TAX AND BUSINESS-RELATED NEWS [OCTOBER 14-22] BUREAU OF INTERNAL REVENUE-INTERNATIONAL TAX AFFAIRS DIVISION (ITAD) RULINGS BIR RULINGS ON VAT-EXEMPT PURCHASES OF COMELEC & TAX-EXEMPT RETIREMENT COURT OF TAX APPEALS CASES DIGEST
| | | 1. TAX AND BUSINESS-RELATED NEWS | Google halves Play Store fees for subscription apps New name for Facebook? Critics say reports meant to distract from controversy DOF: Without new law, excise on fuel can’t be suspended No jab, no pay’ scheme illegal: DOLE Vince Dizon resigns as BCDA president, stays in gov't COVID-19 efforts - BCDA exec Labor dept says 'no COVID-19 vaccine, no pay' is unlawful Drilon: Tax and then ban Chinese firm in pandemic funds mess Georgia faces healthcare staff shortage amid lingering pandemic Banning unvaccinated from work illegal – ECOP SC upholds driver/hauler; reverses NLRC, CA rulings Isko Moreno to seek tax cut on electricity if he wins 2022 presidential race SC on 3-week decision-writing period from Oct. 18 to Nov. 8 Gov’t eyes P492-B investments from gas deals Lucio Tan alone bankrolling PAL revival Bitcoin tops $60,000 on US fund approval hopes Converge joins Mineski Global Bohol, Davao investors lose P2B in new scam Amazon will allow workers to be remote indefinitely Jollibee, Ayala, Aboitiz among world's best employers Workers must get 13th month pay, Palace reminds business owners
| Google halves Play Store fees for subscription apps [ABS-CBN News, October 22, 2021] Alphabet Inc-owned Google said on Thursday it is lowering the fee that subscription-based apps need to pay Play Store to 15 percent right from day one, following criticism about its fee structure from companies such as Spotify . New name for Facebook? Critics say reports meant to distract from controversy [ABS-CBN News, October 21, 2021] Facebook critics pounced Wednesday on a report the leading social network plans to rename itself, arguing it may be seeking to distract from recent scandals and controversy. DOF: Without new law, excise on fuel can’t be suspended [Philippine Daily Inquirer, October 21, 2021] The Department of Finance (DOF) is cold to the Department of Energy’s (DOE) proposal to suspend excise on oil amid high global prices, as doing so would cost the government over a hundred billion pesos in foregone revenues amid a prolonged pandemic. ‘No jab, no pay’ scheme illegal: DOLE [ABS-CBN News, October 19, 2021] Withholding the salary of employees because they have not yet received the vaccine against COVID-19 is illegal, the Department of Labor and Employment (DOLE) said Tuesday. | Vince Dizon resigns as BCDA president, stays in gov't COVID-19 efforts - BCDA exec [ABS-CBN News, October 19, 2021] Secretary Vince Dizon has resigned as president and chief executive officer of the Bases Conversion and Development Authority but will continue to be part of the government's efforts against the COVID-19 pandemic, a BCDA official said Monday. Labor dept says 'no COVID-19 vaccine, no pay' is unlawful [ABS-CBN News, October 18, 2021] Employers who refuse to pay workers who are unvaccinated against COVID-19 will be investigated as this practice is “unlawful”, the labor department said on Monday. Drilon: Tax and then ban Chinese firm in pandemic funds mess [Philippine Daily Inquirer, October 18, 2021] Senate Minority Leader Franklin Drilon said a Chinese company that won contracts for pandemic supplies worth P2.23 billion but had not paid taxes should be made to pay up and then banned from doing any more business in the country. Georgia faces healthcare staff shortage amid lingering pandemic [ABS-CBN News, October 18, 2021] A report from the Bureau of Labor Statistics released Tuesday shows a record-breaking 4.3 million Americans quit their jobs in August, the highest level since the agency started tracking in 