March 2012 1 11 11

March 2012
Tax brief
Contents Contents Contents Contents Contents
02 BIR Rulings BIR Rulings BIR Rulings BIR Rulings BIR Rulings
Tax-exempt exchange of
properties
Tax consequences of
involuntary separation
03 BIR Issuances BIR Issuances BIR Issuances BIR Issuances BIR Issuances
Mandatory submission of
SLSP
VAT treatment of imported
petroleum products
Clarification on the effectivity
of new VAT exemption
thresholds
04 Cour Cour Cour Cour Court Decisions t Decisions t Decisions t Decisions t Decisions
Period to appeal protest at
the CTA
Advance VAT on sale of
refined sugar by
cooperatives
LBT assessment based on
imputed sales
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Customs compliance review
2 2 2 2 2 March 2012
BIR Rulings
T TT TTax-exempt exchange of pr ax-exempt exchange of pr ax-exempt exchange of pr ax-exempt exchange of pr ax-exempt exchange of proper oper oper oper operties ties ties ties ties
Voluntary agreement to exchange
properties by virtue of a Deed of
Exchange in order to correct a mistake
committed in the designation of lots is
not subject to capital gains tax. Likewise,
it is not subject to documentary stamp tax
(DST) imposed on exchange of real
properties (except P15 DST on notarial
acknowledgment of deed) considering
that the exchange transaction is without
any monetary consideration, and the
execution of deed of exchange is only for
the purpose of rectifying the error
committed.
However, if the exchanged properties, i.e.,
parcels of land, are not of the same size,
the difference in the size shall be subject
to the 6% capital gains tax based on the
gross selling price or the fair market value,
whichever is higher. It shall also be subject
to DST pursuant to Section 196 of the
Tax Code, where the conveyance or deed
whereby land is assigned or transferred to
another is subject to DST based on the
consideration contracted to be paid for
such realty or on its fair market value or
zonal value, whichever is higher.
(BIR Ruling No. 042-2012, February 9,
2012)
T TT TTax consequences of involuntary ax consequences of involuntary ax consequences of involuntary ax consequences of involuntary ax consequences of involuntary
separation separation separation separation separation
If an employee is separated involuntarily
from service due to a cause beyond his
control pursuant to Section 32(B)(6)(b) of
the Tax Code, the separation benefits he
receives are exempt from income tax
and consequently, to withholding tax
under Section 79 of the Tax Code as
implemented by Revenue Regulations No.
(RR) 2-98.
When an employee is terminated on
account of closure of a companys
business, the separation is considered
involuntary or beyond the control of the
employee since it is not asked or initiated
Mandatory submission of SLSP Mandatory submission of SLSP Mandatory submission of SLSP Mandatory submission of SLSP Mandatory submission of SLSP
The Bureau of Internal Revenue (BIR)
has made it mandatory to all value-added
tax (VAT) registered taxpayers to submit
their quarterly summary list of sales (SLS)
and purchases (SLP) starting January 1,
2012.
Previously, the requirement to submit SLS
applied to VAT-registered taxpayers with
total quarterly sales/receipts (net of VAT)
exceeding P2.5 million, while the SLP was
required of VAT-registered taxpayers with
quarterly total purchases (net of VAT)
exceeding P1 million.
The SLSP shall be submitted through
compact disk-recordable (CDR) medium
by the employee. Accordingly, separation
benefits received by the terminated
employee as a result of his separation
are exempt from income tax under
Section 32(B)(6)(b) of the Tax Code, and
accordingly, to the withholding tax
prescribed under RR 2-98.
Moreover, the terminal pay, i.e.,
commutation and payment of monetized
unused vacation leave credits not
exceeding 10 days during the year, are not
subject to income tax and consequently to
withholding tax. However, the cash
equivalent of vacation leave exceeding 10
days and sick leave, regardless of number
of days, shall be subject to income tax and
consequently, to withholding tax. The
exemption likewise does not include the
payment of salaries and the payment of
the 13
th
month pay and other benefits in
excess of the P30,000 threshold under
Section 2.78.1 (A)(3)(a) and (A)(7) of RR
2-98, as amended.
(BIR Ruling No. 050-2012, February 9,
2012)
BIR Issuances
following the prescribed format under
existing regulations.
