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Tax Updates is a quarterly issue of ACCRALAW’s Tax Department.
Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW®)
Volume 2, Issue 2 April – June 2009
In this Issue Rules on the Revalidation of Letters of Authority and Issuance of Subpoena Duces Tecum To be entitled to a refund on zero-rated transactions, the invoicing requirements of the Tax Code, as amended, must be complied with The BIR has no power to periodically review the net retail prices of new cigarettes for the purpose of updating their tax classification A deposit on subscription of capital stock is not subject to DST ………………….. ………………….. ………………….. …………………..
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Bureau of Internal Revenue (BIR) Issuances Revenue Regulations (RR) RR 6-09 - Top 20,000 private corporations shall include a corporate taxpayer who has been determined and notified by the BIR as having satisfied any of the following criteria: a. Classified and duly notified by the BIR Commissioner as a large taxpayer, unless previously declassified as such or had already ceased business operations;
resident supplier of services (other than those covered by other rates of withholding tax) shall be similarly subject to the creditable withholding tax of 1% and 2%, respectively. The same threshold with regard to the purchase of agricultural products in their original state discussed above also applies. Top 5,000 individual taxpayers shall refer to individual taxpayers engaged in trade or business or exercise of profession who have been determined and notified by the BIR as having satisfied any of the following criteria: a. VAT payment or payable, whichever is higher, of at least P100,000 for the preceding year;
b. VAT payment or payable, whichever is higher, of at least P100,000 for the preceding year; c. Annual income tax due of at least P200,000 for the preceding year;
b. Annual income tax due of at least P200,000 for the preceding year; c. Total percentage tax paid of at least P100,000 for the preceding year;
d. Total percentage tax paid of at least P100,000 for the preceding year; e. f. Gross sale of P10,000,000 and above for the preceding year; Gross purchase of P5,000,000 and above for the preceding year; and
d. Gross sale of P10,000,000 and above for the preceding year; e. Gross purchase of P5,000,000 and above for the preceding year; and f. Total excise tax payment of at least P100,000 for the preceding year. Revenue Memorandum Circular (RMC) RMC 21-09—Prescribes the procedures for all EFPS filers filing monthly remittance, quarterly in-
g. Total excise tax payment of at least P100,000 for the preceding year. RR 6-09 likewise provided that income payments made by the top 5,000 individual taxpayers to their local/resident supplier of goods and to their local/
. issuance of Subpoena Duces Tecum and review of cases by the Assessment Division in the Regional Office Revalidation of Letters of Authority (Las): By way of a background. including the reassignment of the case to another RO if the Regional Director. the BIR has established a new policy dispensing with the requirement of securing a prior BIR Ruling before any tax clearance can be issued by the Revenue District Office (RDO) before the land and the common areas can be transferred from the real estate developer to the Condominium Corporation. This circular also provides that the Assessment Division shall generally review all dockets covered by LAs and TVNs prior to issuance of a preliminary/ final assessment notice. If the final report is not completed within the 120-day period. copy furnished the issuing authority. However. deems it necessary. The RDO can issue the CAR/TCL provided it is assured that the facts and the circumstances surrounding such transfer are analogous to the facts and circumstances contained in the previously promulgated rulings of the BIR resolving the tax issues on the matter. Section 5(c) of the Tax Code grants the Commissioner. However. Under this circular. the BIR clarified that only the book of accounts. including claims for refund/TCC amounting to One Million Pesos and below. among others. Prior to the issuance of a subpoena. Commissioner of Internal Revenue (GR No. a Revenue Officer (RO) is allowed only 120 days from the date of the issuance of the LA to conduct his audit and submit his investigation.Tax Updates come tax and quarterly VAT returns and monthly VAT declarations RMC 22-09— Clarifies the allowable claims for personal and additional exemptions and optional standard deduction pursuant to RR Nos. 171138) on the issue of the imposition of Documentary Stamp Tax on pawn tickets Revenue Memorandum Order (RMO) RMO 12-09 — Enjoins the strict implementation of the penalties imposed on non-filing of Quarterly Summary List of Sales and Purchases RMO 18-09 — Through this order.This circular directs all customs officers to collect the applicable taxes. the power to issue summons or subpoena. respectively RMC 23-09—Reiterates the policies and procedures relative to revalidation of Letters of Authority. the RO must follow the audit procedures set out in