [BusinessWorld, July 21, 2022] “The 1987 Constitution provides for economic provisions that impede our economic growth because of its restrictions on foreign equity in the exploration, development, and utilization of natural resources, public utilities, build-operate-transfer projects, operation of deep-sea commercial vessels… (as well as) foreigners owning land, equity in mass media and the practice of professions,” Senator Robinhood Ferdinand C. Padilla said in Senate Resolution 6. Foreign, local business groups list 24 priority bills [Manila Bulletin, July 21, 2022] Foreign and business groups in the Philippines have called for the passage of 24 priority reform measures in the 19th Congress to boost economic growth in the country. BSP recorded more dollar outflows from PH in June [Inquirer Mobile, July 21, 2022] Consisting of foreign investments, gold, foreign exchange, reserve position in the International Monetary Fund and special drawing rights, the BSP’s GIR has been declining month after month since February. PH, Japan join hands to enhance vegetable value chain [Manila Bulletin, July 21, 2022] Dubbed Market-Driven Enhancement of Vegetable Value Chain in the Philippines (MV2C), the project will be implemented by the Department of Agriculture (DA) and Japan International Cooperation Agency (JICA). PLDT urges consumers to report intentional cable cutting [ABS-CBN News, July 21, 2022] This was after a group of men intentionally damaged PLDT fiber optic cables that disrupted the delivery of service in the area as well as reports of nationwide "sabotage" of PLDT fiber optic cable, the telco said in a statement. Country’s first globally-accredited cyber security school launched [Manila Bulletin, July 21, 2022] To help the government and private sectors answer the skills gap and talent shortage threatening cybersecurity, Israeli and Filipino IT professionals partnered with ThriveDX SaaS Ltd. to launch the country’s first globally-accredited cyber security school. The goal is to produce local cybersecurity professionals to secure the Philippines from cyber-attacks. Elon Musk says remote workers are just pretending to work. Turns out he’s (sort of) right [Fortune, July 21, 2022] The world’s richest man doubled down when he confirmed the memo’s authenticity on Twitter, writing that remote workers “should pretend to work somewhere else.” Attack of a new ransomware called “BlackCat” [Manila Bulletin, July 21, 2022] Came into light mid-November 2021, BlackCat is a ransomware family coded in Rust programming language which has numerous native options and is highly customizable, making it easier for malware authors to pivot and individualize attacks. Ransomware attacks can be easily compiled against various operating system architectures of business. Probe underway as Microsoft Teams suffers outage [ABS-CBN News, July 21, 2022] Business communication platform Microsoft Teams experienced an outage on Thursday, becoming a trending topic in the Philippines. Sandro takes action vs Ilocos Norte’s soaring power rates [Manila Bulletin, July 20, 2022] “Successful meeting with Comm. Alexis M. Lumbatan of the ERC regarding the complaints of my constituency about the high power rates in Ilocos Norte,” Marcos wrote on his Facebook on Tuesday, July 19. Airfares continue to go up [Inquirer Mobile, July 20, 2022] The Civil Aeronautics Board (CAB) recently released an advisory raising the passenger and cargo fuel surcharge to Level 12 for August from Level 11 this month. Prior to this, fuel surcharge was at Level 7 in June. Abacore seals Surigao del Sur coal mining deal [Inquirer Mobile, July 20, 2022] Listed holding company Abacore Capital Holdings Inc. struck a deal with Oriental Vision Mining Philippines Corp. (ORVI) to begin developing coal mines in an area spanning 3,000 hectares in Surigao del Sur, Mindanao. CLI’s P 8-B bond sale a go despite challenging environment [Inquirer Mobile, July 20, 2022] Cebu Landmasters Inc. (CLI) will push through with a maiden bond sale of up to P8 billion as it remains undeterred by challenging conditions in the capital markets. Coming soon: higher mall occupancy rates [Inquirer Mobile, July 20, 2022] More retailers are expected to open physical stores in malls and other commercial spaces before the year ends with the return of foot traffic as mobility restrictions have eased, according to real estate expert Santos Knight Frank (SKF). Office space demand unlikely to return to pre-Covid level in 