ORQUIA, ANNDHREA S.

BSA – 32

I. SEC implemented accounting updates for the year 2018-2020 application

(at least 5 accounting related standards)

1. SUBJECT YEAR 2020:

GUIDELINES ON POSTING OF:
1. ADDITIONAL SECURITIES DEPOSIT
2. SUBSTITUTION OF SECURITIES DEPOSIT AND
3. CHANGE OF RESIDENT AGENT

WHEREAS, pursuant to SEC Memorandum Circular No. (SEC MC No.) 11, Series of 2020, the
Commission has issued an extension on the deadline for the submission or filing of securities deposit
during the Covid-19 outbreak while the Philippines was placed under the Enhanced Community
Quarantine (ECQ) within thirty (30) days from lifting of the Enhanced Community Quarantine (ECQ) or
until June 15, 2020;

WHEREAS, for Foreign Corporations with License to Operate as Branch Office, Memorandum Circular
Nos. 17, and 18, all series of 2020, were pertinent as these extended the deadline for the submission of
the audited financial statements (AFS):

a. MC No. 17 – a period of 60 calendar days from the regular filing deadlines (for companies with
fiscal years ending 31 January 2020 to 31 March 2020); a period of 45 calendar days from the
regular filing deadline (for companies with fiscal year ending 30 April 2020), as follows:

1. FY ending 31 January 2020 – filing extended until 29 July 2020

2. FY ending 28 February 2020 – filing extended until 27 August 2020
3. FY ending 31 March 2020 – filing extended until 27 September 2020
4. FY ending 30 April 2020 – filing extended until 12 October 2020

b. MC No. 18 –filing extended from June 29 2020 to August 7, 2020 depending on the last numerical
digit of the SEC registration or license number

WHEREAS, the latest due AFS is used as basis for monitoring of branch offices in its posting of
additional and/or substitution of securities deposit.

WHEREAS, the change of resident agent in foreign corporations requires posting of securities deposit
that are compliant with SEC Memorandum Circular No. 17 Series of 2019.
NOW, THEREFORE, the Commission hereby resolves to EXTEND the deadline for the posting of
additional securities deposit and substitution of securities deposit to align the same with the extended
deadline of the AFS, subject to the following guidelines:

1. Posting of additional securities deposit for branch offices whose submission of AFS was
extended pursuant to MC Nos. 17 and 18, all series of 2020 shall be extended until October 29,
2020.

2. Securities deposit that matured during the period of extension pursuant to MC Nos. 17 and 18,
all series of 2020, shall likewise be extended until October 29, 2020.

3. The extension for posting of additional securities deposit and substitution of securities deposit
shall automatically be applied without the need for a request from the affected branch offices.

4. Sec. 185 of the Revised Corporation Code (RCC) provides that “a corporation lawfully existing
and doing business in the Philippines affected by the new requirements of this Code shall be
given a period of not more than two (2) years from the effectivity of this Act within which to
comply”. The RCC became effective on February 23, 2019. As such, pursuant to Sec. 185, these
affected corporations are given until February 23, 2021 to comply. However, pursuant to the
directive under Sec. 4 (z) of Republic Act No. 11469, otherwise known as the Bayanihan to Heal

Published:
Manila Bulletin, August 26, 2020
Philippine Star, August 26, 2020

As One Act, to move statutory deadlines and timelines for the filing and submission of any
document, payment of taxes, fees and other charges required by law and the grant of any
benefit in order to ease the burden on individuals under Community Quarantine, the
Commission is further extending the compliance period for these affected corporations.

Accordingly, for corporations incorporated prior to February 23, 2019, the adjustment in the
computation of additional securities deposit based on the new figures of Sec. 143 of the RCC
and compliance with the increase in initial deposit amounting to Five Hundred Thousand Pesos
(P500,000.00) will commence on August 1, 2021, unless the foreign corporation opts to comply
the minimum amount of Five Hundred Thousand Pesos (P500,000.00) imposed by the RCC.

5. For foreign corporations licensed on February 23, 2019 or onwards, the minimum of Five
Hundred Thousand Pesos (P500,000.00) shall be imposed, as required by Sec. 143 of the RCC.
Any additional securities deposit for these corporations shall adopt the adjustment in the
computation based on the figures of Sec. 143 of the RCC.
 FURTHER, in relation to the change of resident agent 1, the following applications will not incur
penalty if payment of appropriate fees 2 are made on or before September 30, 2020. Hence, penalty
shall commence to run on October 1, 2020:

1. Applications on request for change of resident agent filed and reviewed before March 16, 2020
with issued Payment Assessment Form (PAF)

2. Applications on request for change of resident agent filed before the quarantine period (ECQ,
MECQ, GCQ, MGCQ) but issued a PAF during the quarantine period (ECQ, MECQ, GCQ, MGCQ)

3. Applications on request for change of resident agent filed and reviewed during the quarantine
period (ECQ, MECQ, GCQ, MGCQ) but without issuance of PAF

This Memorandum Circular shall take effect immediately.