RAMO 3-82 and RMC 35-90. may at his option still secure a prior ruling from the BIR to confirm the tax-exempt status of such transfer. the BIR reiterated that the failure of the RO to request for the revalidation of the LA or the expiration of the “revalidated period” does not nullify the LA nor will it affect or modify the rules on the reglementary period within which an assessment may be validly issued. this shall be considered as a ground for the imposition of disciplinary action and demerit in the performance rating of the concerned RO. 10-2008 and 16-2008. RMC 24-09—Circularizes the relevant excerpts from the Supreme Court Decision in Tambunting vs. Issuance of Subpoena Duces Tecum (SDT): Generally. accounting records and/or specific documents necessary for inspection/ investigation but not yet provided by the taxpayer should be mentioned in the memorandum of the RO recommending the issuance of the SDT. The taxpayer. duties and Tax Updates is a quarterly issue of ACCRALAW’s Tax Department. Documents submitted as partial compliance to earlier request (s) should no longer be mentioned in the memorandum. the RO simply asks for whatever books and records which need to be examined. termination letter. the RO must submit a progress report every end of the month to the head of the audit office. such examination is sometimes unnecessarily delayed due to non-cooperation of taxpayers in making available their book of accounts and other accounting records for inspection. upon the recommendation of the Revenue District Officer. the RO shall then return the LA for revalidation. Page 2 Under this circular. Bureau of Customs Issuances Customs Memorandum Circular (CMC) CMC 149-09 . In order to avoid such delay. While the case is pending completion. however. tax credit certificate (TCC) or refund check.
7257. 2 April 2009) The transitional / presumptive input tax credit of real estate dealers is based on the value of the entire real property. on importations of cigars. et al. now known as the Fort Bonifacio Global City (Global City). et al. a vast tract of land that formerly formed part of the Fort Bonifacio military reservation.Circularized EO 790 (Modifying the Nomenclature and Rates of Import Duty on Various Products Under Section 104 of the Tariff and Customs Code ) Customs Memorandum Order (CMO) CMO 015-09 . Since the sale was consummated prior to the enactment of RA 7716.Suspended the implementation of Department Order No. cigarettes.R. 2009) Supreme Court Decisions Real properties of government instrumentalities are exempt from real property taxes. Tax Updates is a quarterly issue of ACCRALAW’s Tax Department. is exempt from all taxes. . were not complied with. 168584). by virtue of its special charter. G. 17-09 (Clarificatory Guidelines on Duty-Free Importation of Books) which imposes duty on the importation of books CMC 131-09 . NMHC is still not entitled to a refund on the ground that the invoicing requirements under the Tax Code.Tax Updates charges. As a government instrumentality. May 28. In 1995. fermented liquors and wines brought directly into the duly chartered or legislated freeports of the Subic Economic Freeport Zones and such other freeports. Strict compliance with the invoicing requirements is explicit under the Tax Page 3 Code. and from October 1996 onwards it has been selling lots located in the Global City to interested buyers. the MIAA is not subject to any kind of tax by local governments under Sec. Commissioner of Internal Revenue.R. Ramon S. then the sales of electricity to NPC cannot qualify for VAT zero-rating. No. City of Pasay. must be complied with Northern Mini Hydro Corporation (NMHC) is a VATregistered entity providing power generation services to National Power Corporation (NPC). Fort Bonifacio Development Corporation (FBDC) is engaged in the development and sale of real property. CMC 145-09 . whether indirect or direct including VAT. It filed a request for the issuance of a tax credit certificate of unutilized input VAT from its domestic purchases of goods and services attributable to the sale of electricity to NPC. 163072. CTA Case No. (Northern Mini Hydro Corporation v. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. distilled spirits.. FBDC acquired by way of sale from the National Government. While it is true that services rendered by a VAT-registered entity are effectively subject to 0% VAT. 133(o) of the Local Government Code (LGC). Caguioa. no VAT was paid thereon. (Manila International Airport Authority v. (G. The Manila International Airport Authority (MIAA) is exempt from the payment of real property taxes. The Court held that NPC. as amended. The Court ruled that since the invoices and receipts were not imprinted/stamped with the word “zerorated”. including excise tax. Neither is it a government-owned or controlled corporation under Section 16. The MIAA is not a government-owned or controlled corporation under the Administrative Code as it is not organized as a stock or non-stock corporation. as amended. Article XII of the 1987 Constitution because it is not required to meet the test of economic viability. FBDC then proceeded to develop the tract of land. authorized under Section 6 of RA 9334. Hon.Published the Revised Rules and Regulations on the Accreditation of Importers Court of Tax Appeals Decisions To be entitled to a refund of the input VAT on zero-rated transactions. in view of the finality of the Supreme Court’s decision in Republic vs. No. the invoicing requirements of the Tax Code. The exception to the exemption in Sec. 234(a) does not apply to MIAA because MIAA is not a taxable entity under the LGC.
