TAX & BUSINESS-RELATED NEWS [AUGUST 29-SEPTEMBER 5] SEC LEGAL OPINIONS ON AMENDMENT OF LICENSE & REAL ESTATE INVESTMENT TRUST DOF LEGAL OPINIONS REVERSING BIR RULINGS ON TAXABILITY OF RECEIPTS OF HOMEOWNERS' ASSOCIATION & DONOR'S TAX IMPOSITION ON BONAFIDE CORPORATE RESTRUCTURING BIR RULINGS
| 1. TAX & BUSINESS-RELATED NEWS [AUGUST 29-SEPTEMBER 5] | | House bill grants 10-day bereavement leave NEA orders power coops to bring down fuel costs 10 companies hiring right now that let you work from anywhere in the world NCCA issues cease-and-desist order against demolition of Locsin-designed Makati towers Devanadera is new acting Clark Development Corp. CEO, president Approved FDIs in Subic Freeport hits P32.98B year on year Jollibee restaurant opens its doors in Northeast Philadelphia Bill filed expanding NLRC SSS raises alarm on pension benefits Miss Universe pageant for sale at US$20M – report Breaking: Binance Announces LUNC, USTC Deposit And Withdrawal Changes Megawide, India’s GMR divesting from MCIA; Aboitiz group to take over Villar’s AMBS redefines TV experience for Filipino viewers Singapore Food Festival 2022 brings hit SG restaurants to PH SEC shuts down Wellcons Unlimited Systems Philippines lags globally in 5G usage but is fast catching up says Nokia Lufthansa pilots stage strike in wage dispute P1.2-T ‘excesses’ of oligopolists blamed for high power rates Embattled Credit Suisse aims to launch China wealth business next year Baguio eyes PPP deals for more parking buildings Fruitas sets up ‘cloud kitchen’ to expand reach US awards P288-M grant for conservation, climate solutions in PH BSP to watch banks with cyber software GCash to forward transaction confirmation messages to app's inbox CCP closed for 2 to 3 years starting January 2023 BBM Guest Program, tourist 'super app', more: DOT's plans, programs for recovery ABS-CBN-TV5, Cignal-Sky terminate investment deal Experts raise questions over proposed EDSA busway privatization Why foreign banks exit the Philippines Diokno rejects Total PH’s request: Goodwill subject to VAT
| 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. | House bill grants 10-day bereavement leave [The Manila Times, September 5, 2022] HB 2345 "shall allow the employee to take a leave from work to grieve and recover from the loss without sacrificing his income," Romualdez and Acidre said in the bill's explanatory note. NEA orders power coops to bring down fuel costs [The Philippine Star, September 4, 2022] In a memorandum dated Sept. 1, NEA instructed all ECs to adopt a 15-day fuel consumption monitoring cycle for their service vehicles and other operational equipment or vehicle. 10 companies hiring right now that let you work from anywhere in the world [Insider, September 3, 2022] Here are its 10 companies that offered the most full- or part-time work-from-anywhere jobs in the six-month period. These have no location restrictions and require no time in an office. NCCA issues cease-and-desist order against demolition of Locsin-designed Makati towers [The Philippine Star, September 3, 2022] The National Commission for Culture and the Arts has issued a cease-and-desist order against the ongoing demolition of the BDO Corporate Center buildings in Makati City, designed by National Artist for Architecture Leandro Locsin. Devanadera is new acting Clark Development Corp. CEO, president [ABS-CBN News, September 3, 2022] Former Energy Regulatory Commission chairperson Agnes Devanadera is the new acting president and CEO of Clark Development Corporation (CDC), documents showed Friday. Approved FDIs in Subic Freeport hits P32.98B year on year [The Manila Times, September 3, 2022] Meanwhile, Renato Lee 3rd, senior deputy administrator for business and investment, said the biggest FDI account came from Vectrus Subic Corp. (formerly Vector Services Philippines Corp.) with a P14.5-billion investment. The company is engaged in general logistics services and service exports. This was followed by Agila South Inc. with an investment of P10.73 billion; Agila NY Naval Inc. approved an investment of P6.28 billion; and Agila Subic TC Inc. with an investment of P313.13 million, to name a few. Jollibee restaurant opens its doors in Northeast Philadelphia [ABC, September 3, 2022] The food website Eater.com ranked Jollibee's chickenjoy the "best chain fried chicken in America." Bill filed expanding NLRC [The Manila Times, September 3, 2022] SEN. Christopher Lawrence "Bong" Go has re-filed a bill that seeks to create an additional division of the National Labor Relations Commission (NLRC). SSS raises alarm on pension benefits [The Philippine Star, September 2, 2022] SSS chief actuary Edgar Cruz said current registered members of SSS total to 40.97 million, but not all are consistently