2000. The healthcare industry is one of the most affected sectors. The Covid-19 pandemic, officials say, exacerbated an already-existing shortage. | Banning unvaccinated from work illegal – ECOP [Manila Bulletin, October 18, 2021] The Employers Confederation of the Philippines (ECOP) declared that banning unvaccinated workers from returning to work is illegal. SC upholds driver/hauler; reverses NLRC, CA rulings [Manila Bulletin, October 18, 2021] On May 19, 2017, Upod sued Onon Trucking and Marketing Corporation (Onon Trucking) and Aimardo V. Interior for illegal dismissal. Isko Moreno to seek tax cut on electricity if he wins 2022 presidential race [ABS-CBN News, October 18, 2021] Manila City Mayor Francisco "Isko Moreno" Domagoso on Monday said he would seek to reduce taxes on electricity should he win the 2022 presidential race. SC on 3-week decision-writing period from Oct. 18 to Nov. 8 [Manila Bulletin, October 17, 2021] | Gov’t eyes P492-B investments from gas deals [Manila Bulletin, October 17, 2021] The government is expecting P492.4 billion worth of investments if the oil and gas service contracts (SCs) to be awarded under the Philippine Conventional Energy Contracting Program (PCECP) designed by the Duterte administration will eventually reach commercial development and production phases. Lucio Tan alone bankrolling PAL revival [Philippine Daily Inquirer, October 16, 2021] Bitcoin tops $60,000 on US fund approval hopes [ABS-CBN News, October 16, 2021] Bitcoin breached the $60,000 mark for the first time since April on growing optimism that American regulators will greenlight the first US futures exchange-traded fund for the cryptocurrency. Converge joins Mineski Global [Manila Bulletin, October 15, 2021] With internet connectivity as essential in day-to-day tasks and responsibilities, it also plays a vital role in the esports industry. Having access to a fast, stable, and consistent internet connection helps gamers unleash their full potential and showcase their talent. Internet setbacks are one of the biggest challenges today with gamers hyper-focused on bringing home the bacon and establishing a name for themselves. Bohol, Davao investors lose P2B in new scam [Philippine Daily Inquirer, October 14, 2021] At least 300 residents in Bohol province have sought the help of the police’s Criminal Investigation and Detection Group (CIDG) to recover at least P2 billion which they lost to people behind a new scam. Amazon will allow workers to be remote indefinitely [Philippine Daily Inquirer, October 14, 2021] Amazon announced that most of the corporate and tech employees would continue to work remotely. Only that, Amazon employees should be able to commute to the office when needed. This is a change to Amazon’s earlier stance of resuming work in the offices in January. Jollibee, Ayala, Aboitiz among world's best employers [Rappler, October 14, 2021] Three Filipino companies joined the prestigious list of the world’s best employers by Forbes. Workers must get 13th month pay, Palace reminds business owners [Manila Bulletin, October 14, 2021] Presidential Spokesperson Harry Roque reminded companies Thursday, Oct. 14 that there are no exceptions when it comes to releasing 13th month pay to employees, even amid the protracted coronavirus disease (COVID-19) pandemic. | | A. ROYALTY INCOME IS SUBJECT TO 25% TAX RATE FOLLOWING NON-APPLICABILITY OF THE MOST-FAVORED NATION CLAUSE; BUSINESS PROFITS OF A NON-RESIDENT FOREIGN CORPORATION (NRFC) ARE TAXABLE IF ATTRIBUTED TO A PERMANENT ESTABLISHMENT IN THE PHILIPPINES | B. SERVICE FEES PAID TO A NON RESIDENT FOREIGN CORPORATION (NRFC) WITH NO PERMANENT ESTABLISHMENT IN THE PHILIPPINES ARE EXEMPT FROM INCOME TAX PURSUANT TO RP-SINGAPORE TAX TREATY; TAXATION OF PAYMENT FOR SERVICES DEPENDS ON CLASSIFICATION