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February 2012

Tax brief
Contents 02 BIR Rulings • Royalties non-deductible for PEZA enterprises • FBT on cash housing allowance 03 BIR Issuances • Clarification on taxability of GPPs • Rule on acceptance of tax payments by RCOs t Decisions 04 Cour Court • Statutory taxpayer is the proper party to claim excise tax refund • Due process in tax assessments • Proof of receipt of assessment • Proof of remittance not required for FWT refunds 06 Highlight on P&A services • Tax opinion and studies
February 2012 1

However. January 4. The Bureau of Internal Revenue (BIR) held that the list of allowable deductions for ecozone export enterprises under Section 2. as implemented by Revenue Regulations No. such benefit shall be considered fringe benefit subject to FBT. December 20. As long as the grant of the housing allowance was given in addition to the basic salary of the employee. 2012) FBT on cash housing allowance Housing privilege granted to expatriate employees holding managerial/ supervisory posts in the form of a fixed monthly allowance is treated as fringe benefit subject to fringe benefit tax (FBT) imposed under Section 33 of the Tax Code of 1997. i.. the mention of one thing implies the exclusion of another thing not mentioned.e. All other rulings that treat royalties as allowable deductions are considered revoked by this BIR ruling. (RR) 3-98. (BIR Ruling No. where the actual amount of housing allowance exceeds the actual amount of rent. In determining whether the housing privilege is subject to FBT or not. 512-2011. 014-2012. it is immaterial whether the lease contract was entered under the name of the employer or under the name of the employee. it may not be deducted from the gross income subject to the 5% preferential tax rate under the maxim expressio unius est exclusion alterius.BIR Rulings Royalties non-deductible for PEZA enterprises Royalty payments made by an export enterprise registered with the Philippine Economic Zone Authority (PEZA) to a nonresident foreign corporation under a trademark license agreement are not allowed as deduction for purposes of computing the taxable gross income of the PEZA-registered enterprise under the 5% preferential tax rate. the excess shall be treated as part of the employee’s income subject to income tax and consequently to the withholding tax on compensation prescribed under Section 79 of the Tax Code. Rule XX of the PEZA implementing rules and regulations (IRR) is exclusive. 2011) 2 February 2012 . (BIR Ruling No. Since royalties are not included in the allowable deductions.

2012) February 2012 3 . However. each partner shall report as gross income his distributive share.for the filing and payment of quarterly VAT d.BIR Issuances Clarification on taxability of GPPs The BIR issued the following clarifications on the tax liability of general professional partnerships (GPPs) and their partners. For the annual income tax payment of individual taxpayers as well as calendar-period corporate taxpayers. (Revenue Memorandum Circular No. (Revenue Memorandum Circular No. the BIR clarified that the authority of RCOs to issue RORs shall apply only on the following deadlines: a. For income tax purposes. as amended by RMO 02-2010.000. in the net income of the partnership.000. 1. On the 20th day of the month . January 3.2 of Revenue Memorandum Order No. 03-2012.A GPP is not subject to Rule on acceptance of tax payments by RCOs The BIR reiterated the rules to be observed in the acceptance of tax payments and issuance of Revenue Official Receipts (RORs) by Revenue Collection Officers (RCOs). Creditable withholding tax on GPPs and partners . Pursuant to Section III. and 10% if otherwise. 2012) income tax.for the remittance of withholding taxes c. actually or constructively received. income payments made periodically or at the end of the taxable year by a GPP to its partners. However. RORs by RCOs shall be limited to cash not exceeding P20. 2. Income tax liability of GPPs and partners . (RMO) 042007.for the payment of Annual Registration Fee b.Since a GPP is not subject to income tax. are subject to the 15% creditable withholding tax (CWT) if payments to the partner exceed P720. stipends and the like. it is exempt from withholding tax prescribed in RR 2-98 on income payments it receives in consideration for its professional services. On January 31 . the issuance of RORs shall start five working days prior to and until April 15. January 12. policies and guidelines on the acceptance of tax payments by RCOs assigned in areas where there are authorized agent banks (AABs) will subject the concerned revenue officials and employees to administrative disciplinary action under the Revised Code of Conduct for BIR officials and employees. The BIR further clarified that pursuant to RMO 04-2007 as amended. advances. allowances. 02-2012. such as drawings. sharings. It is the partners who are liable to income tax on their separate and individual capacities. On the 10th day of the month . there shall be no limit to the amount if payment is made through checks. Non-compliance with the rules.