paying, which means that retirement benefits are at risk. Miss Universe pageant for sale at US$20M – report [Manila Bulletin, September 2, 2022] This was revealed in a report by the New York Post in an online article entitled “Superagent Ari Emanuel struggles to dump Miss Universe pageant for $20M: source” dated Sept. 2, 2022. Breaking: Binance Announces LUNC, USTC Deposit And Withdrawal Changes [CoinGape, September 2, 2022] The world’s largest crypto exchange Binance on Friday said the deposits and withdrawals of Terra Classic (LUNC) and TerraClassicUSD (USTC) will be suspended from September 7 at 00.00 UTC due to the closure of the Shuttle Bridge. However, users can continue to deposit and withdraw LUNC and USTC tokens through the Terra Classic network. Megawide, India’s GMR divesting from MCIA; Aboitiz group to take over [BusinessWorld, September 2, 2022] Aboitiz InfraCapital, Inc. (AIC) will eventually operate the airport, which is currently managed by GMR-Megawide Cebu Airport Corp. (GMCAC), the joint venture of Megawide and GAIBV. Villar’s AMBS redefines TV experience for Filipino viewers [Manila Bulletin, September 2, 2022] The ultimate multi-media star, singer, TV host and actress, Toni Gonzaga, and multi-awarded film director, script-writer and producer Paul Soriano, signed a contract with the Villar Group’s Advanced Media Broadcasting System Channel 2 (AMBS) on Sept. 1. Singapore Food Festival 2022 brings hit SG restaurants to PH [ABS-CBN News, September 2, 2022] Pinoy food lovers can have a taste of Singapore from traditional favorites, to contemporary delights, and even modern cuisine, at The Grid in Powerplant Mall, Makati City. SEC shuts down Wellcons Unlimited Systems [Inquirer Mobile, September 2, 2022] On Thursday, the regulator said it had rejected the request of Wellcons to lift the cease and desist order issued against the company for offering investments “in the guise of health products.” Philippines lags globally in 5G usage but is fast catching up says Nokia [ABS-CBN News, September 2, 2022] The Philippines is still playing catch up with the rest of the world when it comes to 5G usage despite being one of the first countries to deploy 5G in Southeast Asia, an official of Nokia said on Thursday. Lufthansa pilots stage strike in wage dispute [Inquirer Mobile, September 2, 2022] BERLIN – Pilots at Lufthansa walked out on Friday, forcing the German airline to cancel hundreds of flights and leave holidaymakers stranded. P1.2-T ‘excesses’ of oligopolists blamed for high power rates [Manila Bulletin, September 2, 2022] “Chair Dimalanta, my only request to you: to all these conglomerates, tell them enough! Can you please always decide on the side of the consumers,” Salceda stressed. Embattled Credit Suisse aims to launch China wealth business next year [Inquirer Mobile, September 2, 2022] Credit Suisse, which has been buffeted by a string of scandals, management changes and global strategy rejigs, is still betting big on China and plans to launch a wealth business there next year, a senior Asia executive said. Baguio eyes PPP deals for more parking buildings [Philippine News Agency, September 2, 2022] Among the identified areas for a multi-level pay-parking building is the city-owned property on Kayang Street that will cater to the parking requirements of officials, employees, and clients of city hall offices. Fruitas sets up ‘cloud kitchen’ to expand reach [Inquirer Mobile, September 2, 2022] The listed company, in a disclosure on Thursday, announced the launch of its cloud kitchen called Nube Kuxina. A cloud kitchen provides delivery or takeout meals and has no dine-in customers. US awards P288-M grant for conservation, climate solutions in PH [Philippine News Agency, September 2, 2022] The CSOs are the ABS-CBN Lingkod Kapamilya Foundation, Inc., Jaime V. Ongpin Foundation, Inc., Mount Apo Foundation, Inc., NGOs for Fisheries Reform, PATH Foundation Philippines, Inc., Philippine Association for the Intellectual Development, Inc., Philippines Biodiversity Conservation Foundation, Inc., Philippine Eagle Foundation, Inc., Sentro Para sa Ikauunlad ng Katutubong Agham at Teknolohiya, Xavier Science Foundation, Inc., and Zoological Society of London – Philippines. BSP to watch banks with cyber software [Inquirer Mobile, September 2, 2022] Dubbed “Advanced SupTech Engine for Risk-Based Compliance or ASTERisC*,” the system is a unified regulatory and supervisory technology (RegTech and SupTech) solution that streamlines and automates regulatory supervision, reporting and compliance assessment of banks’ cybersecurity risk management. GCash to forward transaction confirmation messages to app's inbox [GMA News Online, September 1, 2022] "We'll start with PAY BILLS on September 13, then