OF SUCH AS BUSINESS PROFITS OR ROYALTIES; SERVICE FEES WHICH CONSTITUTE AS BUSINESS PROFITS ARE EXEMPT FROM INCOME TAX IF NOT ATTRIBUTABLE TO A PERMANENT ESTABLISHMENT; SERVICES PERFORMED IN THE PHILIPPINES BY AN NRFC SHALL BE CONSIDERED AS RENDERED IN THE COURSE OF TRADE OR BUSINESS, HENCE, SUBJECT TO VAT | C. CAPITAL GAINS TAX EXEMPTION ON TRANSFER OF SHARES BETWEEN TWO (2) NON-RESIDENT FOREIGN CORPORATION (NRFC) OVER LOCAL SHARES OF STOCKS; DONOR’S TAX IS IMPOSABLE EVEN IN THE ABSENCE OF DONATIVE INTENT ON THE PART OF THE SELLER OF THE SHARES | D. SERVICE FEES PAID TO JAPAN NON-RESIDENT FOREIGN CORPORATION (NRFC) WITH NO PERMANENT ESTABLISH IS EXEMPT FROM FINAL WITHHOLDING TAX (FWT) AND FINAL WITHHOLDING FVAT (FVAT) THOUGH THERE IS SERVICE RENDERED IN THE PHILIPPINES IF THE WITHHOLDING AGENT IS PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA)-REGISTERED | [ROYALTY INCOME IS SUBJECT TO 25% TAX RATE FOLLOWING NON-APPLICABILITY OF THE MOST-FAVORED NATION CLAUSE] [BUSINESS PROFITS OF AN NRFC ARE TAXABLE IF ATTRIBUTED TO A PERMANENT ESTABLISHMENT IN THE PHILIPPINES] D-PH is seeking confirmation on whether the royalty payments made to D-US are subject to the 10% preferential income tax rate pursuant to the Most Favored Nation (MFN) Clause under Article 13(2)(b)(iii) of the Philippines-United States (PH-US) Tax Treaty, in relation to Article 12(2)(a) of the Philippines-United Arab Emirates (PH-UAE) Tax Treaty. In reply, Section 28(B)(1) of the Tax Code provides that the income of a non-resident foreign corporation is subject to 30% income tax (now 25% under CREATE Law). However, under Section 32(B)(5) of the same code, such income is exempt to the extent required by any treaty obligation binding upon the Philippine government. Even if the royalty payments for licensed information, firmware, or software made by D-PH to D-US were able to qualify as per the definition of royalties under the treaty provisions, the Bureau did not agree that the methods employed for eliminating or mitigating the effects of double taxation under the tax treaty with the US and UAE are the same. Thus, the MFN clause shall not be applicable, and the royalty income derived by D-US shall be subject to the 25% income tax rate. Further, Section 28 (B)(4) of the Tax Code provides that the rental payments for the use of test equipment made to D-US are subject to a tax rate of 7.5% on the gross rentals or fees. Article 8 of the PH-US Tax Treaty provides that business profits of D-US shall be taxable only in the US unless it has a permanent establishment in the Philippines. Further, gross receipts derived by D-US from all sales of services to D-PH are also subject to 12% VAT under Section 108(4), relative to Section 105 of the Tax Code. [BIR ITAD RULING NO. 044-21, SEPTEMBER 29, 2021] | [SERVICE FEES PAID TO AN NRFC WITH NO PERMANENT ESTABLISHMENT IN THE PHILIPPINES ARE EXEMPT FROM INCOME TAX PURSUANT TO RP-SINGAPORE TAX TREATY] [TAXATION OF PAYMENT FOR SERVICES DEPENDS ON CLASSIFICATION OF SUCH AS BUSINESS PROFITS OR ROYALTIES] [SERVICE FEES WHICH CONSTITUTE AS BUSINESS PROFITS ARE EXEMPT FROM INCOME TAX IF NOT ATTRIBUTABLE TO A PERMANENT ESTABLISHMENT] [SERVICES PERFORMED IN THE PHILIPPINES BY AN NRFC SHALL BE CONSIDERED AS RENDERED IN THE COURSE OF TRADE OR BUSINESS, HENCE, SUBJECT TO VAT] E Co. is seeking confirmation on whether the service fees paid to E Ltd., a Singapore-based corporation are exempt from income tax pursuant to the Philippines-Singapore (RP-Singapore) Tax Treaty. In reply, E Ltd. was not deemed to have a permanent establishment in the Philippines following that it has no fixed place of business and had not furnished services in the Philippines through its employees or other personnel for more than 183 days. As such, service fees paid by E. Co