TAX & BUSINESS-RELATED NEWS [OCTOBER 10-17] SEC LEGAL OPINIONS ON APIC & CONVERSION OF NON-STOCK TO STOCK CORPORATION BIR ISSUES IRR ON THE PROPER TAX TREATMENT OF EQUITY-BASED COMPENSATION BIR RULINGS ON THE EXTENT OF TAX EXEMPTION OF VETERANS FEDERATION OF THE PHILIPPINES, VAT-EXEMPT FEEDS & LIFTING OF NOTICE OF TAX LIEN COURT OF TAX APPEALS CASE ON LOCAL TAX CASE JURISDICTION
| 1. TAX & BUSINESS-RELATED NEWS [OCTOBER 10-17] | | Business registration now available online, BIR says Iraq probes $2.5 billion 'theft' from tax agency Coca-Cola PH ramps up output of recycling facility Many small businesses fail to observe occupational safety standards: DOLE Notify DOE of WPS oil and gas exploration plans, firms told 'Inasal na manok' ranks 5th in Taste Atlas list of best chicken dishes Changes in procurement law pushed to bring down expenses Bill filed to double economic relief allowance Binance Academy and Enderun Colleges team Up to boost Web3 education in the country PH now just 7th biggest WB borrower; India tops list Philippine pension system second worst globally: study BIR probe of DepEd’s ‘favored suppliers’ sought PCCI supports lifting of 12% VAT on basic commodities The end of Lance Gokongwei’s P9.4B nightmare: JG gets protection from plastic imports in first 3 years of Marcos administration Baguio-Cebu flights seen to boost Cordillera tourism AboitizPower ventures into wind energy with stake in Camarines Sur plant DOTr working double time to keep PH seafarers’ int’l certifications First Gen to help transform Batangas dumpsite into a wildlife shelter DMCI Holdings’ Isidro Consunji named MAP’s ‘Management Man of the Year’ for 2022 Netflix to debut subscription with ads 'Most beautiful' McDonald's in PH opens in Bacolod Non-money pay received by employees subject to income tax, BIR says Teleperformance taps Aboitiz's clean power unit to energize Philippine offices Axie Infinity player count falls back to Jan 2021 levels PH garments manufacturers expect layoffs, closures with decline in US demand PEZA approves Cirtek expansion
| 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. | Business registration now available online, BIR says [Manila Bulletin, October 17, 2022] BIR Commissioner Lilia Catris Guillermo said taxpayers may submit their application for registration for head office, or branch under its NewsBizReg portal. Iraq probes $2.5 billion 'theft' from tax agency [ABS-CBN News, October 17, 2022] State news agency INA reported Saturday that an internal probe by the finance ministry found the money had been withdrawn from the agency's account at a state-owned bank. Coca-Cola PH ramps up output of recycling facility [Inquirer Mobile, October 15, 2022] The P2-billion recycling facility was established in partnership with Bangkok-based Indorama Ventures, and has been granted pioneer status by the Department of Trade and Industry’s (DTI) Board of Investments last year, making it eligible for tax incentives. Many small businesses fail to observe occupational safety standards: DOLE [ABS-CBN News, October 15, 2022] Three years after the implementation of the updated occupational safety and health law, the Department of Labor and Employment found nearly half of local businesses it inspected failed to observe OSH standards, the agency said Friday. Notify DOE of WPS oil and gas exploration plans, firms told [Inquirer Mobile, October 15, 2022] Companies need to submit their work program to government regulators before undertaking any exploration activities in the West Philippine Sea, an official of the Department of Energy (DOE) said. 'Inasal na manok' ranks 5th in Taste Atlas list of best chicken dishes [ABS-CBN News, October 15, 2022] For the best places to eat Inasal, Taste Atlas recommended six restaurants in the Philippines, based on ratings from their food critics. Topping the list is Aida’s Manokan in Bacolod. Changes in procurement law pushed to bring down expenses [Inquirer Mobile, October 15, 2022] Pangandaman added that with nearly two decades behind Republic Act No. 9184, the time was ripe for introducing further reforms and reviewing the government procurement process. Bill filed to double economic relief allowance [The Philippine Star, October 15, 2022] Villar said he filed Senate Bill 1378 or the proposed “Act Providing an Increase and an Automatic Adjustment Mechanism in the Personnel Economic Relief Allowance (PERA) Granted to Government Employees” to increase the financial assistance given to government workers “to defray some of their expenses corresponding to the cost of essential goods and services.” Binance Academy and Enderun Colleges team Up to boost Web3 