by September 28 SEND MONEY & BUY LOAD will follow," GCash said. CCP closed for 2 to 3 years starting January 2023 [GMA News Online, September 1, 2022] The 53-year old Cultural Center of the Philippines (CCP) building will be closed for two to three years starting January 2023 to give way for renovation. BBM Guest Program, tourist 'super app', more: DOT's plans, programs for recovery [The Philippine Star, September 1, 2022] Among these are Bisita Be My Guest Program, guest incentive system for overseas Filipino Workers. Frasco said this will be coordinated with relevant national government agencies including the Department of Migrant Workers headed by Secretary Susan “Toots” Ople. ABS-CBN-TV5, Cignal-Sky terminate investment deal [ABS-CBN News, September 1, 2022] The deal was earlier paused to enable concerned firms to address issues raised by several lawmakers. Experts raise questions over proposed EDSA busway privatization [BusinessWorld, August 31, 2022] “All buses running on EDSA are privately owned, to begin with. And what missing elements on EDSA Busway are to be provided by the private sector, in the minds of MAP? The building blocks for a true BRT (bus rapid transit), like 20 stations on median? Digital payments? Correct separators, not concrete barriers? Articulated buses with doors on left sides, or both sides? At what fares? MAP should offer more details other than motherhood statements,” Mr. Santiago said. Why foreign banks exit the Philippines [BusinessWorld, August 30, 2022] John Paolo R. Rivera, Asian Institute of Management economist, said that foreign retail banks exiting the country is most likely a strategic decision. Diokno rejects Total PH’s request: Goodwill subject to VAT [Bilyonaryo, August 29, 2022] He said the DOF agrees with the decision of the Commissioner of Internal Revenue in BIR Ruling No. VAT-0331-2020 that the assignment of goodwill that was included in the total sale price of P1.87 billion is also subject to VAT as the main transaction of sale of service gas stations is subjected to VAT. | 2. SEC LEGAL OPINIONS ON AMENDMENT OF LICENSE TO TRANSACT BUSINESS & REAL ESTATE INVESTMENT TRUST | NO NEED TO AMEND THE LICENSE TO TRANSACT BUSINESS IF THE ACTIVITY IS INCIDENTAL M Co. is requesting confirmation on whether its Manila Branch may lend money to companies within M Co. Group without amending the Manila Branch’s SEC License to Transact Business. In reply, corporations are artificial entities granted legal personalities upon their creation by their incorporators in accordance with the law. As such, corporate acts that are outside those express definitions under the law or Articles of Incorporation or those committed outside the object for which a corporation is created are ultra vires, except when acts are necessary and incidental to carry out the corporation’s purposes conferred by the corporation’s articles of incorporation. However, the following requisites must concur: (a) the act is lawful and not otherwise prohibited; (b) the act is done to serve corporate ends; and (c) the act is reasonably tributary to the promotion of those ends, in a substantial and not a remote and fanciful sense. Based on the foregoing, the Manila Branch may lend a part of its corporate funds to members of the M Co. Group without amending its License since the said act is incidental to the express powers granted to the Manila Branch under its License to Transact Business. However, the lending activity to be undertaken by the Manila Branch should be strictly limited to the members of the M Co. Group and should not be pursued as a regular and separate business activity. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO. 22-11, AUGUST 19, 2022] INCOME-GENERATING REAL ESTATE, WITHIN THE PURLANCE OF REAL ESTATE INVESTMENT TRUST (REIT), MEANS REAL PROPERTY WHICH IS HELD TO GENERATE A REGULAR STREAM OF INCOME P Co. is requesting an opinion on various matters involving a Real Estate Investment Trust (REIT) company. Currently, the types of income that P Co. generates from the operation of the memorial parks are (a) the sale of the burial lots; (b) the sale of double interment right; (c) collection of periodic maintenance assessment charges; and (d) rentals from the use of the memorial park facilities. P Co. is requesting confirmation on the following: (1) that the term “income-generating real estate” excludes income from (a) to (d) enumerated above; and (2) P Co. can lease or convey to a REIT company its real properties used in the operation of its memorial parks business. In reply, the sale of the burial lots and double interment rights, which are the primary sources of income for the memorial parks, are dispositions of real property assets, thus, there would be no generation of recurring income for the REIT selling such real property assets. These properties may not be considered part of the income-generating real estate assets of a REIT. Meanwhile, the collection of periodic maintenance assessment charges and rentals from the use of the memorial park facilities may fall under the definition of income-generating real estate as these may generate a regular stream of income. As to the 2nd query, P Co. may lease or convey its real property assets used in the operation of its memorial parks business to REIT company, provided that REIT company must ensure that at least 75% of its deposited property must be invested in, or consists of, income-generating real estate. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO. 22-10, AUGUST 15, 2022] | 3. DOF LEGAL OPINIONS REVERSING BIR RULINGS ON TAXABILITY OF RECEIPTS OF HOMEOWNERS' ASSOCIATION & DONOR'S TAX IMPOSITION ON BONAFIDE CORPORATE RESTRUCTURING | MEMBERSHIP, ASSOCIATION DUES & OTHER FEES COLLECTED BY HOMEOWNERS’ ASSOCIATIONS INTENDED FOR BASIC SERVICES OF THE ASSOCIATION ARE EXEMPT FROM INCOME TAX & VAT/PERCENTAGE TAX D Village Association Inc (D Association), a non-stock nonprofit corporation registered with the Housing and Land Use Regulatory Board (HLURB), is requesting a review of the BIR’s earlier ruling denying its request for a confirmatory ruling of tax exemption and subjecting to applicable internal revenue taxes its income from association or membership dues, rentals of facilities, trade business, and other activities. D Association believes that the association dues are not income but are instead capital, and not derived from real or personal property or activity conducted for profit. Likewise, association dues are merely held in trust, solely used for administrative expenses. Further, these are exempt from Value-Added Tax (VAT)/Percentage Tax under Section 18 of the Republic Act (R.A.) No. 9904, otherwise known as “Magna Carta for Homeowners and Homeowners’ Associations” (Homeowners’ Law) and the 1997 Tax Code, as amended by R.A. No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act. In rendering the opinion, the DOF reversed the BIR’s earlier ruling holding that D Association met the conditions for tax exemption of Homeowners’ Law, as clarified in Revenue Memorandum Circular (RMC) No. 9-2013, specifically the compliance with the submission of the Certification of Local Government Unit (LGU) attesting that it lacks resources to provide basic services being rendered by D Association. Likewise, financial documents submitted showed that rental income and dues collected were used for providing basic community services needed by the members, including the maintenance of the facilities of the village. Based on the foregoing, the DOF REVERSED the BIR’s earlier ruling. [DEPARTMENT OF FINANCE OPINION NO. 013.2022, JULY 20, 2022] TRANSFER OF SHARES AS A RESULT OF BONAFIDE CORPORATE RESTRUCTURING IS NOT SUBJECT TO DONOR'S TAX M Co., a foreign company, is seeking the review of the earlier BIR International Tax Affairs Division (ITAD) Ruling, which ruled that the transfer made by M Co. of its shares in MTSC to MHPS is subject to Donor’s Tax. In ruling, while the Donor’s Tax is imposed on the difference when the selling price of the shares is lower than the fair market value of the shares exchanged under Section 100 of the 1997 Tax Code, as amended, it should be borne in mind that the application of this provision is obtaining only in a situation where a tax is sought to be avoided by the parties to a sale. Here, as ruled by the BIR, the capital gain derived by M Co. is exempt from income tax under Article 13 of the RP-Japan Tax Treaty. In fine, M Co. could not have intended to avoid the income tax due on the transfer as any gain derived from the transfer is covered by the exemption. Furthermore, the transfer made by M Co. of shares it owned in 31 subsidiaries and affiliates worldwide for a 65% ownership in MHPS was made in the ordinary course of business under a bona fide business arrangement between two companies, therefore, not subject to Donor’s Tax. Hence, the Request for Review was GRANTED. [DEPARTMENT OF FINANCE OPINION NO. 006.2022, APRIL 21, 2022] | 4. BIR RULINGS ON APPLICABILITY OF TAX-FREE MERGER, TAX EFFECTS OF REVOCABLE TRUST & VAT-EXEMPT SALE OF ROASTED CHICKEN | A TAX-FREE MERGER DOES NOT QUALIFY WHETHER THE MERGER IS DOMESTIC OR OFFSHORE I Co., a foreign company based in the US, is requesting a confirmation that the transfer of the shares of capital stock of C(PH) Co. from C(US) Co. to I Co., pursuant to an offshore merger between C(US) Co. and I Co., is not subject to the Capital Gains Tax (CGT). In reply, the application of Section 40(C)(2) of the 1997 Tax Code, as amended, to a nonresident foreign