is exempt from Philippine income tax pursuant to paragraph 1, Article 7 of the RP-Singapore Tax Treaty. Furthermore, classification of said fees was emphasized, distinguishing such payments as business profits which shall be exempt if not attributable to a permanent establishment, as against as payments for know-how or royalties which shall be subject to income tax at reduced rate. The Organisation for Economic Co-operation and Development provides that in the supply of know-how, there would generally be minimal services done other than to supply existing information or reproduce existing material. Whereas in the performance of services, it mostly involves a greater level of expenditure by the supplier to perform his contractual obligations to the other party, such as salaries and wages for employees engaged in researching, designing, testing, drawing and other associated activities or payments to subcontractors for the performance of similar services. Considering that the Service Agreement between E Co. and E Ltd. involves services covering various areas including regional management, human resources, IT, and marketing and branding, and by reason that a greater level of expenditure will be incurred by E Ltd. in relation to provision of such services, the fees paid by E Co. clearly constitute as business profits and not royalties. Lastly, the service fees are likewise subject to 12% final withholding VAT pursuant to Section 4.112-2 of Revenue Regulations No. 16-2005. The VAT withheld shall be filed through BIR Form 1600 which shall serve as documentary substantiation for its claim of input tax on the fees. In case that E Co. is not VAT-registered, it may treat the VAT as part of the cost of services, whichever is applicable. [BIR ITAD RULING NO. 042-21, SEPTEMBER 29, 2021] | [CAPITAL GAINS TAX EXEMPTION ON TRANSFER OF SHARES BETWEEN TWO (2) NRFC OVER LOCAL SHARES OF STOCKS] [DONOR’S TAX IS IMPOSABLE EVEN IN THE ABSENCE OF DONATIVE INTENT ON THE PART OF THE SELLER OF THE SHARES] MHI, a foreign parent of MTSC, is requesting confirmation that the capital gains from the transfer of its shares in MTSC, a domestic corporation, to MHPS, a foreign corporation, are exempt from capital gains tax pursuant to the Philippines-Japan Tax Treaty. The MTSC shares were transferred by MHI in exchange for the MHPS shares. In ruling on the taxability of the capital gains, Section 28(B)(5)(c) of the Tax Code, provides that the net capital gains realized from the sale, barter, exchange, or other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through the stock exchange, are subject to capital gains tax, except when such income is exempt under any treaty obligation binding on the Government of the Philippines. Article 13(4) of the Philippines-Japan Tax Treaty allows the Philippines to tax the gains derived by a resident of Japan from the disposition of its shares in a domestic corporation if the latter’s assets consist principally of immovable property or real property interests situated in the Philippines. To determine whether the assets of the domestic corporation consist principally of immovable assets, reference may be made to Section 2(b) of Revenue Regulations (RR) No. 4-86, which defines the term "principally" as more than fifty percent (50%) of the entire assets in terms of value. Based on MTSC's Balance Sheet, the percentage of its real property interest over its total assets was only 29.84%. Since MTSC's assets do not consist principally of immovable property, the gains realized by MHI from the sale of its shares in MTSC to MHPS shall only be taxable in Japan. Hence, said gains are exempt from Philippine income tax. However, under Section 100 of the Tax Code, where property (other than real property located in the Philippines and classified as