(Revenue Regulations No. 1-2012, February 20,
2012)
V VV VVA AA AAT tr T tr T tr T tr T treatment of impor eatment of impor eatment of impor eatment of impor eatment of imported petr ted petr ted petr ted petr ted petroleum oleum oleum oleum oleum
pr pr pr pr products oducts oducts oducts oducts
The BIR has prescribed the following
guidelines on the imposition of VAT and
excise tax on imported petroleum and
petroleum products, and the operation
and maintenance of storage facilities of
such articles, whether subject to excise
taxes or not.
A. Tax treatment of imported petroleum
and petroleum products
All importers must pay to the Bureau of
Customs (BOC) the VAT and excise tax
due on all petroleum and petroleum
products that are imported and/or
brought from abroad to the Philippines,
including to Freeport and Economic
Zones.
The subsequent exportation or sale/
delivery of the petroleum or petroleum
products to registered enterprises enjoying
tax privileges within the Freeport and
Economic Zones and international
carriers shall be subject to 0% VAT. For
the VAT paid on account of the above
zero-rated sales and excise tax paid on
account of sales to international carriers
of Philippine or foreign registry for use or
consumption outside the Philippines or
March 2012 3 33 33
BIR Issuances
exempt entities or agencies, the importer
may claim credit or refund with the BOC
subject to compliance with certain
conditions.
No refund for excise taxes shall be
granted to the importer for the product
sold in the event that the Freeport/
Economic Zone-registered enterprise
shall subsequently sell/introduce the
petroleum or petroleum products, or part
of the volume thereof, into the customs
territory (except sales of fuel for use in
international operations) or another
Freeport/Economic Zone-registered
enterprise not enjoying tax privileges.
On the other hand, the seller shall be
liable to 12% VAT in case of sale/
introduction of petroleum and petroleum
products, or part of the volume thereof,
by a Freeport/Economic Zone-registered
enterprise, or part/volume thereof, into
the customs territory or to a Freeport/
Economic Zone-registered enterprise not
enjoying tax privileges, or any sale to an
entity not enjoying 0% VAT rate. No
refund for VAT shall be allowed to the
importer. In case a refund has already
been granted, an assessment for VAT shall
be issued to the importer and seller.
Issuance of ATRIG and withdrawal
certificate
The importer shall secure the prescribed
Authority To Release Imported Goods
(ATRIG) for each and every importation
of petroleum and petroleum products
from the BIRs Excise Tax Regulatory
Division (ETRD), and pay the VAT and
excise taxes before the release of the
products from the BOCs custody. In case
of subsequent sale/introduction to
customs territory by a Freeport/Eco-
nomic Zone-registered enterprise, the
importer shall secure the necessary
Withdrawal Certificate.
Permit to operate
For excise tax purposes, all importers of
petroleum and petroleum products shall
secure a Permit to Operate with the BIRs
ETRD. The permit shall prescribe the
appropriate terms and conditions, which
shall include, among others, the issuance
of a Withdrawal Certificate and the
submission of liquidation reports, for the
permittees strict compliance.
B. Registration of storage facilities
All tank facilities, depots or terminals
throughout the Philippines, including
those located within the Freeport and
Economic Zones, shall be registered by
the owners, lessors or operators with the
following BIR offices:
Revenue Regions (RR) where the
storage facilities are located
BIR registration office
RR 4, 5, 6, 7, 8, 9 and 10 Excise Tax Regulatory Division -- National Office
RR 1, 2 and 3 Excise Tax Area I -- Baguio City
RR 11 and 12 Excise Tax Area III -- Bacolod
RR 13 and 14 Excise Tax Area IV -- Cebu
RR 15 and 19 Excise Tax Area V -- Davao
RR 16, 17 and 18 Excise Tax Area VI -- Cagayan de Oro
A Permit to Operate for facilities that will
be used for storage of petroleum or
petroleum products or other articles
subject to excise tax, and Permit to
Operate Exempt Facility for facilities to
be used for storage of exempt products or
articles shall be secured by the owner,
lessor or operator of the storage facilities.
