TAX AND BUSINESS-RELATED NEWS [OCTOBER 22-28] BIR RULINGS DIGEST BIR ISSUES NEW VERSION OF e-BIRFORMS COURT OF TAX APPEALS CASES DIGEST HIGHLIGHTS OF NEWLY-PASSED POGO TAX
| | | 1. TAX AND BUSINESS-RELATED NEWS | DOF orders BIR to track, tax online sales Lucio Tan throwing $505 million lifeline to PAL as part of airline's reorganization NEA exec persona non grata in Baguio Mastercard expands cryptocurrency services with wallets, loyalty rewards Here’s a list of cinemas opening in Metro Manila this November No phaseout of coal power plants in Mindanao – Cusi Firms may find it harder to get bank loans this quarter AirAsia PH ready to rehire retrenched workers next year Korean firm set to invest P5B to produce e-jeeps, e-cars in PH Bacolod pushes for incentives on fully vaxxed customers Panay power distributors assured damaged submarine cable will be repaired Trump's social media deal ignites 350 percent gain in SPAC's shares
| DOF orders BIR to track, tax online sales [Philippine Daily Inquirer, October 27, 2021] Lucio Tan throwing $505 million lifeline to PAL as part of airline's reorganization [ABS-CBN News, October 27, 2021] Tycoon Lucio Tan’s Buona Sorte Holdings Inc (BSHI) will infuse $255 million, or around P12.75 billion, in fresh capital into Philippine Airlines as part of the ailing carrier’s restructuring, PAL Holdings disclosed on Wednesday. NEA exec persona non grata in Baguio [Philippine Daily Inquirer, October 27, 2021] Omar Mayo, the government lawyer designated to resolve the leadership problem at Benguet Electric Cooperative (Beneco), was declared persona non grata (unwelcome person) by the Baguio City council on Monday for leading the forcible takeover of the utility serving Baguio and Benguet province last week. Mastercard expands cryptocurrency services with wallets, loyalty rewards [ABS-CBN News, October 26, 2021] Mastercard Inc said on Monday it would allow partners on its network to enable their consumers to buy, sell and hold cryptocurrency using a digital wallet, as well as reward them with digital currencies under loyalty programs. | Here’s a list of cinemas opening in Metro Manila this November [Manila Bulletin, October 25, 2021] As per the Inter-Agency Task Force (IATF), cinemas in the National Capital Region (NCR) are only allowed to operate at a minimum of 30 percent capacity and must only admit fully-vaccinated individuals. In addition to that, the Cinema Exhibitors Association of the Philippines (CEAP), through “Sa Sine Safe Ka,” has released a detailed set of protocols to ensure the safety of moviegoers and theater staff. No phaseout of coal power plants in Mindanao – Cusi [Manila Bulletin, October 24, 2021] The Department of Energy (DoE) has categorically countered the planned buy-out and phaseout or retirement of coal-fired power plants in Mindanao, specifying that this is not part of a scenario set in the Philippine Energy Plan (PEP) in the next two decades. | AirAsia PH ready to rehire retrenched workers next year [Philippine Daily Inquirer, October 23, 2021] Budget carrier AirAsia Philippines is ready to rehire retrenched pilots and cabin crew by the second quarter of 2022 as it seeks to double the number of operating planes in the coming months. During a virtual briefing on Thursday, AirAsia Philippines CEO Ricardo Isla said increasing their workforce would be a “top priority” given their plans to expand on the back of easing travel restrictions and lower COVID-19 cases. Korean firm set to invest P5B to produce e-jeeps, e-cars in PH [Philippine Daily Inquirer, October 23, 2021] A Korean company, known for making fire trucks and fire-fighting products, will invest P5 billion to produce electric cars and electric jeepneys in the Philippines, according to the Philippine Economic Zone Authority (Peza), which recently signed a memorandum of understanding (MOU) with the firm. Bacolod pushes for incentives on fully vaxxed customers [Manila Bulletin, October 22, 2021] Hotels, restaurants, and other business establishments here were encouraged to offer incentives to fully vaccinated customers such as discounts and freebies to attract more people to get COVID-19 jabs. Panay power distributors assured damaged submarine cable will be repaired [Manila Bulletin, October 22, 2021] The National Grid Corporation of the Philippines (NGCP) has assured power distributors in Panay Island that preparatory works are underway for the repair of the damaged submarine cable that transmits power across the Visayan island. Trump's social media deal ignites 350 percent gain in SPAC's shares [ABS-CBN News, October 22, 2021] Former US President Donald Trump's deal to create a social media app after Twitter Inc and Facebook Inc barred him won an exuberant endorsement from investors, with shares in a shell company backing the plan closing up more than 350 percent on Thursday after rising more than 400 percent earlier in the day. | 2. BIR RULINGS DIGEST ON EXCISE TAX ON NATURAL SWEETENERS & TAXABILITY OF