In its ruling. (Hermano Miguel Febres Cordero Medical Education Foundation v. 106 and 108 of the Tax Code.e. is actually passed on to the end consumer as part of the transfer value or selling price of the goods sold. the petroleum company – that is the proper party to claim the tax refund and accordingly refund to the foreign airline company the excise tax erroneously passed on to the latter. which apply to articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported into the Philippines. the assessment was based on discrepancy from RELIEF and Third-Party Matching. 8194. 2012) 4 February 2012 . In the instant case. it cannot claim for refund of the erroneously paid excise taxes because it is not the proper party to claim such excise tax refund. the requirement of the law to inform the taxpayer of the basis of the assessment does not necessarily mean that a full narration of the facts and laws on which the assessment is based is needed. The “details of discrepancy” likewise provided the legal basis for assessing the taxpayer by citing Sections 31.. and RMO 32-2007. in reality. Ltd. The taxpayer further argued that the “details of discrepancy” attached to the FAN failed to explain how the underdeclaration was determined except that there is a discrepancy. that is. as amended and RMO 32-2007. The notices did not state the factual and legal bases of the assessment in violation of Section 228 of the Tax Code. January 25. According to the CTA. This circumstance proves that the taxpayer was sufficiently informed of the facts and the law as to why the assessment has been issued against it. As long as the parties are notified and given the opportunity to explain their side. the Court of Tax Appeals (CTA) held that the FAN. Failure to do so shall void the assessment. Thus. the tax.1. 32. Commissioner of Internal Revenue.4 of RR 12-99. the taxpayer argued that the final assessment notice (FAN) and assessment notice (BIR Form No. the taxpayer was able to intelligently make its protest by stating that its sale transactions are exempt from VAT. 32. In the appeal of its tax assessment. the requirements of due process are satisfactorily complied with. v. Rather.Court Decisions Statutory taxpayer is the proper party to claim excise tax refund The proper party to question or seek a refund of erroneously paid excise taxes on petroleum products is the statutory taxpayer. January 9. is basically an indirect tax. Excise taxes. It merely provides a statement that the assessment was made in accordance with Sections 31. The statutory taxpayer is the person on whom the tax is imposed by law and who paid the same even when the burden is shifted to the buyer. While the tax is directly levied upon the manufacturer/importer upon removal of the taxable goods from its place of production or from the customs custody. Commissioner of Internal Revenue. 1708) issued by the BIR are void since they merely showed mathematical computation of the alleged deficiency income tax and VAT discovered from the BIR’s Reconciliation of Listing for Enforcement (RELIEF) and Third Party Matching–BOC Data Program. it is the supplier – i. [Silkair (Singapore) Pte. while a foreign airline company is not liable to excise tax on the petroleum products it purchased and consumed in its international flight under Section 135(b) of the Tax Code. 106 and 108 of the Tax Code. a taxpayer must be informed of the facts and the laws upon which an assessment is made. 2012] Due process in tax assessments Under Section 228 of the Tax Code and Section 3. and “details of discrepancies” attached to the FAN sufficiently complied with Section 228 of the Tax Code since they contained the factual basis for the assessment. GR 166482. assessment notice. bartered or exchanged. CTA Case No.

Commissioner of Internal Revenue. and must indicate the name of the payor. For failure to establish that the PAN was actually received by the taxpayer. January 5. the amount of tax withheld. the same rule should apply to claims for refund of FWT. 2012) February 2012 5 . 7967. b. This is clear under RR 2-98 where both provisions of FWT and CWT appear under the subject/ heading “Withholding of tax at source”. the claim is filed with the CIR within the two-year period from the date of payment of tax. in case of denial of receipt of PAN. Court of Appeals. Its absence would render nugatory any assessment made by the tax authorities. To establish the fact of withholding.Court Decisions Proof of receipt of assessment Sending a preliminary assessment notice (PAN) to a taxpayer is part of the due process requirement in the issuance of deficiency tax assessment. it is incumbent upon the BIR to prove by competent evidence that the PAN was indeed received by the addressee in the due course of mail. Luang v. The taxpayer-refund claimant is likewise not required to present supporting documents to prove that the corresponding FWT on its interest on currency bank deposits has been remitted to the BIR in order to be entitled to tax refund. 2012) Proof of remittance not required for FWT refunds A final withholding tax (FWT) is of the same genre as CWT. the income payment basis of the tax withheld. to wit: a. To prove receipt of PAN. The certificates of final tax withheld at source (BIR Form 2306) should suffice. (Laurence Lee V. the document that may be accepted as evidence must emanate from the payor and not from the payee. the Supreme Court and CTA held that proof of actual remittances of the taxes withheld is not required to prove entitlement to refund of CWT. Considering that FWT and CWT are of the same nature. and c. that there are three conditions that must be established by the taxpayer-refund claimant. the CTA held that the conditions for entitlement to refund of CWT should likewise apply in a case of refund of FWT. the fact of withholding is established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom. 665 re CTA Case No. January 5. the Supreme Court held in the case of Banco Filipino Savings and Mortgage Bank v. Inc. CTA En Banc Case No. In a number of cases. 7224. CTA Case No. the BIR should present the copy of registry return receipt or other evidence that the taxpayer personally received the assessment. it is shown on the return of the recipient that the income payment received was declared as part of the gross income. Hence. and the nature of the tax paid. v. Thus. CTA and Commissioner of Internal Revenue (CIR). To be entitled to refund of unutilized CWT. either personally or by registered mail the assessment was deemed void. Commissioner of Internal Revenue. (Philippine Airlines.

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