Dear Clients & Friends, We are sending the following relevant tax updates for this week, for your reference and information: | I. SUPREME COURT CASES DIGEST II. TAX AND BUSINESS-RELATED NEWS [SEPTEMBER 21-27] | | | I. SUPREME COURT CASES DIGEST | A. TAXPAYER CANNOT RELY ON BIR RULINGS ISSUED TO A DIFFERENT ENTITY IN DEFENSE OF ITS POSITION; COMPROMISE PENALTY CAN ONLY BE COLLECTED IF AGREED UPON BY TAXPAYER B. BURDEN OF PROOF RESTS UPON THE TAXPAYER TO ESTABLISH BY SUFFICIENT AND COMPETENT EVIDENCE ITS ENTITLEMENT TO CLAIM FOR REFUND C. CUSTOMS MEMORANDUM ORDER MAY BE CONSIDERED INVALID IF IT IS ULTRA VIRES; IMPORTATION OF RIGHT-HAND DRIVE VEHICLES INTO SUBIC BAY FREEPORT ZONE DOES NOT CONSTITUTE IMPORTATION OF GOODS INTO THE DOMESTIC TERRITORY; BUREAU OF CUSTOMS HAS NO AUTHORITY TO RESTRICT THE FREE FLOW OF GOODS IN THE SUBIC BAY FREEPORT ZONE D. FAILURE OF THE BIR TO VERIFY THE AMOUNTS IT OBTAINED FROM THIRD-PARTY MATCHING WILL RESULT IN CANCELLATION OF THE ASSESSMENT; IN ORDER TO BE VALID, AN ASSESSMENT MUST BE BASED ON ACTUAL FACTS SUPPORTED BY CREDIBLE EVIDENCE E. GOVERNMENT INTRUMENTALITY IS EXEMPT FROM REAL PROPERTY TAX (RPT) EXCEPT WHEN BENEFICIAL USE IS GIVEN TO LESSEE | [TAXPAYER CANNOT RELY ON BIR RULINGS ISSUED TO A DIFFERENT ENTITY IN DEFENSE OF ITS POSITION] [COMPROMISE PENALTY CAN ONLY BE COLLECTED IF AGREED UPON BY TAXPAYER] Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the previous Decision and Resolution of the Court of Tax Appeals (CTA) En Banc which granted the refund or issuance of tax credit certificate (TCC) in favor of Respondent South Premiere Power Corporation representing surcharge, interest, and compromise penalty in the aggregate amount of Php 1,359,773.48. Previously, the Respondent relied on prevailing court decisions and BIR rulings in support of its position that some of its transactions are not subject to Documentary Stamp Tax (DST). Such was subsequently negated by the Court as elucidated that Respondent cannot rely on them for it did not secure its own favorable ruling from the BIR, hence, it is still liable, and consequently, not entitled to the refund of the surcharge and interest. Further, the Court held that the imposition of 25% surcharge and 20% interest per annum was justified, pursuant to Sections 248 and 249 of the 1997 Tax Code, following the undisputed fact that Respondent did not pay the DST on various transactions and did not file the related DST returns for taxable year 2010. The compromise penalty, however, cannot be imposed on the Respondent since there was no sufficient evidence of any agreement made for such. In relation to this, the Court cited the case of Wonder Chemical Engineering Corporation vs. CTA and reiterated that compromise penalty could only be collected or imposed by agreement or conformity of the taxpayer; the absence of which renders the imposition of said penalty illegal and unauthorized. Consequently, the Petition was PARTIALLY GRANTED, and Petitioner was ordered to refund or issue TCC to Respondent the amount of Php 25,000.00 representing the compromise penalty. [COMMISSIONER OF INTERNAL REVENUE VS. SOUTH PREMIERE POWER CORPORATION, G.R. NOS. 252627 & 252630, JUNE 16, 2021, UPLOADED AUGUST 26, 2021] | BURDEN OF PROOF RESTS UPON THE TAXPAYER TO ESTABLISH BY SUFFICIENT AND COMPETENT EVIDENCE ITS ENTITLEMENT TO CLAIM FOR REFUND Petitioner Philippine Airlines, Inc. filed a Petition for Review on Certiorari seeking to reverse the earlier decisions and resolutions of the Court of Tax Appeals (CTA) En Banc denying its claim for refund of alleged erroneously paid excise taxes. Petitioner claimed that it attached material portions of the records in its Petition contrary to the allegations of the Respondents Commissioner of Internal Revenue and Commissioner of Customs. Likewise, it sufficiently proved that its imported liquors, wines, and cigarettes were not locally available in reasonable quantity, quality, or price, as part of the requirements on refund. In ruling, the Court found that Petitioner attached to the Petition material portions of the records in compliance with