as amended. 145 of the Tax Code. No. the amendments introduced by RA 7716 to Sec. 158885 and 170680. On 1 January 1996. Commissioner of Internal Revenue. the transitory provisions of EO 273. That is. The classification is considered valid and reasonable provided that: (1) it rests on substantial distinctions. all things being equal. No. real estate transactions such as those regularly engaged in by FBDC have since been made subject to VAT. then Congress needed a uniform mechanism to fix the tax bracket of a new brand. there can be no denial of the equal protection of the laws since the rational-basis test is amply satisfied. FBDC likewise invoked its right to avail of the transitional input tax credit.Tax Updates Following the effectivity of RA 7716. (Fort Bonifacio Development Corporation v. 100 of the Tax Code to include “real properties” among the “goods or properties. it is sufficient that the legislative classification is rationally related to achieving some legitimate State interest. (2) it is germane to the purpose of the law. a statutory classification that neither proceeds along suspect lines nor infringes constitutional rights must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification. 2 April 2009) The classification freeze provision under Section 145(c) of the Tax Code is valid. provide for a presumptive input tax equivalent to 8% of the value of the inventory as of 31 December 1987 of materials and supplies which are not for sale. reveal the lack of any legislative intent to make persons or entities in the real estate business subject to a VAT treatment different from those engaged in the sale of other goods or properties or in any other commercial trade or business. Page 4 The High Court affirmed its 20 August 2008 Decision upholding the validity of Sec. had remained intact despite the enactment of RA 7716. third and fourth requisites are satisfied in this case. 1988).. FBDC from thereon became obliged to remit the output VAT payments it received from the sale of its properties. FBDC remitted its output VAT payments to the BIR. G. et al. (British American Tobacco v. and (4) it applies equally to all those belonging to the same class.” the sale. whichever is higher. The first. It has been held that “in the areas of social and economic policy. since a new brand was not yet in existence at the time of the passage of RA 8240. 15 April 2009) A Siltation Dam is a structure and not considered as machinery or equipment for pollution control and environmental protection which is exempt from real property tax. Thus. The transitional input tax shall be 8% of the value of the inventory or actual VAT paid. RA 7716 took effect. Jose Isidro N. But the provisions of Sec.. to both present and future conditions. (3) it applies.R. on the transitional input tax credit. in the case of real estate dealers. et al. at the same time utilizing the transitional/presumptive input tax credit which petitioner allocated for the lots it sold. as amended by EO 273. As the vendor. Camacho. barter or exchange of which is made subject to VAT. . The BIR disallowed the claimed presumptive input tax credit citing RR 7-95 and RMC 396. G. the rational basis test was properly applied to gauge the constitutionality of the assailed law in the face of an equal protection challenge. and goods for sale. The Provincial Assessor of Marinduque (Assessor) issued an Assessment Notice against Marcopper Tax Updates is a quarterly issue of ACCRALAW’s Tax Department.R. Does the 8% transitional input tax credit in Section 105 applies only to the improvements on the real property or to the value of the entire real property? The High Court ruled that that the transitional input tax credit applies to the value of the entire real property. 105 of the old Tax Code. coupled with the fact that the said law left Sec. As result of 2 contracts to sell it executed. the basis for the presumptive input tax shall be the improvements constructed on or after the effectivity of EO 273 (January 1. Furthermore. It amended Sec. Consequently. 105 of the Tax Code.” Under the rational basis test. 163583. RR 7-95 provided that. 100. It noted that the instant case neither involves a suspect classification nor infringes on a fundamental right. Consequently. The classification freeze provision was inserted in the law for reasons of practicality and expediency. which amount may be allowed as tax credit against the output tax of the VAT-registered person. In doing so. This is clear from Sec. 105 intact. A legislative classification that is reasonable does not offend the constitutional guaranty of the equal protection of the laws.