education in the country [Manila Bulletin, October 14, 2022] The world’s leading blockchain ecosystem, through its educational program, Binance Academy, joins hands with one of the leading and highly respected management colleges in the Philippines. This partnership follows the recent partnership of Binance with the Cybercrime Investigation and Coordination Center (CICC) and expands Binance’s educational reach to not only business movers and regulators but also to students and educators. PH now just 7th biggest WB borrower; India tops list [Inquirer Mobile, October 14, 2022] India has emerged as the World Bank (WB) Group’s top borrower in fiscal year 2022 that ended on June 30, dethroning the Philippines that is now ranked seventh with about $1.58 billion taken out from the International Bank for Reconstruction and Development (IBRD). Philippine pension system second worst globally: study [ABS-CBN News, October 14, 2022] The Philippines has the second worst retirement fund system out of 44 nations, according to the Mercer CFA Institute's 2022 Global Pension Index (MCGPI). BIR probe of DepEd’s ‘favored suppliers’ sought [Inquirer.Net, October 14, 2022] “This is to request your good office for an investigation on the reported ‘Favored Suppliers’ in the Department of Education, including but not limited, to the following companies: Advance Solutions Inc. (ASI), Columbia Technologies, Inc., Reddot Imaging Philippines, Inc., Techguru Inc. and Girltekki Inc., for possible criminal violations of the National Internal Revenue Code of 1997,” the letter states. PCCI supports lifting of 12% VAT on basic commodities [Inquirer Mobile, October 14, 2022] The country’s largest business group is backing proposed legislation at the House of Representatives to remove the value-added tax (VAT) on basic commodities, which include bread, sugar and cooking oil, saying it will help both consumers and businesses. The end of Lance Gokongwei’s P9.4B nightmare: JG gets protection from plastic imports in first 3 years of Marcos administration [Bilyonaryo, October 14, 2022] After piling up a cumulative P9.4 billion losses in the last two and a half years, ultra bilyonaryo Lance Gokongwei’s petrochemical concern is expected to get a much needed boost from President Bongbong Marcos after getting the tariff shield against cheap imports in the first three years of the new administration. Baguio-Cebu flights seen to boost Cordillera tourism [Philippine Daily Inquirer, October 14, 2022] Provinces in the Cordillera region will open their tourism destinations and sell their goods to the largely untapped market in the Visayas once Baguio City reopens Loakan Airport to domestic flights by the end of the year, an official of the Department of Tourism (DOT) said on Wednesday. AboitizPower ventures into wind energy with stake in Camarines Sur plant [Inquirer Mobile, October 14, 2022] In a disclosure, AboitizPower said the joint venture agreement signed between Aboitiz Renewables Inc., its holding company for renewable energy projects, would allow it to develop the 90-megawatt onshore wind project in Libmanan town together with global renewable energy company Mainstream Renewable Power. DOTr working double time to keep PH seafarers’ int’l certifications [Inquirer Mobile, October 14, 2022] The Department of Transportation (DOTr) is working double time with other government agencies and maritime schools to ensure that Filipino seafarers will meet the standards of training, certification and watchkeeping for seafarers (STCW) required by the international maritime sector. First Gen to help transform Batangas dumpsite into a wildlife shelter [Inquirer Mobile, October 14, 2022] For this initiative, First Gen will serve as a “partner adoptor.” It will donate construction materials for the site’s walkway and it will also plant hundreds of tree-growing endemic hardwood saplings.These undertakings, it said, would be maintained in a park area to be called “First Gen Regenerative Projects,” showcasing its various programs to enhance the environment. DMCI Holdings’ Isidro Consunji named MAP’s ‘Management Man of the Year’ for 2022 [Inquirer Mobile, October 14, 2022] Isidro Consunji, chair and president of engineering conglomerate DMCI Holdings Inc. (DMC), was selected by the Management Association of the Philippines (MAP) as its “MAP Management Man of the Year” for 2022, making him the second in his family to receive the prestigious award. Netflix to debut subscription with ads [Inquirer Mobile, October 14, 2022] Netflix on Thursday said a subscription option subsidized by ads will debut in November in a dozen countries as the streaming service strives to jumpstart growth. 