TAX ALERT

March 31, 2012 AMENDING REVENUE REGULATIONS NO. (REV. REGS.) 13-2001 ON ABATEMENT OR CANCELLATION OF INTERNAL REVENUE TAX LIABILITIES BY DELETING THE PROVISION THAT PENALTIES AND/OR INTEREST IMPOSED ON THE TAXPAYER MAY BE ABATED OR CANCELLED ON THE GROUND OF ONE DAY LATE FILING AND REMITTANCE DUE TO FAILURE TO BEAT THE BANK CUT-OFF TIME. Revenue Regulations No. 4-2012 dated March 28, 2012. WHILE PNRC IS EXEMPT FROM DIRECT AND INDIRECT TAXES INCLUDING VAT ON ITS INCOME FROM OPERATIONS, INTEREST INCOME EARNED FROM PNRCS CURRENCY BANK DEPOSITS AND YIELD OR ANY OTHER MONETARY BENEFIT FROM DEPOSIT SUBSTITUTES AND FROM INVESTMENTS IN MONEY MARKET PLACEMENTS, TRUST FUNDS AND/OR SIMILAR ARRANGEMENTS/INVESTMENTS NOT BEING PART OF INCOME FROM OPERATIONS SHALL BE SUBJECT TO THE 20% AND 7.5% FINAL WITHHOLDING TAX UNDER SEC. 27(D)(1) OF THE TAX CODE. BIR Ruling No. 69-2012 dated February 10, 2012. UNDER SECTIONS 40(C)(2) AND (6)(C) OF THE TAX CODE, IN DETERMINING THE 51% STOCK OWNERSHIP REQUIRED TO GAIN CONTROL, ONLY THOSE PERSONS WHO TRANSFERRED PROPERTY FOR STOCKS IN THE SAME TRANSACTION MAY BE COUNTED UP TO A MAXIMUM OF FIVE. Since only FM Corp. owns the property being transferred and it did not receive controlling shares in the corporation, the gain or loss in the transfer shall be recognized. BIR Ruling No. 101-2012 dated February 20, 2012. SALES NOT PROPERLY TAXED IN A BRANCH OFFICE CAN ONLY BE SUBJECT TO DEFICIENCY BUSINESS TAXES PAYABLE WHERE THE BRANCH IS LOCATED AND SHOULD NOT BE INCLUDED IN THE COMPUTATION OF BUSINESS TAXES IN THE HOME OFFICE. City of Makati vs. Nippon Express Philippines Corporation, CTA AC Case No. 76 dated February 17, 2012. THE COURT OF TAX APPEALS HAS THE JURISDICTION TO RULE ON THE VALIDITY OF A RULE OR REGULATION ISSUED BY THE BUREAU OF

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2 INTERNAL REVENUE. Negros Consolidated Farmers Association Multi-Purpose Cooperative vs. CIR, et al., CTA Case No. 7994 dated February 17, 2012. SALE OF SUGAR PRODUCE MADE BY PETITIONER TO ITS MEMBERS AS WELL AS NON-MEMBERS IS EXEMPT FROM THE PAYMENT OF VAT. HENCE, SECTIONS 3 AND 4 OF REV. REGS. 13-2008 INSOFAR AS IT IMPOSES AN ADDITIONAL REQUIREMENT IS, THEREFORE, ULTRA VIRES AND INVALID. Negros Consolidated Farmers Association Multi-Purpose Cooperative vs. CIR, et al., CTA Case No. 7994 dated February 17, 2012. A WAIVER THAT DOES NOT SHOW THE DATE WHEN SIGNED AND ACCEPTED BY THE REVENUE DISTRICT OFFICER, OR THAT A COPY OF THE SAME WAS RECEIVED BY THE TAXPAYER, IS VOID, SUCH DATES BEING INDICATIVE WHETHER THE ACCEPTANCE OF WAIVER WAS MADE WITHIN THE PRESCRIPTIVE PERIOD. East Asia Power Resources Corporation vs. CIR, CTA Case No. 7936 dated February 6, 2012. FOR INCOME TAX PURPOSES, A TAXPAYER IS FREE TO DEDUCT FROM ITS GROSS INCOME A LESSER AMOUNT, OR NOT CLAIM ANY DEDUCTION AT ALL. WHAT IS PROHIBITED BY THE INCOME TAX LAW IS TO CLAIM A DEDUCTION BEYOND THE AMOUNT AUTHORIZED THEREIN. EVEN WHEN THERE IS UNDERDECLARATION OF INPUT TAX WHICH MEANS THERE IS ALSO A CORRESPONDING UNDERDECLARATION OF PURCHASES, THE SAME IS NOT PROHIBITED BY LAW. Philippine Daily Inquirer, Inc. vs. CIR, CTA Case No. 7853 dated February 16, 2012. IN VAT ASSESSMENTS, SINCE VAT IS IMPOSED ON GROSS RECEIPTS FROM THE SALE OR EXCHANGE OF SERVICES, WHAT IS CRITICAL TO BE SHOWN IS THAT THE TAXPAYER RECEIVED AN AMOUNT OF MONEY OR ITS EQUIVALENT, AND NOT WHEN THERE ARE UNDERDECLARED INPUT TAXES OR PURCHASES. Philippine Daily Inquirer, Inc. vs. CIR, CTA Case No. 7853 dated February 16, 2012. SECTION 228 OF THE TAX CODE PROVIDES TWO OPTIONS FOR THE TAXPAYER IN TAX ASSESSMENTS: (1) APPEAL TO THE CTA WITHIN 30 DAYS FROM THE LAPSE OF THE 180-DAY PERIOD ALLOWED FOR THE COMMISSIONER TO DECIDE THE PROTEST; OR (2) AWAIT THE FINAL DECISION OF THE COMMISSIONER ON THE DISPUTED ASSESSMENT AND APPEAL SUCH FINAL DECISION TO THE CTA WITHIN 30 DAYS AFTER RECEIPT OF A COPY OF SUCH DECISION. THESE OPTIONS ARE MUTUALLY EXCLUSIVE AND RESORT TO ONE BARS THE APPLICATION OF THE OTHER. Lascona Land Co., Inc. v. Commissioner of Internal Revenue, G.R. No. 171251 dated March 5, 2012.

3 Note: The information provided herein is general and may not be applicable in all situations. It should not be acted upon without specific legal advice based on particular situations. If you have any questions, please feel free to contact any of the following at telephone number (632) 633-9418, facsimile number (632) 633-1911, or at the indicated e-mail address: Atty. Carlos G. Baniqued Atty. Laura Victoria A.S. Yuson-Layug Atty. Terence Conrad H. Bello Atty. Suzette A. Celicious-Sy Atty. Madeline L. Zialcita-Villapando Atty. Excelsis V. Antolin Atty. Bernadette V. Quiroz Atty. Luis Martin V. Tan Atty. Emma Malou U. Lim Atty. Dane-Daniel O. Umali Atty. Francesca Noelle M. Huang cgbaniqued@baniquedlaw.com lvyusonlayug@baniquedlaw.com thbello@baniquedlaw.com sacelicious@baniquedlaw.com mlzvillapando@baniquedlaw.com evantolin@baniquedlaw.com bvquiroz@baniquedlaw.com lvtan@baniquedlaw.com eulim@baniquedlaw.com doumali@baniquedlaw.com fmhuang@baniquedlaw.com

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