16 June 2009) The Court of Tax Appeals has no jurisdiction over cases involving decisions of the One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center In 1997 and 1998. Unless expressly granted to the BIR. The LBAA held that the subject property is taxable as an improvement on the principal real property. implement. 166498. Marinduque. A subscription contract is defined as any contract for the acquisition of unissued stocks in an existing corporation or a corporation still to be formed. instrument. an event which may or may not happen. Inc. which exempts machinery and equipment used for pollution control and environmental protection from the payment of real property tax. G. 2009) A deposit on subscription of capital stock is not subject to documentary stamp tax (DST). the power to reclassify cigarette brands remains a prerogative of the legislature which cannot be usurped by the former. the subject property is a structure adhered to the soil. and RMO 6-2003. Cruz. and filters comprised of course tailings. among others. No. the deposit on stock subscription refers to an amount of money received by the corporation as a deposit with the possibility of applying the same as payment for the future issuance of capital stock. v. Sta. 170532. voting rights or other prerogatives and attributes of a stockholder. Court of Appeals. Pilipinas Shell Petroleum Corporation (Shell) settled its liabilities for customs duties and internal revenue taxes using tax credit certifi- Tax Updates is a quarterly issue of ACCRALAW’s Tax Department. June 11. The person making a deposit on stock subscription does not have the standing of a stockholder and he is not entitled to dividends. 175 and 176 of the Tax Code contemplate a subscription agreement in order for a taxpayer to be liable to pay the DST. Nos. et al. The deposit on stock subscription is merely an amount of money received by a corporation with a view of applying the same as payment for additional issuance of shares in the future. First Express Pawnshop Company. 145 of the Tax Code because they authorize the BIR Commissioner to up- Page 5 date the tax classification of new brands every two years or earlier subject only to its issuance of the appropriate regulations. are invalid insofar as they grant the BIR the power to reclassify or update the classification of new brands every two years or earlier. It cited the project design which describes the subject property as a “zoned earth siltation dam” composed of a clay core consisting of materials or impervious fill. the Supreme Court held. (Commissioner of Internal Revenue v.R.R. Camacho. a random fill made up of heavily to intensely fractured metarock. when nowhere in Sec. (Hon. as pertinent to cigarettes packed by machine. Secretary of Finance. 9-2003. (Provincial Assessor of Marinduque v. 22-2003. In the recent case of British American Tobacco v. Central Board of Assessment Appeals that a tailings dam is a permanent improvement not exempt from real property taxation. 172045-046. In this case. citing the ruling in Benguet Corporation v.. First Express is not liable for the payment of DST on its deposit on subscription for the reason that there is yet no subscription that creates rights and obligations between the subscriber and the corporation. apparatus.R. including its Siltation Dam and Decant System at Barangay Lamese. 145 of the Tax Code is such authority granted to the BIR. tool. Marcopper appealed the assessment before the Local Board of Assessment Appeals (LBAA) on the ground that the subject property is exempt from real property taxation under Sec. Secs. No.. et al. nor paraphernalia that produces a mechanical effect or performs a mechanical work of any kind. that RR Nos. by design. G. composition and function. The High Court held that the dam cannot be considered as machinery and equipment for pollution control and environmental protection and is therefore not exempt from real property taxes.Tax Updates Mining Corporation (Marcopper) for real property taxes due on the latter's real properties. Hence. and is neither a mechanical contrivance. 30 April 2009) The BIR has no power to periodically review the net retail prices of new cigarettes for the purpose of updating their tax classification. La Suerte Cigar and Cigarette Factory. appliances. These issuances unjustifiably emasculate the operation of Sec. . et al. Therefore. river sand deposits and course filter gravels. 234(e) of the LGC. G...