'Most beautiful' McDonald's in PH opens in Bacolod [ABS-CBN News, October 13, 2022] The newly opened branch is located at The Upper East, a 34-hectare New York-inspired township by Megaworld. https://news.abs-cbn.com/life/10/13/22/most-beautiful-mcdonalds-in-ph-opens-in-bacolod Non-money pay received by employees subject to income tax, BIR says [Manila Bulletin, October 13, 2022] Stocks, bonds and other equities received by employes from their employers are subject to income tax, the Bureau of Internal Revenue (BIR) said on Thursday, Oct. 13. Teleperformance taps Aboitiz's clean power unit to energize Philippine offices [The Philippine Star, October 13, 2022] Call center giant Teleperformance Philippines announced it would switch to AboitizPower’s renewable energy portfolio to power some of its offices, marking a critical juncture in the company’s transition to cleaner energy. Axie Infinity player count falls back to Jan 2021 levels [Cointelegraph, October 12, 2022] The numbers represent a 74% decrease from peak levels witnessed just ten months ago. PH garments manufacturers expect layoffs, closures with decline in US demand [ABS-CBN News, October 12, 2022] The Confederation of Wearable Exporters of the Philippines (CONWEP) said in an online press briefing they expect temporary closures or partial retrenchment of workers among their member manufacturers in the next few months. PEZA approves Cirtek expansion [The Manila Times, October 10, 2022] CIRTEK Holdings Philippines Corp. (CHPC) announced the application for the registration in the expansion project and new projects of its two business units, namely Cirtek Electronics Corp. (CEC) and Cirtek Advanced Technologies and Solutions Inc. Philippine Branch (Catsi), were both approved by the Philippine Economic Zone Authority (PEZA). | 2. SEC LEGAL OPINIONS ON APIC & CONVERSION OF NON-STOCK TO STOCK CORPORATION | [NON-STOCK, NON-PROFIT CORPORATION CANNOT BE CONVERTED TO STOCK CORPORATION WITHOUT LIQUIDATING ITS ASSETS] [AMENDMENT OF ARTICLES OF INCORPORATION OF A NON-STOCK NON-PROFIT IS NOT SUFFICIENT TO CONVERT IT TO A STOCK CORPORATION] P Co. is requesting an opinion on the following: (1) whether a non-stock, non-profit corporation may be converted into a stock corporation without liquidating its assets; (2) whether a non-stock, non-profit corporation may be converted into a stock corporation after it liquidates its assets; and (3) whether an undertaking in the Corporate By-laws indicating that the corporation is accountable for the obligations acquired while it was still a non-stock corporation sufficient if the corporation does not liquidate its assets. In reply, the Commission referred to Section 86 of the Revised Corporation Code of the Philippines (RCCP), which provides that a nonstock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers. Relative to the 1st and 3rd query, a non-stock corporation may not be “converted” into a stock corporation without liquidating its assets nor is an undertaking in the Corporate By-laws indicating that the corporation is accountable for the obligations acquired while it was still a non-stock corporation sufficient. In the previous opinion citing Section 87 of the Corporation Code, it was clarified that a non-stock corporation cannot be converted into a stock corporation by mere amendment of the articles of incorporation. As to the 2nd query, the former members of the non-stock educational corporation may incorporate and organize the educational institution as a stock corporation after liquidating its assets in accordance with the provisions of the RCCP. [SEC OFFICE OF THE GENERAL COUNSEL LEGAL OPINION NO. 22-14, OCTOBER 7, 2022] [APIC FALLS WITHIN THE PURVIEW OF THE TRUST FUND DOCTRINE] [REVERSE STOCK SPLIT AMPLIFIED] C. Co. is requesting an opinion on the proposed actions in returning its capital to its parent company registered in the British Virgin Islands. As represented, C Co. suffered continued losses from 1999 to 2008. To partially wipe out the existing deficit, it was agreed that the advances of the parent company be converted into Additional Paid-in Capital (APIC) as part of the equity restructuring. C Co. intends to return the same provided it can do so legally and without violating the Trust Fund Doctrine. In particular, C. Co. seeks legal opinion on the following: (1) whether the nullification of APIC and its subsequent conversion into subscribed capital will violate the Trust Fund Doctrine; (2) under what circumstances/conditions APIC may be applied to an increase in par value of C. Co. Philippines' shares without violating the Trust Fund