capital assets) is transferred for less than an adequate and full consideration in money or money's worth, the amount by which the Fair Market Value of the property exceeded the value of the consideration shall be deemed a gift subject to the donor's tax. [BIR ITAD RULING NO. 041-21, SEPTEMBER 29, 2021] | SERVICE FEES PAID TO JAPAN NRFC WITH NO PERMANENT ESTABLISH IS EXEMPT FROM FWT AND FVAT THOUGH THERE IS SERVICE RENDERED IN THE PHILIPPINES IF THE WITHHOLDING AGENT IS PEZA-REGISTERED P Co., a PEZA export enterprise, is requesting confirmation that payment of service fees to J Co. is exempt from income tax pursuant to Philippines-Japan Tax Treaty. In reply, paragraph 1, Article 7, and paragraphs 1, 2, and 6, Article 5 of the Philippines-Japan Tax Treaty provide that the profits of an enterprise of a Contracting State shall be taxable only in that Contracting State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein and the profits are attributable to the permanent establishment. Considering that J Co. is not licensed to engage in trade or business in the Philippines, does not have an office, a branch, or a fixed place of business in the Philippines, and did not furnish services for more than six (6) months within any twelve-month period but for thirty-six (36) days only, J Co. shall not be deemed to have a permanent establishment. This being so, the service fees by P Co. to J Co. shall be exempt from Philippine income tax. Similarly, since the services were performed in the Philippines, the services therefore, are subject to VAT. However, since P Co. is a PEZA-registered enterprise, and as such, is exempt from national and local taxes, the sale of services is, therefore, exempt from VAT. [BIR ITAD RULING NO. 033-21, JUNE 18, 2021] | VAT-EXEMPT PURCHASES OF COMELEC & TAX-EXEMPT RETIREMENT | [COMMISSION ON ELECTION (COMELEC) IS VAT AND PERCENTAGE TAX EXEMPT ON ITS LOCAL PURCHASES OF GOODS AND SERVICES, AND IMPORTATION OF GOODS] [SUPPLIERS OF GOODS AND SERVICES CANNOT SHIFT OR PASS VAT AND PERCENTAGE TAX TO PURCHASES FOR ELECTION USE] [COMELEC’s INPUT TAX ATTRIBUTABLE TO VAT EXEMPT SALES SHALL NOT BE ALLOWED AS CREDIT, BUT TREATED AS PART OF THE COST OR EXPENSE] H Co. is seeking confirmation that its commercial printing services rendered to COMELEC are business tax-exempt under Republic Act (R.A.) No. 8436 otherwise known as Automated Election Law as amended by R.A. No. 9369. In reply, Section 12 of R.A. No. 9369 provides that COMELEC is authorized to procure by purchase, lease, rent, or other forms of acquisition, supplies, equipment, materials, software, facilities, and other services, from local or foreign sources free from taxes and import duties relative to the automated national and local elections. Given the preceding provision and as held in BIR Ruling No. 390-2015, COMELEC is clearly exempt from 12% VAT or 3% percentage tax on its local purchases of goods and services, as well as the importation of goods. Hence, the suppliers/sellers of goods and services to COMELEC cannot shift or pass on any VAT or percentage tax on the latter’s purchases of goods and services that will be used in the elections. Consequently, such exemption may only be invoked by COMELEC, and it does not extend to COMELEC’s suppliers with respect to the latter’s purchases and other contractual agreements. Thus, neither the NPO, H Co., or the Joint Venture is entitled to the said tax exemption but shall be considered the end-user who will bear or assume the tax burden. Consequently, input tax attributable to VAT-exempt sales to COMELEC shall not be allowed as a credit against the output tax on the supplier’s part but should be treated as part of their cost or expense. [BIR RULING NO. OT-268-21, JULY 26, 2021] | TAX EXEMPT RETIREMENT BENEFITS MAY BE GRANTED EVEN