2022 [Manila Bulletin, July 19, 2022] “Has demand caught up with pre-pandemic levels? The answer to that is no,” said Morgan McGilvray, Santos Knight Frank (SKF) senior director, occupier strategy & solutions, at the company’s virtual property briefing. P924-M desiccated coconut project gets tax incentives [Manila Bulletin, July 19, 2022] With a project cost of P924 million, CCC will produce 93,750 metric tons of high quality food grade desiccated coconuts annually starting September this year in Plaridel, Misamis Occidental. The project is expected to create 475 jobs. Pangasinan mountain-volcano resort now drawing tourists [Philippine News Agency, July 19, 2022] The green surroundings, zigzag road, and cool environment greet tourists to the extinct volcano-turned resort here – the Mt. Balungao Hilltop Adventure. Prime Infra offers 500-MW stored power to Meralco [BusinessWorld, July 18, 2022] PRIME Infrastructure Capital Inc. has been declared by Manila Electric Co. (Meralco) as the original proponent to supply 500 megawatts (MW) to the power distributor, the Razon-led company said on Sunday. | 2. BIR RULINGS DIGEST ON INHERITED PROPERTY AS CAPITAL ASSET, TAXABILITY OF HONORARIA OF ELECTION POLL WORKERS & ELECTRONIC GIFT CERTIFICATES | INHERITED PROPERTY IS CONSIDERED A CAPITAL ASSET IF THE SAME IS NOT SUBSEQUENTLY USED IN TRADE OR BUSINESS & THE TRANSFEROR IS NOT ENGAGED IN REAL ESTATE BUSINESS The Heirs are requesting a confirmatory ruling on whether the subject real properties are ordinary or capital assets for the purpose of determining the applicable taxes on the sale of the said properties to LBL Prime. In rendering an opinion, the Bureau opined that the lots subject of sale to LBL Prime are capital assets in the hands of the Heirs in view of the transfers that have occurred from Sea ‘N’ Sun Properties Corporation to Marisol, and from Marisol to her Heirs. The Heirs conditioned the sale in dismissal and/or withdrawal of all pending civil and criminal cases. It is represented that Marisol, Heir’s predecessor in interest, was never engaged in the real estate business. Also, the Heirs are not engaged in the real estate business. Under Section 3 (f) of Revenue Regulations (RR) No. 7-2003, the real property transferred through succession or donation to the heir or donee, who is not engaged in the real estate business with respect to the real property inherited or donated and who does not subsequently use such property in trade or business, shall be considered as capital asset in the hands of the heir or donee. Thus, the subject lots became capital assets in the hands of Marisol when she received the same as liquidating dividends since, as represented, she was never engaged in the real estate business. [BIR RULING NO. 114-2022, MAY 31,2022] TAXABILITY OF HONORARIA, TRAVEL ALLOWANCES & OTHER BENEFITS OF ELECTORAL BOARDS/POLL WORKERS FOR 2022 ELECTIONS COMELEC is seeking legal opinion on the exemption from withholding tax of honoraria, travel allowance, and such other benefits granted to electoral boards/poll workers or persons rendering election service in the 2022 elections. In reply, the BIR held that honoraria and allowances are wealth that flow into the hands of the recipient, hence, subject to income tax and, consequently, to withholding tax on compensation. Therefore, the honoraria and allowances granted to the electoral boards/poll workers or persons who rendered election services in the elections are considered compensation income subject to withholding tax. Also, since the poll workers/electoral boards are not in the performance of their duties as public-school teachers, the honoraria and allowances are not professional fees. Hence, the exemption from withholding taxes for income payment of Php 10,000 and below is not applicable. The BIR agreed, however, with the COMELEC that the honoraria and allowance to be paid to the teachers shall not be subject to the Value-Added Tax (VAT) or Percentage tax because the performance of service of the electoral boards/poll workers will not be made in the course of trade or business. [BIR RULING NO. 195-2022, MAY 2, 2022] ELECTRONIC GIFT CERTIFICATES: TAXABILITY & EXEMPTION M Co. is seeking confirmation on the tax implications of its issuance of electronic gift certificates to its various customers and clients. In ruling, the value of the electronic gift certificates does not constitute income on the part of the M Co. but a fund held in trust of the vendor. Thus, said