Signed this 24 day of August 2020, Pasay City, Philippines

Please note that for change of resident agent, the approval of SEC through a Petition for Change of Resident
Agent is required and within 30 days upon SEC approval, a GIS should be filed. Otherwise, penalties will be
incurred.

Penalty is 1,000 per month. Fraction of a month is considered as 1 month. Please note that despite
community quarantine, online payment centers are readily available.

2. SUBJECT YEAR 2018

ADOPTION OF REVISED AUDITING STANDARDS AND AMENDMENTS TO
EXISTING ACCOUNTING STANDARDS, AND INTERPRETATIONS

The Commission, in its meeting held on 09 January 2018, approved the adoption of the following
pronouncements as part of SEC's rules and regulations on financial reporting:

 Transfers of Investment Property (Amendments to PAS 40)

An entity shall apply these amendments for annual periods beginning on or after
January 1, 2018. Early adoption of the amendment is permitted.
 Philippine Interpretation IFRlC-22, Foreign Currency Transactions and Advance
Consideration
An entity shall apply this interpretation for annual periods beginning on or after January
1, 2018. Earlier application is permitted.
1
2
  Annual Improvements to Philippine PFRSs 2014-2016 Cycle
The amendments to PFRS 12 are effective for annual periods beginning on or after
January 1, 2017 whereas the amendments to PFRS 1 and PAS 28 are effective for annual
periods beginning on or after January 1, 2018.

All of the foregoing pronouncements have been adopted by the Auditing and Assurance
Standards Council and Philippine Financial Reporting Standards Council and approved by the
Board of Accountancy and Professional Regulation Commission and published in the Official
Gazette.

3. SUBJECT YEAR 2020

BASIS OF PREPARATION OF AUDITED FINANCIAL STATEMENTS FOR BSF’s
YEAR 2020

WHEREAS, the Bangko Sentral ng Pilipinas (BSP) issued a Memorandum to all

Banks1 allowing regulatory relief measures, as follows:
1. Staggered booking of allowance for credit losses over a maximum period of five years;
2. Reclassification of debt securities measured at fair value to amortized cost category;
3. Exclusion of eligible loans from past due and non-performing classification until 31
December 2021; and
4. Any other regulatory relief that will be issued for prudential reporting due to COVID-19
pandemic;

WHEREAS, the above regulatory reliefs, once adopted and recorded for financial reporting
purposes, are not considered in accordance with Philippine Financial Reporting Standards
(PFRS);
WHEREAS, the BSP requested that the SEC allow Audited Financial Statements of BSFIs to be
prepared in accordance with Philippine Financial Reporting Standards (PFRS), as modified by the
application of the above financial reporting reliefs, for the duration and terms allowed by the
BSP, in response to the request of the Bankers Association of the Philippines (BAP) addressed to
both the SEC and BSP;

4. SUBJECT YEAR 2019:

ADOPTION OF REVISED CONCEPTUAL FRAMEWORK
The Commission, in its meeting held on 07 May 2019, approved the adoption of the Revised
Conceptual Framework as part of SEC's rules and regulations on financial reporting.

The Revised Conceptual Framework includes: a new chapter on measurement; guidance on

reporting financial performance; improved definitions and guidance-in particular the definition
of a liability; and clarifications in important areas, such as the roles of stewardship, prudence
and measurement uncertainty in financial reporting.
 The amendments to references to the Conceptual Framework in the Philippine Financial
Reporting Standards are effective for annual periods beginning on or after January 1, 2020, with
earlier application permitted. These amendments should be applied retrospectively unless
retrospective application would be impracticable or involve undue cost or effort.

The foregoing pronouncement has been adopted by the Philippine Financial Reporting
Standards Council and approved by the Board of Accountancy and Professional Regulation
Commission and published in the Official Gazette.

Issued this 28 day of May 2019 at Pasay City, Philippines.