Section 4, Rule 45 of the Rules of Court. The Court was convinced that Petitioner sufficiently proved compliance with the second condition for excise tax exemption and reiterated Section 13 (b)(2) of Presidential Decree (P.D.) No. 1590 or “An Act Granting a New Franchise to Philippine Airlines, Inc. to Establish, Operate, and Maintain Air-Transport Services in the Philippines and Other Countries” which provides for the conditions that must be complied with for the imported commissary and catering supplies to be exempt from excise tax, namely: (1) the supplies are imported for the use of the franchisee in its transport/non-transport operations and other incidental activities; and (2) they are not locally available in reasonable quantity, quality, or price. The CTA committed a severe departure from settled jurisprudence amounting to abuse or improvident exercise of authority when it ruled that the pieces of evidence Petitioner presented are "inadequate" to show compliance with Section 13 (b)(2) of P.D. No. 1590. However, the Court resolved to deny the Petitioner's claim for refund on the excise tax it paid on cigarettes as it fell short of proving the non-availability of the imported cigarettes at reasonable quantity, quality, or price. Thus, the Petition for Review on Certiorari was PARTLY GRANTED. The case was REMANDED to the CTA to determine Petitioner's entitlement to a refund of excise taxes paid on importation of liquors and wines. [PHILIPPINE AIRLINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS, G.R. NO. 231638, FEBRUARY 17, 2021, UPLOADED AUGUST 10, 2021] | [CUSTOMS MEMORANDUM ORDER MAY BE CONSIDERED INVALID IF IT IS ULTRA VIRES] [IMPORTATION OF RIGHT-HAND DRIVE VEHICLES INTO SUBIC BAY FREEPORT ZONE DOES NOT CONSTITUTE IMPORTATION OF GOODS INTO THE DOMESTIC TERRITORY] [BUREAU OF CUSTOMS HAS NO AUTHORITY TO RESTRICT THE FREE FLOW OF GOODS IN THE SUBIC BAY FREEPORT ZONE] Petitioner Bureau of Customs (BOC) filed a Petition for Review on Certiorari seeking to reverse the earlier decision of the Regional Trial Court (RTC) enjoining it on the enforcement of Customs Memorandum Order (CMO) No. 16-2005 within the Subic Bay Freeport Zone. Petitioner argued that the RTC erred in: (1) finding that all the elements of a Petition for Declaratory Relief are present; and (2) declaring the said CMO as invalid within the Subic Bay Freeport Zone and in enjoining the Petitioner to implement the issuance. In ruling, the Court held that CMO No. 16-2005 is ultra vires because it extends the importation ban of right-hand drive vehicles into foreign territory. This act is an intrusion upon the powers granted to the Subic Bay Metropolitan Authority (SBMA) under Section 13(b)(2) of Republic Act (R.A.) No. 7227 or “Bases Conversion and Development Act of 1992.” Moreover, the Court found that CMO No. 16-2005 went beyond the scope of its enabling law, R.A. No. 8506 or “An Act Banning the Registration and Operation of Vehicles With Right-hand Steering Wheel in Any Private or Public Street, Road or Highway” which banned the importation of right-hand motor vehicles and, ultimately, their use inside the domestic territory. Since the shipment took place from one foreign territory to another, Respondent Japanese 4X4 Export Corporation does not import or cause the importation of goods into the customs territory of the Philippines. In this case, Petitioner cannot validly assert its authority over the transaction. Furthermore, the enforcement of CMO No. 16-2005 inside the Freeport Zone is invalid as it does not serve the primordial purpose of the importation ban. In this regard, the Court will keep the statute’s intent to preserve the free flow of goods and capital in Subic Bay. Thus, the Petition for Review on Certiorari was DENIED. [BUREAU OF CUSTOMS VS. JAPANESE 4X4 EXPORT CORPORATION, G.R. NO. 227542, MAY 12, 2021, UPLOADED JULY 30, 2021] | [FAILURE OF THE BIR TO VERIFY THE AMOUNTS IT OBTAINED FROM THIRD-PARTY MATCHING WILL RESULT IN CANCELLATION OF THE ASSESSMENT] [IN ORDER TO BE VALID, AN ASSESSMENT MUST BE BASED ON ACTUAL FACTS SUPPORTED BY CREDIBLE