SERVICES PERFORMED OUTSIDE THE PHILIPPINES | ONLY STEVIA AND COCO SUGAR ARE EXEMPT FROM EXCISE TAX UNDER TRAIN LAW A Co. is requesting legal opinion on whether MONK FRUIT and ERYTHRITOL, which they claim are natural sweeteners, are exempt from excise tax. Accordingly, Section 150-B (A)(B)(C) of the 1997 Tax Code, as amended by Tax Reform for Acceleration and Inclusion (TRAIN) Law states that only sweetened beverages using purely coconut sap sugar and purely steviol glycosides are exempt from excise tax. Moreover, the processing of MONK FRUIT and ERYTHRITOL is neither artificial nor include chemicals, and they should therefore not be considered “non-caloric sweeteners'', by definition, they can still fall under “caloric sweetener” which refers to a substance of sweet. Furthermore, neither MONK FRUIT nor ERYTHRITOL is included under Section 150-B (C) of the Tax Code, which pertains to the exclusions of sweetened beverages. In this instant case, MONK FRUIT and ERYTHRITOL may arguably be in the same classification as stevia and coco sugar, in the sense that they are “natural” sweeteners; unfortunately, the law is clear - only stevia and coco sugar were singled out as exempt. Thus, MONK FRUIT and ERYTHRITOL are not exempt from excise tax, and therefore, taxable. [BIR RULING NO. 343-2021, SEPTEMBER 30, 2021] | SERVICES PERFORMED OUTSIDE THE PHILIPPINES ARE NOT SUBJECT TO PHILIPPINE TAXES B Co. is seeking confirmation that payments made to S Co. are not subject to Philippine income tax as the services are not to be rendered in the Philippines. In their Maintenance Agreement, S Co.’s services will be performed in Barbados using internet-based Remote Computer Repair Technology. It must be maintained that no services will be performed in the Philippines and no S Co. personnel will be sent to the Philippines. In reply, Section 23(F) of the Tax Code of 1997, as amended, provides that a foreign corporation, whether engaged in trade or business in the Philippines, is subject to income tax only with respect to income derived from sources in the Philippines. Moreover, Sections 42(A)(3) and (C)(3) of the Tax Code states that income is considered derived in the Philippines only if the services are performed in the Philippines. As cited in a Supreme Court case of Commissioner of Internal Revenue vs. Marubeni Corporation, G.R. No. 137377, December 18, 2001, services rendered outside the taxing jurisdiction of the Philippines are therefore, not subject to contractor’s tax. Hence, the service fees paid by B Co. to S Co. are exempt from income tax and consequently, from withholding tax. Likewise, it is VAT exempt since the services are performed outside the Philippines pursuant to Section 108(A) of the Tax Code. [BIR RULING NO. 068-2013, SEPTEMBER 28, 2021] | 3. BIR ISSUES NEW VERSION OF e-BIRFORMS | Revenue Memorandum Circular (RMC) No. 111-2021, issued on October 21, 2021, circularizes the availability of Offline Electronic Bureau of Internal Revenue Forms (eBIRForms) Package Version 7.9.2. The updated package now includes the following January 2018 version: BIR Form No. 2552 BIR Form No. 1600-VT BIR Form No. 1600-PT BIR Form No. 1707 BIR Form No. 2200-C
| 4. COURT OF TAX APPEALS CASES DIGEST ON PRESCRIPTION OF CRIMINAL CASES, REFUND & DOCUMENTARY STAMP TAX IMPOSITION | [PRESCRIPTION SHALL COMMENCE FROM THE DAY OF COMMISSION OF THE VIOLATION OF THE LAW OR FROM THE DISCOVERY THEREOF AND THE INSTITUTION OF JUDICIAL PROCEEDINGS] [IN ADDITION TO THE FACT OF DISCOVERY, THERE MUST BE A JUDICIAL PROCEEDING FOR THE INVESTIGATION AND PUNISHMENT OF THE TAX OFFENSE BEFORE THE FIVE-YEAR LIMITING PERIOD BEGINS TO RUN] [TAX CASES ARE PRACTICALLY IMPRESCRIPTIBLE FOR AS LONG AS THE PERIOD FROM THE DISCOVERY AND INSTITUTION OF JUDICIAL PROCEEDINGS FOR ITS INVESTIGATION AND PUNISHMENT, UP TO THE FILING OF THE INFORMATION IN COURT DOES NOT EXCEED FIVE (5) YEARS] Petitioner People of the Philippines filed a Petition for Review assailing the Resolutions promulgated by the CTA 1st Division denying its Motion for Reconsideration. Petitioner maintained that the Information against Respondents Juanchito Bernardo (President), Praxedes Bernardo (Vice President and Treasurer) and JDBEC, Inc. was timely filed before the CTA Division. Petitioner alleged that the application of the pronouncement in Lim, Sr. v. Court of Appeals (Lim case) to the case is contrary to the provision on prescription of crimes, as its interpretation goes beyond what is stated in the law. Petitioner claimed that the Lim case added the phrase “up to the filing of the information in court does not exceed five (5) years” when nowhere in Section 281 of the Tax Code does it so provide. Petitioner also cited the cases of People v. Ma. Theresa Pangilinan (Pangilinan case), and Luis Panaquiton, Jr. vs. Department of Justice (Panaquiton case), to bolster its stand that prescription of crimes is interrupted or tolled by the filing of preliminary investigation before the Department of Justice. In