Commissioner of Customs. character. The transfers of the TCCs to Shell were processed by the transferors-BOI-registered companies and were eventually approved by the One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (Center). the Center required Shell to pay the BIR and BOC the amounts corresponding to the TCCs Shell had used to settle its liabilities. Shell’s remedy against the cancellation should have been a certiorari petition before the regular courts. 176380. both the BIR and the BOC accepted and allowed Shell to use them to pay and settle its tax liabilities. Monitor Eric R. No. but by the Center. Legaspi Village Makati City. (Pilipinas Shell Petroleum Corporation v. under the TCCP. Recalde. the letters and the actions for collection. . G. specifically the genuineness of the TCCs. Senior Associate Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW®) 122 Gamboa Street. As the CTA has no jurisdiction over decisions of the Center. Shell thereafter filed with the CTA a Petition for Review questioning the BOC collection efforts for lack of legal and factual basis. Is Shell’s resort to the CTA proper? No. the Center. In these collection cases. Through a series of letters. Flores. These are payment and collection issues. On the belief the TCCs were actually good and valid. based on official reports as to the quantity. Tax Dept. the absence of due process in the enforcement of the decision to cancel the TCCs. However. not tax protest issues within the CTA’s jurisdiction to rule upon. the Page 6 tax liabilities of Shell under the original assessments were considered unpaid. Philippines 0770 Telephone Number: + 63 2 830 8000 Facsimile Numbers: +63 2 812 4897 816 0119 Email Address: taxdept@accralaw. it discovered that the TCCs had been fraudulently secured by the original grantees who thereafter transferred them to Shell. To be very precise. When Shell went to the CTA. None of the letters can be considered as a liquidation or an assessment of Shell’s import tax liabilities that can be the subject of an administrative tax protest proceeding before the respondent whose decision is appealable to the CTA. hence. and Shell paid these liabilities using the TCCs transferred to it as payment. However. the respondent sought to recover the amounts covered by the cancelled TCCs. and value thereof. The Center claimed that after conducting a post-audit investigation.R. A tax protest case. 18 June 2009) For questions or comments. and the application of estoppel. Yusi. It subsequently received summons in one of the three collection cases filed by respondent before the Regional Trial Court (RTC) of Manila. Shell’s petition before the CTA principally questioned the validity of the cancellation of the TCCs – a decision that was made not by the respondent. and the collector’s own finding as to the applicable rate of duty. Tax Dept.Tax Updates cates (TCCs) that were transferred to it for value by several Board of Investment (BOI)-registered companies. involves a protest of the liquidation of import entries.com Tax Updates is a quarterly issue of ACCRALAW’s Tax Department. the facts surrounding the fraud in originally securing the TCCs. the issues it raised in its petition were all related to the fact and efficacy of the payments made. not a tax protest case before the CTA. it is akin to an assessment of internal revenue taxes under the Tax Code where the tax liability of the taxpayer is definitely determined. Shell’s import tax liabilities had long been computed and ascertained in the original assessments. Head Rowena G. A liquidation is the final computation and ascertainment by the collector of the duties on imported merchandise. on account of the cancellation of the TCCs. through the DOF Secretary. please contact: Ruby Rose J. informed Shell that it was cancelling the TCCs transferred to and used by Shell as payment.
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