EVIDENCE] Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the earlier decision and resolution of the Court of Tax Appeals (CTA) En Banc. In the assailed decision and resolution, the CTA En Banc cancelled the assessment due to issue of prescription and for failure of the Petitioner verify the amounts obtained from computerized/third-party matching by securing confirmation or certification from the third-party information source, or from externally sourced data. In ruling, Supreme Court held that Petitioner cannot insist on the applicability of Revenue Memorandum Order (RMO) No. 13-2012 to justify the use of unverified third-party information as basis for its assessment. The mentioned RMO clearly provides that it can only be retroactively applied for the 2009 and 2010 Letter Notices. Upon scrutiny, it was shown that the Letter Notice in this case was issued in 2011, and thus, outside the coverage of the RMO. Moreover, to be valid, an assessment must be based on facts supported by credible evidence. However, even if the amounts were verified, Petitioner failed to prove that the Respondent filed a false or fraudulent return. Hence, the ten (10) year prescriptive period shall not apply in this case and the period of prescription must be counted from three (3) years from the date of filing of the returns. Since the Formal Assessment Notice (FAN) was received by the Respondent beyond the prescriptive period, the Petition was DENIED, and the earlier decision was AFFIRMED. [COMMISSIONER OF INTERNAL REVENUE VS. MCC TRANSPORT SINGAPORE PTE LTD, G.R NO 255382, JUNE 28, 2021, UPLOADED JULY 30, 2021] | GOVERNMENT INTRUMENTALITY IS EXEMPT FROM RPT EXCEPT WHEN BENEFICIAL USE IS GIVEN TO LESSEE Petitioner Atty. Racimo R. Estampador filed a Petition for Review on Certiorari seeking to reverse the earlier decision and resolution of the Court of Tax Appeals (CTA) En Banc. Petitioner argued that the CTA erred in remanding the case to the Local Board of Assessment Appeals (LBAA) and ruling that Philippine Port Authority (PPA) should be impleaded as an indispensable party. In addition, Petitioner faulted the CTA for not applying the City of Pasig case and ignoring paragraph 8 of the terms and conditions of the Contract of Lease, which provides that all taxes and assessments levied or to be levied upon the leased premises shall be for the exclusive account of the lessor. On the other hand, Respondent City Assessor of Manila countered that the Court, in the City of Pasig case, recognizes that the Republic of the Philippines will not pay the tax on the leased portions of its property but will just pass the real estate tax to the lessee. In ruling, the Court held that PPA is not an indispensable party; PPA’s interest is separable from the interest of Petitioner. Hence, remand is not necessary. Moreover, the ruling in City of Pasig case is subject to the assumption that “Republic of the Philippines passes on the real estate tax as part of the rent to the lessees.” The PPA being a government instrumentality, Section 234 (a) of the Local Government Code, which must be read in conjunction with Section 133(o), is applicable. Accordingly, its properties are generally exempted from payment of real property taxes. That exemption, however, ceases when the beneficial use of its properties has been granted to a taxable person. In this case, while the tax liability is being assumed by PPA, the use and possession of leased property is lodged on Petitioner. In fine, the tax liability must be a liability that arises from law, which the local government unit can rightfully and successfully enforce, not the contractual liability that is enforceable only between the parties to the contract. As such, it is clearly Petitioner who bears the responsibility to pay the real property tax. Thus, the Petitioner is not entitled to a refund he paid under protest to the City of Manila. Moreover, it is only Petitioner who can demand compliance from PPA with respect to the contractual obligation it assumed under Paragraph 8 of the Contract of Lease, not the City of Manila. Consequently, the Petition