IN THE ABSENCE OF AN APPROVED REASONABLE RETIREMENT PLAN PURSUANT TO SECTION 1 OF REPUBLIC ACT (R.A.) NO. 7641 AM, Inc. is requesting for exemption from payment of taxes on the retirement benefits of workers to be received based on the Collective Bargaining Agreement (CBA) entered into by AM, Inc and FFW-AM Chapter. AM, Inc. is a corporation duly organized and existing under the laws of the Philippines, while FFW-AM, Inc. Chapter is a legitimate labor union duly registered with the DOLE. AM, Inc. and FFW-AM, Inc. Chapter entered into a CBA, Article XIII of which grants termination and retirement benefits. Accordingly, if the company maintains a private retirement plan which have been determined by the BIR as a "reasonable retirement benefit plan," the retirement benefits that will be received by the employees shall be exempt from income tax, provided that the two (2) conditions are met: (1) the employee had been in the service of the same private firm for at least ten (10) years; and (2) he is at least fifty (50) years old at the time of retirement. However, even if the company maintains a retirement plan but was not approved by the BIR as a "reasonable retirement benefit plan", the provisions of Section 1 of R.A. No. 7641 otherwise known as “Retirement Pay Law” shall apply. In the instant case, considering that the Article XIII of the CBA which provides for termination and retirement benefits was not determined or approved by the BIR as a "reasonable retirement benefit plan," the requirements under Section 1 of RA No. 7641, in order that the employee benefits received may be granted tax exemption must be present: (1) the employee had been in the service for at least five (5) years; and (2) he is at least sixty (60) years old but not beyond sixty-five (65) years old at the time of retirement. [BIR RULING NO. OT-243-21, JULY 12, 2021] | 4. COURT OF TAX APPEALS CASES DIGEST | A. UNDER THE DOCTRINE OF INCORPORATION, RULES OF INTERNATIONAL LAW ARE GIVEN A STANDING EQUAL, NOT SUPERIOR, TO NATIONAL LEGISLATIVE ENACTMENTS; THE ISSUANCE OF REVENUE MEMORANDUM CIRCULAR (RMC) NO. 31-2013 DOES NOT HAVE A MODIFYING EFFECT ON ANY RULE OR REGULATION; TAXABILITY OF THE INCOME DERIVED FROM WORKING WITH ASIAN DEVELOPMENT BANK (ADB) IS NOT DEPENDENT ON THE VALIDITY OR INVALIDITY OF RMC NO. 31-2013 | B. DIFFERENCE BETWEEN REQUEST FOR RE-INVESTIGATION AND RECONSIDERATION AMPLIFIED; ISSUANCE OF FINAL DECISION ON DISPUTED ASSESSMENT (FDDA) BEFORE THE LAPSE OF THE 60-DAY PERIOD AFTER FILING FOR REQUEST FOR REINVESTIGATION WILL RENDER THE ASSESSMENT VOID; WITHIN 60 DAYS FROM FILING OF THE PROTEST, ALL RELEVANT SUPPORTING DOCUMENTS SHALL HAVE BEEN SUBMITTED, OTHERWISE THE ASSESSMENT SHALL BECOME FINAL | C. ASSESSMENT IS VOID FOR FALURE TO STATE THE FACTS AND LAW ON WHICH SUCH ASSESSMENT WAS MADE | D. OTHER OFFICIALS MAY BE AUTHORIZED TO ISSUE AND SIGN LETTERS OF AUTHORITY BUT ONLY UPON PRIOR AUTHORIZATION BY THE COMMISSIONER HIMSELF; COURT MAY NOT LIMIT ITSELF TO THE ISSUES STIPULATED BY THE PARTIES BUT MAY ALSO RULE UPON RELATED ISSUES NECESSARY FOR ORDERLY DISPOSITION OF A CASE; REASSIGNMENT OR TRANSFER OF CASES TO ANOTHER REVENUE OFFICER (RO) SHALL REQUIRE THE ISSUANCE OF A NEW LETTER OF AUTHORITY (LOA) | [UNDER THE DOCTRINE OF INCORPORATION, RULES OF INTERNATIONAL LAW ARE GIVEN A STANDING EQUAL, NOT SUPERIOR, TO NATIONAL LEGISLATIVE ENACTMENTS] [THE ISSUANCE OF RMC NO. 31-2013 DOES NOT HAVE A MODIFYING EFFECT ON ANY RULE OR REGULATION] [TAXABILITY OF THE INCOME DERIVED FROM WORKING WITH ADB IS NOT DEPENDENT ON THE VALIDITY OR INVALIDITY OF RMC NO. 31-2013] Petitioner Irish Aguilar and employees of Asian Development Bank (ADB) filed a Petition for Review seeking refund of the alleged erroneously and illegally paid income tax for taxable years 2015 and 