As part of the transitory guidelines, all
owners, lessors or operators of tank
facilities, depots or terminals are required
to submit copies of the following
documents to the appropriate BIR office
within 15 days from the effectivity of the
regulations:
1. BIR Certificate of Registration
2. Latest blueprint of the perspective
design of the whole storage facility,
depot or terminal specifically
containing, among others, the tanks
located therein, duly approved by a
licensed professional authorized by
law to issue such document
3. Lease or operating agreement, in
case the whole facility, depot or
terminal is actually being leased or
operated by another person or entity
other than the owner thereof
4. Terminaling, lease, or storage
agreement(s) with the lessee-
owner(s) of the contents of the
respective tanks
5. Notarized undertaking(s) executed
jointly with the respective lessee-
owner(s) of the content(s) of the
storage tank(s) within the facility,
depot or terminal indicating the tank
number, description of the product
and the volume of inventory thereof
as of the date of effectivity of the
regulations
After evaluation/validation of the
documents and verification and ocular
inspection of storage facilities, the
concerned BIR offices shall issue the duly
approved Permit to Operate to the
applicants.
(Revenue Regulations No. 2-2012, February 20,
2012)
4 4 4 4 4 March 2012
BIR Issuances
Period to appeal pr Period to appeal pr Period to appeal pr Period to appeal pr Period to appeal protest at the CT otest at the CT otest at the CT otest at the CT otest at the CTA AA AA
Under Section 228 of the Tax Code,
an assessment may be protested
administratively by a taxpayer by filing
a request for reconsideration or
reinvestigation within 30 days from
receipt of assessment. Within 60 days
from filing of the protest, the taxpayer
must submit all relevant supporting
documents on its assessment.
If the protest is denied in whole or in
part, or is not acted upon within 180 days
from submission of documents, the
taxpayer adversely affected by the
decision or inaction may appeal with the
Court of Tax Appeals (CTA) within 30
days from receipt of decision, or from the
lapse of the 180-day period.
In the instant case, the taxpayer received a
formal letter of demand (FLD) with
deficiency tax assessment on March 21,
2005. Within 30 days from receipt of the
FLD, or on March 30, 2005, the taxpayer
Clarification on the ef Clarification on the ef Clarification on the ef Clarification on the ef Clarification on the effectivity of new fectivity of new fectivity of new fectivity of new fectivity of new
V VV VVA AA AAT exemption thr T exemption thr T exemption thr T exemption thr T exemption thresholds esholds esholds esholds esholds
The BIR has clarified that the new VAT
threshold amounts under RR 16-2011
shall be effective beginning January 1,
2012. In case of sale of real property, the
new thresholds shall be effective for
instrument of sale (whether the
instrument is nominated as a deed of
absolute sale, deed of conditional sale or
otherwise) executed and notarized on or
after January 1, 2012.
Court Decisions
The new VAT exemption thresholds are as follows:
(Revenue Regulations No. 3-2012, February 20, 2012)
filed its protest to the FLD. On April 12,
2005, or before the expiration of the
60-day period from the filing of its
protest, the taxpayer submitted additional
documents in support of its protest.
The BIR did not act on the protest within
180 days from the date of submission of
the taxpayers supplemental protest, which
lapsed on October 9, 2005. Although the
taxpayer is given 30 days from October 9,
2005, or until November 8, 2005, to assail
the BIRs inaction before the CTA, the
taxpayer sought relief from the CTA only
after it received the Final Decision on
Disputed Assessment (FDDA). The
taxpayer filed its appeal on November 29,
2007, or more than two years from the
end of the 30-day period from the
inaction of the BIR.
The CTA held that the 30-day period to
appeal set by Section 228 of the Tax Code
should be reckoned from October 9,
2005, when the 180-day period for the
taxpayer to act on the protest lapsed
without any decision having been
rendered, and not from July 9, 2007, when
the taxpayer received the FDDA dated
June 1, 2007. The CTA ruled that the
taxpayer cannot be given an infinite
period to act on protest brought to the
court in blatant disregard of the time
frame explicitly provided by law and
willful oversight of orderly administration
of justice.
(P&A Note: There are also court
decisions that recognize the right of the
taxpayer to file an appeal to the CTA
within 30 days from receipt of the
FDDA.)