ruling, Section 281 of the Tax Code provides that the period of prescription for the offense charged is five (5) years. As to the time the period of prescription starts to run, the provision states that prescription shall begin to run from the day of the commission of the violation of the law, or if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. The Supreme Court had interpreted the commencement of the prescriptive period as provided in Section 354 (now Section 281) of the Tax Code in the Lim case and ruled that "for as long as the period from the discovery and institution of judicial proceedings for its investigation and punishment, up to the filing of the information in court does not exceed five (5) years", the government's right to file an action will not prescribe. The Court found that the interpretation of the Supreme Court in the Lim case is applicable in the present case. On the other hand, the rulings in Pangalinan and Panaquiton cases are not applicable because these cases do not involve the prescriptive period for the filing of criminal tax case. Applying the foregoing, the Court agreed with the dismissal of the case by the CTA Division on the ground of prescription. Inasmuch as preliminary investigation is a proceeding for investigation and punishment of a crime, it was only on September 23, 2010 when prescriptive period begins to run up to the filing of the information in Court. However, in this case, the filing of the information in Court (June 18, 2019) exceeds five (5) years, thus, the government's right to file an action has prescribed. Consequently, the Petition was DENIED. [PEOPLE OF THE PHILIPPINES VS. JUANCHITO D. BERNARDO, PRAXEDES P. BERNARDO AND JDBEC, INCORPORATED, CTA EN BANC CRIMINAL CASE NO. 078, SEPTEMBER 29, 2021] | [BURDEN OF PROOF RESTS UPON THE CLAIMANT TO ESTABLISH THE FACTUAL BASIS OF CLAIM FOR TAX CREDIT OR REFUND] [BOTH ADMINISTRATIVE AND JUDICIAL CLAIMS FOR REFUND MUST BE FILED BEFORE THE EXPIRATION OF TWO (2) YEARS FROM THE DATE OF PAYMENT, REGARDLESS OF ANY SUPERVENING CAUSE THAT MAY ARISE FROM PAYMENT] Petitioner Philippine Airlines, Inc. filed a Petition for Review seeking refund or issuance of Tax Credit Certificate representing excise taxes imposed on imported items. Petitioner claimed that its importation of catering and commissary supplies for international consumption is exempt from all taxes pursuant to its franchise considering that Republic Act (R.A.) No. 9334 or “An Act Increasing The Excise Tax Rates Imposed on Alcohol and Tobacco Products” did not repeal Presidential Decree (P.D.) No. 1590 or “An Act Granting a New Franchise to Philippine Airlines, Inc.”. However, Respondent Commissioner of Internal Revenue averred that the total amount claimed for refund was not properly documented and that Section 13 of the 1997 Tax Code, as amended by R.A. No. 9334, expressly withdrew the conditional tax exemption granted to Petitioner. In ruling, the Court resolved that in cases of recovery of erroneously paid or illegally collected tax, both the administrative and judicial claim for refund must be filed before the expiration of two (2) years from the date of payment, regardless of any supervening cause that may arise after payment. Likewise, the requirements under Sections 204 and 229 of the 1997 Tax Code must be complied with in order to prove the claim for refund of taxes erroneously paid or illegally collected. Upon perusal of the documents, the Court found that Petitioner failed to present sufficient and convincing evidence to prove that the subject importations of alcohol products were not locally available in sufficient quantity, quality, or price at the time of importation, thus, had not fulfilled all the conditions to be entitled to the tax exemption granted under Section 13 of P.D. No. 1590. Consequently, Petitioner failed to satisfy the fourth (4th) requisite in a claim for refund of taxes erroneously paid or illegally collected under Sections 204 and 229 of the 1997 Tax Code. Thus, the Petition was DENIED for lack of merit. [PHILIPPINE AIRLINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10133, SEPTEMBER 28, 2021] | [JUDICIAL DECISIONS APPLYING OR INTERPRETING THE LAW SHALL FORM PART OF THE LEGAL SYSTEM OF THE PHILIPPINES] [DST IS AN EXCISE TAX, BECAUSE IT IS IMPOSED ON THE TRANSACTION RATHER THAN ON THE DOCUMENT] [DST MAY BE IMPOSED EVEN NO FORMAL AGREEMENTS OR PROMISSORY NOTES ARE EXECUTED] Both the Commissioner of Internal Revenue (CIR) and San Miguel Corporation (SMC) filed their respective Petitions for Review assailing the earlier decision and resolution of the Court of Tax Appeals (CTA) Special 1st Division relative to the refund of SMC on DST in the amount of Php 14,507,465. The claim stemmed from the DST imposition of the CIR on advances to related parties in taxable year 2009 which according to SMC is not supposed to be paid because there was no document executed. Likewise, it also claimed that the decision of the Supreme Court