corporation is well-settled. It does not make any qualification or distinction as to its application to a corporation. It provides that no gain or loss shall be recognized if a property is transferred to a corporation by a person, alone or together with others, not exceeding four (4) persons, in exchange for stock or unit of participation in such a corporation of which as a result of such exchange the transferor/s, gains or maintains control of the said corporation. In a merger, the surviving/absorbing corporation succeeds in the rights and liabilities of the absorbed corporation and merely carries on the identity of the latter. The underlying assumption of the tax-free exchange provision generally is that the new property received is substantially a continuation of the old investment, still unliquidated. Hence, a merger does not involve a sale, exchange, or disposition of shares. Therefore, the transfer of the shares of capital stock of C(PH) Co. from C(US) Co. (absorbed corporation) to I Co. (surviving corporation) pursuant to a merger effected in accordance with US Laws, is not subject to the CGT. [BIR RULING NO. 338-2022, JUNE 30, 2022] IN A REVOCABLE TRUST, THE TRUSTOR RETAINS THE RIGHT TO CONTROL THE DISPOSITION OF THE PROPERTY, INCLUDING THE RIGHT TO CAUSE THE REVERSION OF THE LEGAL OWNERSHIP OF THE PROPERTY ITSELF P Co. is requesting confirmation that the transfer of legal title of the Club Floors to the beneficial owners as a consequence of the termination of the trust relationships of P Co. with SSS and PP Co. shall not be subject to Income Tax, Documentary Stamp Tax (DST), Value-Added Tax (VAT) and Donor’s Tax. In reply, the return or transfer of legal ownership of the property to the trustor of a revocable trust is mere confirmation of the title of the trustor as the ultimate and real owner-beneficiary of the property and does not involve an actual transfer of the beneficial ownership of the property since the trustor remains the beneficial owner of the property held in trust before and after the return or transfer of legal ownership of the property. Consequently, the transfer or reversion of the Club Floors by P Co., as the Trustee, to SSS and PP Co., as the Trustors, is not subject to Income Tax. Moreover, the properties are not held primarily for sale to customers or lease in the ordinary course of the trustee’s business since the trustee merely holds or manages the said properties for the benefit of the trustor, thus, the transfer or return by the trustee to the trustor of the properties held in trust is not subject to the 12% VAT. Finally, the transfer or return of the properties, which founded solely on the termination of the trust agreement, thus, the absence of the element of donative intent, is not subject to Donor’s Tax. [BIR RULING NO. 316-2022, JUNE 28, 2022] SALE OF ROASTED CHICKEN ON A TAKE-OUT BASIS, WHICH HAD UNDERGONE THE SIMPLE PROCESSES OF PREPARATION & PRESERVATION & IS STILL CONSIDERED FOOD PRODUCTS IN THEIR ORIGINAL STATE, ARE EXEMPT FROM VAT C Co. is requesting a confirmation that the sale of roasted chicken qualifies as a Value-Added Tax (VAT)-exempt transaction under Section 109 of the 1997 Tax Code, as amended. In reply, Section 109(1)(A) of the 1997 Tax Code, as amended, provides that the sale or importation of agricultural and marine food products in their original state, livestock, and poultry of a kind generally used as, or yielding or producing foods for human consumption are exempted from VAT. Moreover, Section 4.109-1(B)(a) of Revenue Regulations (RR) No. 16-2005, as amended, states that meat, fruits, vegetables, and other agricultural and marine food products shall be considered in their original state even if they undergo the simple processes of preparing or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping those using advanced technological means, such as shrink packaging in plastics, vacuum packing, tetra packing, and other similar packaging methods are exempt from VAT. However, the exemption applies only if the roasted chicken is purchased on a take-out basis. Should C. Co. maintain a facility by which the chicken, which has undergone the simple process of roasting, will be offered as a menu item to customers who would dine in, then it will be subject to VAT on the sale of service, which is similarly imposed on restaurants and other eateries. Thus, the sale of roasted chicken on a take-out basis, which has undergone the simple processes of preparation and preservation and is still considered food product in its original state, is exempt from VAT. [BIR RULING NO. 292-2022, JUNE 13, 2022] | DOWNLOAD OUR PAST EDITIONS & FULL TEXT OF REFERENCES https://weeklytaxupdates.getresponsesite.com/ | |
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