Doctrine; (3) whether it is permitted to execute a reverse stock split to cover the deficit in the amount of subscribed capital following the increase in par value; and (4) whether the increase in Authorized Capital Stock as a result of the reverse stock split would be considered "original issuance” of stocks, thus, subject to documentary stamp taxes. In reply, when a corporate “Trust Fund” will be used for purposes other than to pay for the stockholder's additional subscription to the capital stock, it will effectively result in the unauthorized distribution of the corporate Trust Fund, thereby violating the Trust Fund Doctrine. Citing the Supreme Court decisions in Enano-Bote vs. Alvarez, G.R. No. 223572, November 10, 2020, Philippine Trust Company vs. Rivera, G.R. No. 19761, January 29, 1923, and NTC vs. CA, G.R. No. 127937, July 28, 1999, subsequently infused APIC, as a premium, forms part of the capital of a corporation and, therefore, falls within the purview of the Trust Fund Doctrine. In the NTC case, it is clear that "until the liquidation of the corporation, no part of the subscribed capital may be returned or released to the stockholder (except in the redemption of redeemable shares) without violating this principle." The corporate creditors, therefore, should have the first claim on the trust fund of the corporation, and the stockholders have no rights to it until all the creditors are satisfied. Thus, a corporation may not nullify its APIC and subsequently convert it into subscribed capital, as the same violates the Trust Fund Doctrine. On a stock split, in the absence of some features not associated with the typical stock split, the receipt of shares as a result of a split does not result in taxable income to either the stockholder or the corporation. As described in the Philippine Accounting Standards (PAS) 33, a share split refers to issuing ordinary shares to existing shareholders for no additional consideration. Therefore, the number of ordinary shares outstanding is increased without an increase in resources. A reverse split or consolidation of ordinary shares, on the other hand, reduces the number of ordinary shares without a corresponding reduction in resources. As such, a reverse stock split will not create an APIC because the amount of the subscribed and paid-up capital will remain the same, considering that this will merely be a decrease in the number of shares but with a proportionate increase in par value. Hence, undergoing a reverse stock split will not result in the decrease of deficit. On the last query, since there will be no changes in the balance of the Share Capital/Capital Stock after a reverse stock split, an increase or decrease in the capital would not be possible as it simply increases the par value and decreases the number of shares proportionately. Hence, a reverse stock split will not result in an increase in ACS. [SEC OFFICE OF THE GENERAL COUNSEL LEGAL OPINION NO. 22-13, SEPTEMBER 30, 2022] | 3. BIR ISSUES IRR ON THE PROPER TAX TREATMENT OF EQUITY-BASED COMPENSATION | Revenue Regulations (RR) No. 13-2022, issued on October 7, 2022, provides for the proper income tax treatment of Equity-Based Compensation, such as stock options, restricted stock units, stock appreciation rights, and restricted share awards, which may or may not pertain to the shares of stocks of the grantor itself. Once exercised or availed of by the grantee-employees, the same will be considered taxable compensation subject to the withholding tax on compensation, regardless of the employment status of the grantee-employees, whether rank-and-file or managerial or supervisory employee. | 4. BIR RULINGS ON THE EXTENT OF TAX EXEMPTION OF VETERANS FEDERATION OF THE PHILIPPINES, VAT-EXEMPT FEEDS & LIFTING OF NOTICE OF TAX LIEN | THE EXTENT OF TAX EXEMPTION OF THE VETERANS FEDERATION OF THE PHILIPPINES The Veterans Federation of the Philippines (VFP) is seeking a Certificate of Tax Exemption (CTE) from all taxes. A perusal of documents showed that the VFP is created under Republic Act (R.A.) No. 2640, otherwise known as “An Act to Create a Public Corporation known as the Veterans Federation of the Philippines.” It is classified as a government instrumentality with corporate powers, which is not a government-owned and controlled corporation. VFP’s financial statements show that it derives revenue from lease and lot rentals, interest income, road users, service fees, lot rentals, stickers, and penalties. In reply, Section 11 of R.A. No. 2640 provides the exemption of VFP from all taxes. Citing the Supreme Court case of VFP vs. Reyes, funds of VFP are public funds and for public