2016. Petitioners argued that Revenue Memorandum Circular (RMC) No. 31-2013, which imposes income tax on Filipino ADB employees, amends or alters the provision of Chapter VIII, Article 56(2) of the ADB Charter. Petitioners also cited that the ADB charter grants the Philippine government the discretion to tax, believing that the “power to tax” Filipino ADB employees may or may not be exercised in the future. For this reason, Petitioners claimed that the income tax exemption of ADB employees under said Agreement would prevail since there is no enabling law from the Philippine Congress. In ruling, upon scrutiny of the ADB Charter, the Court found that although the grant of tax-exempt privileges is explicit in nature, the ADB Charter still upholds the prerogative of the Philippine Government to tax its nationals. Moreover, the necessity of an enabling law as propounded by Petitioners is negated by the existing Tax Code of 1997. Under Sections 23(A) and 24(A)(1)(a) of the Tax Code, a resident citizen of the Philippines whose income is derived from all sources within and outside the Philippines is subject to income tax. Based on the foregoing, RMC No. 31-2013 is in accord with the ADB Charter and the provisions of the 1997 Tax Code. Thus, the Petition was DENIED. [IRISH FE N. AGUILAR, ET.AL, VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9867, SEPTEMBER 30, 2021] | [DIFFERENCE BETWEEN REQUEST FOR RE-INVESTIGATION AND RECONSIDERATION AMPLIFIED] [ISSUANCE OF FDDA BEFORE THE LAPSE OF THE 60-DAY PERIOD AFTER FILING FOR REQUEST FOR REINVESTIGATION WILL RENDER THE ASSESSMENT VOID] [WITHIN 60 DAYS FROM FILING OF THE PROTEST, ALL RELEVANT SUPPORTING DOCUMENTS SHALL HAVE BEEN SUBMITTED, OTHERWISE THE ASSESSMENT SHALL BECOME FINAL] Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking to reverse the earlier decision of the Court cancelling the assessment issued against the Respondent Philsaga Mining Corporation for premature issuance of Final Decision on Disputed Assessment (FDDA), thereby depriving the Respondent on its right to due process. Petitioner argued that although the protest of the Respondent was captioned as request for reinvestigation, it was actually a request for reconsideration because no documents were submitted by the Respondent, nor were there new arguments offered. Hence, Petitioner cannot be faulted by issuing the FDDA 43 days after the filing of Respondent’s protest to the Formal Letter of Demand and Formal Assessment Notice. On the other hand, Respondent countered that Petitioner’s failure to observe the 60-day period granted under the Tax Code is tantamount to depriving the taxpayer to be heard, and thereby failing to satisfy the due process. In ruling, the Court discussed that request for reconsideration refers to a plea of re-evaluation of an assessment based on existing records without need of additional evidence, while request for reinvestigation refers to a plea of re-evaluation of an assessment based on newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation. Upon scrutiny, records show that Respondent indicated in its protest that it would furnish Petitioner with supporting documents, hence, it is considered as request for reinvestigation. With Petitioner’s issuance of the FDDA before the lapse of the 60-day period after the filing of the protest, Respondent was essentially precluded from its right to submit supporting documents in support of its protest. By failing to wait for the submission of the supporting documents to the protest, Petitioner unduly deprived the Respondent the opportunity to be heard, and thereby failing to satisfy the due process. Thus, the Petition was DENIED, and the earlier decision was AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. PHILSAGA MINING CORPORATION, CTA EN BANC CASE NO. 