was PARTIALLY GRANTED, and the earlier decision and resolution were REVERSED and SET ASIDE. [ATTY. RACIMO R. ESTAMPADOR VS. THE CITY ASSESSOR OF MANILA, G.R. NO. 227288, MARCH 18, 2021, UPLOADED JUNE 18, 2021] | II. TAX AND BUSINESS-RELATED NEWS [SEPTEMBER 21-27] | Egypt to tax social media stars Manila grants general tax amnesty starting October until Dec. 29 Apple to pay bonuses of up to $1,000 to store employees: Bloomberg News GCash eyes launching 'Buy Now, Pay Later' service this year Philippine chamber opposes retaining telcos, transpo and power firms as utilities Medical, pharma firms to set up shop in PH ecozones: PEZA BSP pushes amendments to PDIC charter as it seeks bigger role SM Group offers to build monorail and road flyover in Pasay House approves 12% VAT on digital transactions DOF says SSS released P2.62-B unemployment insurance benefits during pandemic Dominguez rejects ‘wealth tax’ proposal
| Egypt to tax social media stars [ABS-CBN News, September 27, 2021] Egypt said it will tax social media content creators in a revenue raising exercise as more citizens look to online platforms to make a living. Manila grants general tax amnesty starting October until Dec. 29 [Philippine Daily Inquirer, September 23, 2021] Manila Mayor Francisco “Isko Moreno” Domagoso declared General Tax Amnesty to delinquent business and real property taxes, as well as traffic violations in the city of Manila from Oct. 1 until Dec. 29, 2021. Apple to pay bonuses of up to $1,000 to store employees: Bloomberg News [ABS-CBN News, September 23, 2021] Apple Inc will pay one-time bonuses of as much as $1,000 to store employees next month, Bloomberg News reported on Wednesday, citing people familiar with the matter. GCash eyes launching 'Buy Now, Pay Later' service this year [ABS-CBN News, September 22, 2021] GCash on Wednesday said it is eyeing to launch a Buy Now, Pay Later (BNPL) service this year. | Philippine chamber opposes retaining telcos, transpo and power firms as utilities [ABS-CBN News, September 22, 2021] The Philippines’ biggest business group on Wednesday said it “strongly” opposes reclassifying the transport, telecommunications, and power generation industries as public utilities. Medical, pharma firms to set up shop in PH ecozones: PEZA [ABS-CBN News, September 22, 2021] A number of international medical and pharmaceutical firms will invest and will soon set up shop within the country's economic zones, an official said Wednesday. BSP pushes amendments to PDIC charter as it seeks bigger role [Philippine Daily Inquirer, September 22, 2021] The Bangko Sentral ng Pilipinas (BSP) is lobbying Congress, the Department of Finance and the Philippine Deposit Insurance Corp. (PDIC) for swift passage of amendments to the PDIC charter that would make the deposit insurer an attached agency of the BSP. SM Group offers to build monorail and road flyover in Pasay [Philippine Daily Inquirer, September 22, 2021] House approves 12% VAT on digital transactions [ABS-CBN News, September 21, 2021] According to its congressional fact sheet, the bill seeks to level the playing field between traditional and digital businesses by clarifying the imposition of value-added tax (VAT) on digital service providers and to generate revenues from new sources to fund the country's efforts to recover from the adverse impact of COVID-19. DOF says SSS released P2.62-B unemployment insurance benefits during pandemic [ABS-CBN News, September 21, 2021] About 196,000 members of the Social Security System have received a total of P2.62 billion in unemployment benefits, most of which were released during the COVID-19 pandemic, the Finance Department said Tuesday. Dominguez rejects ‘wealth tax’ proposal [Manila Bulletin, September 21, 2021] Imposing higher tax on Filipino billionaires whose fortunes have reached more than one billion pesos may not be a good idea with Finance Secretary Carlos G. Dominguez III warning this will only result in capital flight out of the Philippines. | 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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