amounts shall not form part of its gross receipts subject to income tax. The BIR confirmed that the cost of points received by M Co. for the issuance of electronic gift certificates to the customers is not taxable as M Co. merely holds them in trust for the vendor whom the client will redeem. Likewise, the same is not subject to Expanded Withholding Tax (EWT). However, service fees paid to M Co. by its clients constitute gross income subject to income tax and consequently, to EWT. The issuance of electronic gift certificates to clients is also not subject to Value-Added Tax (VAT) and as such, non-VAT receipt is proper. However, M Co. shall be subject to VAT and required to issue VAT official receipts on the amount it receives from its customers/clients for the service fees where electronic gift certificates were utilized for facilitation/administrative fee and/or marketing efforts or commission. [BIR RULING NO. 208-2022, MAY 5, 2022] | | [ABSENCE OF AN LOA ON REASSIGNMENT RENDERS THE ASSESSMENT NULL & VOID] [NON-OBSERVANCE OF THE 15-DAY PERIOD TO PROTEST THE PAN VIOLATES THE TAXPAYER’S RIGHT TO DUE PROCESS & RENDERS THE ASSESSMENT VOID] Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the CTA 3rd Division’s earlier Decision canceling the assessment issued to the Respondent Global Fresh Products, Inc. Petitioner argued that the Respondent was afforded due process because it could file its protest against the assessment notices. Likewise, the issuance of a Memorandum of Assignment (MOA) authorizing the new Revenue Officer (RO) to continue the audit and assessment of a previous RO authorized under a valid LOA will not subvert any right of the Respondent. Thus, it does not violate the due process of law. On the other hand, the Respondent reiterated that the absence of a validly issued LOA to conduct the audit renders the present assessment void. In ruling, the Court has been consistent that an RO tasked to conduct the books of taxpayers must be authorized by an LOA and requires the issuance of a new LOA in case of any reassignment or transfer of cases to another RO. In this case, a mere MOA signed by a Revenue District Officer (RDO) does not and cannot confer authority to a RO to continue the audit. Hence, the subject MOA signed by the RDO is neither tantamount to an LOA nor a supplement thereto. Considering the absence of a new LOA, the assessment for deficiency taxes is inescapably void. Furthermore, the lapse of the 15-day for the Respondent to file its protest on the Preliminary Assessment Notice (PAN) unmistakably shows the Petitioner's non-observance of the mandatory 15-day period given to the Respondent. This essentially deprived the Respondent of the opportunity to be heard on the PAN, thus violating the taxpayer's right to due process. Consequently, the subject Formal Assessment Notice is void and bears no valid fruit. Therefore, the Petition was DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS. GLOBAL FRESH PRODUCTS INC., CTA EN BANC CASE NO. 2392, JUNE 30, 2022] PETITION FOR PROHIBITION IS NOT AN ADEQUATE REMEDY WHEN ADMINISTRATIVE REMEDIES ARE OUTLINED CLEARLY BY LAW Petitioner National Food Authority (NFA) filed a Petition for Review with Motion for Suspension of Collection of Tax, against Respondents Province of Nueva Vizcaya, Office of the Provincial Treasurer, and the Provincial Assessor’s Office, seeking reversal of the CTA 2nd Division’s earlier Decision and Resolution. Petitioner assailed the conclusion of the Court 2nd Division that it has no jurisdiction to entertain the Petition for its alleged failure to comply with the procedural requirements under the Local Government Code (LGC). In ruling, the Court En Banc agreed with the Court in Division that the Petition for Prohibition is not the proper remedy against the Real Property Tax (RPT) assessments issued by the Provincial Treasurer of Nueva Vizcaya. Central to the remedy of Prohibition is the absence of any appeal or any other plain, speedy, and adequate remedy in the ordinary course of law. The antecedent facts of the case showed that Petitioner has an available plain and adequate administrative remedy against an RPT assessment found in the provisions of the Local Government Code beginning with the filing of the protest. Petitioner should have exhausted the administrative remedies. Petitioner’s failure to file the necessary protest and to pay the tax under protest made the subject RPT assessments, final, executory, and