2262, SEPTEMBER 23, 2021] | ASSESSMENT IS VOID FOR FALURE TO STATE THE FACTS AND LAW ON WHICH SUCH ASSESSMENT WAS MADE Petitioner Ateneo De Davao University filed a Petition for Review seeking cancellation of the assessment issued by Respondent Commissioner of Internal Revenue citing prescription as its defense. On the other hand, Respondent countered that the right to assess has not yet lapsed citing the applicability of extraordinary period of ten (10) years because of substantial under-declaration of the Petitioner. In ruling, the Court held that the assessment is void for failure to state the facts and law on which such assessment was made. Based on Section 228 of the Tax Code, Respondent is mandated to inform the taxpayer in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Also, the assessment has already prescribed. Upon scrutiny, there is nothing in the record to show any allegations of fraud or any of the exemptions provided under the Tax Code to justify the application of the extraordinary ten (10) year prescriptive period to assess the Petitioner. Thus, the Petition was GRANTED, and the assailed assessment was CANCELLED and SET ASIDE. [ATENEO DE DAVAO UNIVERSITY VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO 9779, SEPTEMBER 23, 2021] | [OTHER OFFICIALS MAY BE AUTHORIZED TO ISSUE AND SIGN LETTERS OF AUTHORITY BUT ONLY UPON PRIOR AUTHORIZATION BY THE COMMISSIONER HIMSELF] [COURT MAY NOT LIMIT ITSELF TO THE ISSUES STIPULATED BY THE PARTIES BUT MAY ALSO RULE UPON RELATED ISSUES NECESSARY FOR ORDERLY DISPOSITION OF A CASE] [REASSIGNMENT OR TRANSFER OF CASES TO ANOTHER RO SHALL REQUIRE THE ISSUANCE OF A NEW LOA] Petitioner Commissioner of Internal Revenue (CIR) files a Petition for Review seeking to set aside and cancel the assailed Decision and Resolution promulgated by the Court of Tax Appeals (CTA) Special First (1st) Division cancelling the assessment issued against then Respondent PGA Sompo Insurance Corporation. Petitioner argued that assessment should not be cancelled since due process is observed in the conduct of assessment. In ruling, the Court held that it may not limit itself to the issues stipulated by the parties but may also rule upon related issues necessary for orderly disposition of the case. Albeit previously unraised, the prevalent issue is whether the ROs assigned – Luzviminda A. Pedrosa and Group Supervisor (GS) Fe F. Caling, have authority to perform the audit. It is to be recalled that their authority arose from a mere Memorandum of Agreement (MOA) issued and signed by the OIC-Chief of Large Taxpayers Regular Audit Division (LTS-RLTAD) II instead of a new Letter of Authority (LOA) as required under Revenue Memorandum Order (RMO) No. 43-90; whereas the original LOA signed by the Assistant Commissioner authorized RO Saidamen Marohombsar and GS Adora Alberto. The Court cited the same RMO above for the list of officials authorized to issue, sign, and effect a modification on an LOA: Regional Directors, Deputy Commissioners, and Commissioner. Other officers are only allowed if they were given prior authorization by the Commissioner himself – there was no mention that OIC-Chief was given such; hence, there is lack of authority. Following the discussion: LOA is invalid, assessment is void and bears no fruit. Therefore, Petition wass DENIED for lack of merit. [COMMISSIONER OF INTERNAL REVENUE VS. PGA SOMPO INSURANCE CORPORATION, CTA EN BANC CASE NO. 2203, SEPTEMBER 15, 2021] | Thank you and best regards, WILLIE B. SANTIAGO Lawyer & Certified Public Accountant Tax & Corporate Services Division TL : (+632) 8 894-5892 Loc. 703 Website: www.dmdcpa.com.ph Don Jacinto Building De la Rosa corner Salcedo Streets Legaspi Village, Makati City 1229 Philippines | |
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