in the case of CIR vs. Filinvest Development Corporation promulgated on July 19, 2011 which effectively reversed previous court decisions and rulings of the BIR should not be applied to cash advances extended to its related parties in taxable year 2009 because at that time the prevailing court decisions and BIR Rulings clearly provided that mere inter-office memos covering inter-company advances were not considered as loan agreements subject to DST. In resolving the Petitions, the Court ruled that interpretation constitutes a part of the law as of the date the statue is enacted. Considering that the interpretation of Section 180 of the Tax Code, as amended, (now Section 179) in Filinvest case was deemed part of the Tax Code as of December 1993 up to the present time, the same may therefore, be applied to this case without violating the principle of non-retroactivity of laws and rulings. More importantly, the decisions in similar cases pronounced that DST may be imposed on the advances based on the Notes to the Audited Financial Statements. DST is an excise tax, because it is imposed on the transaction rather than on the document. Thus, even while there is no debt instrument identified by the BIR, DST may still be imposed, so long as the transactions are clearly established. As Such, SMC’s claim for refund has no basis in fact and in law. Consequently, both Petitions were DENIED. [COMMISSIONER OF INTERNAL REVENUE VS. SAN MIGUEL CORPORATION, CTA EN BANC CASE NOS. 2167 & 2169, SEPTEMBER 23, 2021] | 4. HIGHLIGHTS OF PHILIPPINE OFFSHORE GAMING OPERATIONS (POGO) TAX | On September 22, 2021, President Duterte signed into law Republic Act (R.A.) No. 11590 or the “Act Taxing Philippine Offshore Gaming Operations”. The law amends Sections 22, 25, 27, 28, 106, 108, and adding new Sections 125-A and 288(G) of the 1997 Tax Code, as amended. | | 1. Offshore Gaming Licensee - shall refer to the offshore gaming operator, whether organized abroad or in the Philippines, duly licensed and authorized, through a gaming license, by the Philippine Amusement and Gaming Corporation (PAGCOR) or any special economic zone authority or tourism zone authority or freeport authority to conduct offshore gaming operation, including the acceptance of bets from offshore customers, as provided for in their respective charters. | 2. Service provider refers to any juridical person, duly created or organized within or outside the Philippines, or natural person, regardless of citizenship or residence, which provides ancillary services to an offshore gaming licensee, or any gaming licensee or operator with licenses from other jurisdictions. The ancillary services may include customer and technical relations and support, information technology, gaming software, data provision, payment solutions and live studio and streaming services. | 3. Alien individuals employed and assigned to the Philippines by an offshore gaming licensee or its service providers must pay a final withholding tax of 25% on gross income. However, minimum final withholding tax due for any taxable month from said persons shall not be lower than Php 12,500. | 4. All foreign employees of offshore gaming licensees and their service providers, regardless of nature of employment, shall have a tax identification number (TIN). Otherwise, a penalty of Php 20,000 shall be imposed for each foreign employees, and in proper instances, revocation of their primary and other licenses obtained from government agencies and/or perpetual or temporary ban in employing or engaging foreign nationals for their operations. | 5. Non-gaming revenue of the Philippine-based POGOs is subject to 25% regular income tax. | 6. POGOs are required to withhold, and remit expanded withholding tax on their payments to domestic service providers. | 7. Sale of goods to POGOs and the sale of services rendered in the Philippines by VAT-registered taxpayers to POGOs and their accredited service providers are included in the list of transactions subject to VAT zero-rating. | 8. Disposition of taxes collected from POGOs: | 60% - implementation of Universal Health Care Act 20% - Health Facilities Enhancement Program of the Department of Health 20% - to help attain Sustainable Development Goals determined by the National Economic and Development Authority
| 9. The entire gross gaming revenue or receipts are subject to a percentage tax of 5%, in lieu of all other direct and indirect internal revenue and local taxes. | 10. “Gross gaming revenue or receipts” defined as gross wagers received less payouts made. | 11. PAGCOR to engage the services of a third-party audit platform to determine the amount of gross gaming revenue or receipts that will be subject to tax. | 12. Taking of wagers made in the Philippines and failure to cooperate with the third-party auditor will lead to the revocation of their offshore gaming license. | 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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