(La Flor Dela Isabela, Inc. v. Commissioner of
Internal Revenue, CTA EB No. 672, re: CTA
Case No. 7709, February 2, 2012)
Transaction/Section Amount in
Pesos (2005)
Sale of residential lot [Section 109 (P)] 1,500,000
Adjusted thresholds
amounts in Pesos
1,919,500
Sale of residential house and lot and other
residential dwellings [Section 109 (P)]
2,500,000 3,199,200
Lease of residential units (month/unit)
[Section 109 (Q)]
10,000 12,800
Sale or lease of goods or other properties or
performance of services [Section 109 (V)]
1,500,000 1,919,500
March 2012 5 55 55
Court Decisions
Advance V Advance V Advance V Advance V Advance VA AA AAT on sale of r T on sale of r T on sale of r T on sale of r T on sale of refined sugar efined sugar efined sugar efined sugar efined sugar
by cooperatives by cooperatives by cooperatives by cooperatives by cooperatives
Under Section 3 of RR 13-08, an advance
VAT on the sale of refined sugar shall be
paid by the owner/seller before the
refined sugar is withdrawn from any sugar
refinery/mill. The withdrawal is not
subject to advance VAT in case the
refined sugar is owned and withdrawn
from the sugar refinery/mill by an
agricultural cooperative of good standing
duly accredited and registered with the
Cooperative Development Authority
(CDA), which cooperative is the
agricultural producer of the sugar cane
that was refined into refined sugar.
Section 4 (a) of RR 13-08 provides that in
order for a cooperative to be considered
an agricultural producer, it should be the
tiller of the land it owns or leases, it
should be the one incurring cost of
agricultural production of the sugar, and
it should be the one producing the sugar
cane to be refined.
In the case at hand, before issuing the
Authorization Allowing Release of
Refined Sugar (AARS), the BIR required a
farmers cooperative to pay the advance
VAT on the grounds that the cooperative
was unable to meet the requirements to
qualify as an agricultural producer exempt
from payment of advance VAT.
The CTA held that under Article 61 of
Republic Act No. (RA) 6938 and Section
109(r) of the Tax Code, as amended by
Section 109(L) of RA 9337, sales by
CDA-registered agricultural cooperatives
to their members as well as sale of their
produce, whether in its original state or
processed form, to non-members are
exempt from VAT.
Based on the provisions of RA 6938 and
the Tax Code and evidence presented
by the cooperative, the CTA held that
the sale of sugar produce made by
the cooperative to its members and
non-members is exempt from payment
of VAT. According to the CTA, the BIR
has gone into unauthorized modification
or amendment of the law, which only
Congress can do, in declaring that a
cooperative must be the agricultural
producer of its sugar produce in order
to be exempt from VAT. The CTA
thus declared Sections 3 and 4 of
RR 13-2008, insofar as it imposes such
requirement, as utra vires and invalid.
(Negros Consolidated Farmers Association
Multi-Purpose Cooperative v. Commissioner of
Internal Revenue, CTA Case No. 7994,
February 17, 2012)
LBT assessment based on imputed LBT assessment based on imputed LBT assessment based on imputed LBT assessment based on imputed LBT assessment based on imputed
sales sales sales sales sales
A local government unit (LGU) has no
right to collect local business tax (LBT) on
the receipts that properly belong to other
LGUs where the taxpayer earned and
recorded its sales.
In the instant case, the City Treasurer of
an LGU assessed a freight forwarding
company for deficiency LBT and interest
on its alleged untaxed gross receipts
earned in its two branches, which are
located in two different LGUs. The City
Treasurer argued that since the amount
was not properly taxed by the LGUs that
have jurisdiction over the two branches,
the company should include the sales not
properly taxed in the computation of
taxes payable in the LGU of the City
Treasurer since its head office is in its
jurisdiction. The sales revenues in the
head office and branches are separately
invoiced and the corresponding local
business taxes were paid to the two LGUs
where the branches are located.
The CTA held that the situs rule under
Section 150 of the Local Government
Code (LGC) is clear and unequivocal that
in case an establishment maintains or
operates branches or sales outlets
elsewhere, it shall record the sale in the
branch or sales outlet making the sale or
transaction. Naturally, the tax thereon
shall accrue and shall be paid to the LGU
where such branch or sales outlet is
located.
The CTA ruled that even if there was
under-declaration or mis-declaration of
the total taxable earnings of the taxpayer
in its branches which deprived the other
LGUs of their lawful dues, the City
Treasurer may not collect what under the
Revenue Code and LGC properly belongs
to the two other LGUs. According to the
CTA, the action of the City Treasurer is
impermissible because to allow it would
be to sanction or encroach upon the
prerogatives of another co-equal and
autonomous local government. Hence, the
CTA ruled for the cancellation of the
deficiency LBT assessment issued by the
City Treasurer.
(City of Makati v. Nippon Express Philippines
Corporation, CTA AC No. 76, February 17,
2012)
6 6 6 6 6 March 2012
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