purposes, regardless of its source. This follows that the same shall be tax-exempt. However, they shall be subject to Value-Added Tax (VAT), as the tax privilege provided to VFP is repealed by Sec. 86 (e) of R.A. No. 10963, otherwise known as the “Tax Reform for Acceleration and Inclusion” or TRAIN Law. With this, the VFP is exempted from taxes, except for VAT, if it is used for the public. [BIR RULING NO. 372-2022, AUGUST 23, 2022] MANUFACTURE, DISTRIBUTION & SALE OF FEEDS DEFINED UNDER THE “LIVESTOCK & POULTRY FEEDS ACT ARE VAT-EXEMPT S Feeds Corporation (S Co.) is requesting a Value-Added Tax (VAT) exemption in the manufacture and sale of fish meals. Its primary purpose is to engage in the business of milling, manufacturing, processing, and importing, among others, feeds and agricultural chemicals. The Bureau of Animal Industry (BAI) issued several Certificates of Registration with Licenses to Operate covering the sale of feed products. In reply, Section 109 (1)(B) of the 1997 Tax Code, as amended by Republic Act (R.A.) No. 10963, otherwise known as the “Tax Reform for Acceleration and Inclusion (TRAIN)” Law provides for the exemption from VAT on the sale or importation of feeds. The words “ingredients” and “feeds” are defined in Section 3 of R.A. 1556, otherwise known as the “Livestock and Poultry Feeds Act.” Thus, the distribution/sale of feeds by S Co. is considered exempt from VAT provided that the feeds are used exclusively to produce livestock and poultry feeds, and not for specialty feeds for other animals generally considered as pets. [BIR RULING NO. 371-2022, AUGUST 22, 2022] LIFTING OF NOTICE OF TAX LIEN M is requesting the lifting of the Notice of Tax Lien, Notice of Levy, and Declaration of Forfeiture of Real Properties on Transfer Certificate of Title, which was annotated by the Bureau of Internal Revenue (BIR), purposely to secure the tax liability of the previous owner. In ruling, the Notice of Tax Lien, Notice of Levy, and the Declaration of Forfeiture of Real Property are encumbrances in favor of the government securing the tax liability of the registered owner. However, the encumbrances are effective only in cases wherein the right of ownership in a particular property conforms with the delinquent taxpayer. The tax lien/levy cannot be made applicable to cases when the delinquent taxpayer had sold the property and parted with his ownership thereof. Since the previous owner had sold the subject property to M prior to the inscription of the encumbrances, the annotations therefore in M’s title are void and without any legal effect. Consequently, the Registry of Deeds is given the authority to lift the said encumbrances in M’s favor. [BIR RULING NO. 354-2022, JULY 26, 2022] | 5. CTA CASE ON CTA JURISDICTION ON LOCAL TAX CASES | THE CASES THAT SHOULD BE FILED BEFORE THE CTA MUST PERTAIN TO RTC DECISIONS, RESOLUTIONS, OR ORDERS CONCERNING LOCAL TAX CASES Petitioner CE Casecnan Water and Energy Company, Inc. filed a Petition for Review seeking nullification of the CTA 1st Division’s earlier Decision ruling that it has no jurisdiction over the subject matter of the case. The Petitioner mainly argued that the CTA 1st erred in ruling that it has no jurisdiction over the subject matter of the case. In ruling, Section 7(a)(3) of Republic Act (R.A.) No. 1125, as amended by R.A. No. 9282 or the Act expanding the jurisdiction of the CTA, provides that CTA has exclusive appellate jurisdiction to review by appeal the decisions, orders, or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction. A case is considered a “local tax case” when the subject thereof involves taxes that are imposed by the Local Government Units. Here, although the original case heard in the lower court seems to pertain to the validity of an assessment issued by the Respondents Municipality of Alfonso Castańeda, Nueva Vizcaya, and its Mayor and Treasurer, a simple perusal of the aforesaid assessment itself disclosed that it does not involve a tax dispute. Accordingly, the Court En Banc shall no longer discuss the other issues raised by the Petitioner since the CTA has no jurisdiction over the subject matter of the case. Consequently, the Petition was DENIED. [CE CASECNAN WATER & ENERGY COMPANY, INC. VS. THE MUNICIPALITY OF ALFONSO CASTAŃEDA, NUEVA VIZCAYA & JERRY P. PASIGIAN, JR. & JENNIFER M. TIONGSON, IN THEIR RESPECTIVE CAPACITIES AS MAYOR & TREASURER (OIC) OF THE MUNICIPALITY OF ALFONSO CASTAŃEDA, CTA EN BANC CASE NO. 2492, SEPTEMBER 23, 2022] | DOWNLOAD OUR PAST EDITIONS & FULL TEXT OF REFERENCES https://weeklytaxupdates.getresponsesite.com/ | |
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