demandable. Consequently, the Petition was DENIED for lack of merit and jurisdiction. [NATIONAL FOOD AUTHORITY VS. PROVINCE OF NUEVA VIZCAYA, OFFICE OF THE PROVINCIAL TREASURER & THE PROVINCIAL ASSESSOR’S OFFICE, PROVINCE OF NUEVA VIZCAYA, CTA EN BANC CASE NO. 2361, JUNE 27, 2022] [AN LOA MUST BE SERVED WITHIN THIRTY (3O) DAYS FROM THE TIME IT IS ISSUED, OTHERWISE IT BECOMES NULL & VOID UNLESS REVALIDATED] [THERE CAN BE NO WILLFUL FAILURE TO PAY TAX IF THERE IS NO REQUIREMENT TO PAY THE SAME AT ALL] [THE PROSECUTION MUST RELY ON THE STRENGTH OF ITS OWN EVIDENCE & NOT ANCHOR ITS SUCCESS UPON THE WEAKNESS OF THE EVIDENCE OF THE ACCUSED] Accused Ira General Security Services, Inc. (IGSSI) and Tranquilino Aglubub, Jr. (Aglubub) are charged with willful failure to pay tax under Section 255 of the Tax Code, as amended. Accused Aglubub maintained that the Prosecution failed to prove his guilt beyond reasonable doubt. He argued that the subject assessments are void since the Letter of Authority (LOA) was sent to the taxpayer beyond the 30-day reglementary period and the notices from the BIR were received by individuals not duly authorized by Accused IGSSI to receive the same. In ruling, the Court found that the assessments were based on a valid LOA since the manual LOA, which was issued on 24 June 2010, was served on 21 July 2010, or within the 30-day reglementary period. However, the Court agreed with the Accused Aglubub that the assessments were all received by individuals not duly authorized by Accused IGSSI. Since the assessment notices were not actually received by Accused IGSSI’s authorized representative, the same cannot be considered as having been validly issued and therefore, is considered void. In addition, the assessments is void for lack of authority of the Group Supervisor who participated in the audit and recommended for the issuance of Preliminary Assessment Notice. Since the subject assessments are void, accused IGSSI cannot be said to have failed to pay the deficiency taxes much more to have done so willfully. Consequently, the Accused IGSSI and Aglubub were ACQUITTED of the offenses charged for failure of the Prosecution to prove their guilt beyond reasonable doubt. [PEOPLE OF THE PHILIPPINES VS. IRA GENERAL SECURITY SERVICES, INC. & TRANQUILINO R. AGLUBUB, JR., CTA CRIMINAL CASE NOS. O-776-778, JUNE 22, 2022] | 4. DOF OPINION REVERSING THE EARLIER BIR RULING ON VAT IMPOSITION ON PCSO RECEIPT OF PAYMENT FOR THE STL TICKETS PRICE | PCSO RECEIPT OF PAYMENT FOR THE STL TICKETS PRICE IS NOT SALE OF GOODS OR SERVICES SUBJECT TO VAT Philippine Charity Sweepstakes Office (PCSO) is requesting a review of the Bureau of Internal Revenue (BIR)'s earlier ruling which ruled that the sale of Small Town Lottery (STL) tickets does not pertain to the conduct of horse races nor the sale of horse race sweepstakes which are exempted from all taxes under Section 4 of Republic Act No. 1169, and is, thus, subject to the Value-Added Tax (VAT). In reply, STL includes activities such as the collection of bets, issuance of tickets, conduct and holding of draws, payments to winners and remittances, and other related activities. Receipt of payments for the price of the STL tickets by PCSO is neither a sale of goods nor a rendition of services under Section 105 of the 1997 Tax Code, as amended. Likewise, STL ticket itself is not a good capable of pecuniary estimation because it does not have an innate value per se under Section 106 of the 1997 Tax Code, as amended. A bettor does not purchase a ticket because he/she desires to receive a PCSO ticket, but because he/she desires to place a bet in the lottery, and the ticket merely represents or otherwise evidences the bettor’s stake in the lottery. Further, when a bettor obtains an STL ticket, the PCSO does not perform a service in such a way that it calls for the exercise or use of the physical or mental faculties in exchange for a fee, remuneration, or consideration. The price paid by the bettor represents his bet in the lottery. The bettor merely receives, at most, an expectation, or a potential claim to the prize. Thus, the very nature of lottery, lottery tickets, and receipt of payments for the price of such lottery tickets is not a sale of goods or services that are subject to VAT. [DEPARTMENT OF FINANCE OPINION NO. 007.2022] | DOWNLOAD OUR PAST EDITIONS & FULL TEXT OF REFERENCES https://weeklytaxupdates.getresponsesite.com/ | |
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