5. SUBJECT YEAR 2019:

SHAREHOLDERS’ APPROVAL ON SALE OF CORPORATE ASSETS

To promote good corporate governance and the protection of minority investors, the Commission,
pursuant to its regulatory power under Section 179(d) of Republic Act No. 11232 otherwise known as
the Revised Corporation Code of the Philippines (RCCP) and Administrative Order No. 38, Series of 2013
resolved to adopt the following rules:

(1) The sale or disposal of corporate property and assets amounting to at least 51% of the
corporation’s total assets shall be considered as sale of all or substantially all of corporate
property and assets, whether such sale accrued in a single transaction or in several
transactions taking place within one (1) year from the date of the first transaction
(aggregate sale transactions).
(2) In sale of corporate assets or property falling under the preceding paragraph, the vote of the
stockholders representing at least two-thirds (2/3) of the outstanding capital stock in a
stockholders’ meeting duly called for the purpose shall be required prior to the execution of
the sale transaction.
(3) In aggregate sale transactions, shareholder approval shall be required for the sale
transaction that breaches the 51% corporate asset threshold.
(4) The determination of whether or not the sale amounts to at least 51% of the corporation’s
assets must be computed based on its total assets as shown in its latest audited financial
statements, provided that the computation may also be based on the latest quarterly
financial statement or a special purpose financial statement prepared in connection with the
execution of the transaction.

If, after due notice and hearing, the Commission finds that any provision of this Memorandum Circular
has been violated, the Commission may impose any or all of the sanctions provided under Section 158 of
the RCCP.
This Memorandum Circular shall take effect upon its publication in two (2) newspapers of general
circulation in the Philippines.
Pasay City, Philippines, 7 April 2020

II. Updates on SRC Rule 68, including the micro and small enterprise, SME and full PFRS
The Revised SRC Rule 68 distinguished large entity from publicly-accountable entity. Small and medium-
sized entity is also separated into medium-sized and small entity. Accordingly, PFRS for Small Entities is
also adopted in the Revised Rule as the reporting standards for entities that qualify as small entities.

 Stock corporations with total assets or total liabilities of P600,000 or more.

(Previously, those with paid up capital stock of P50,000 or more.)
 Non-stock corporations with total assets or total liabilities of P600,000 or more.
 (Previously, those with total assets of P500,000 or more, or with gross annual receipts
of P100,000 or more.)
 For branch offices, representative offices and regional operating headquarters of foreign
corporations, the threshold remains the same.

The Revised SRC Rule 68 distinguished large entity from publicly-accountable entity. Small and medium-
sized entity is also separated into medium-sized and small entity. Accordingly, PFRS for Small Entities is
also adopted in the Revised Rule as the reporting standards for entities that qualify as small entities.

 Large and/or Publicly-Accountable Entities

A set of financial reporting framework other than the full PFRSs may be allowed by the Commission
for certain sub-class (e.g., banks, insurance companies) of these entities upon consideration of the
pronouncements or interpretations of any of the regulatory bodies.

 Medium-sized, Small and Micro Entities

✓   Are not required to file the financial statements under Part II of SRC Rule 68;

✓    Are not in the process of filing their financial statements for the purpose of issuing any class of
instruments in a public market; and

✓     Are not holders of secondary licenses issued by regulatory agencies.

Entities shall be exempt from the mandatory adoption of the PFRS for SMEs/PFRS for SEs when they
meet certain criteria in which case they have an option to use PFRS/PFRS for SMEs.

In the event where an entity breached the prescribed threshold in terms of total assets or total liabilities
and this it falls within a different classification, the Audited Financial Statements of said entity shall be
prepared in accordance with the higher framework.

Responsibility for Financial Statements

The Statement of Management’s Responsibility (SMR) for Financial Statements shall be attached to the
financial statements.
 The SMR shall cover the comparative financial statements and shall indicate therein such
periods. It shall be attached to the consolidated financial statements and stand-alone financial
statements. The SMR of companies covered under Part II of this Rule shall, in addition to the
requirements, be signed under oath. The Chairman of the Board, Chief Executive Officer and Chief
Financial Officer shall all sign the SMR.Failure to any of the prescribed signatories to sign the SMR
constitute a material deficiency in the financial statements. For registrants of securities, the SMR shall
be attached to both audited annual financial statements and reviewed interim financial statements.

In case of branch offices, representative offices or regional operating headquarters of foreign

corporations, the SMR shall be signed by its local manager who is in charge of its operations within
Philippines.

III. BIR implemented accounting updates for the year 2018-2020 (at least 5 regulations,
memorandum or the like issued by BIR)

1. Further clarifies the retirement benefits exempt from Income Tax pursuant to RA No. 11494
(Bayanihan to Recover as One Act) as implemented under RR No. 29-2020

REVENUE MEMORANDUM CIRCULAR NO. 120-2020 issued on November 9, 2020 further

clarifies (through Questions and Answers) the exemption from Income Tax of the retirement
benefits received by employees of private firms from June 5, 2020 to December 31, 2020
pursuant to Republic Act (RA) No. 11494 (Bayanihan to Recover as One Act), as implemented
under Revenue Regulations (RR) No. 29-2020. A duly registered retirement plan, as
contemplated under RR No. 29-2020, is when it has been issued a Certificate of Qualification as
a Reasonable Employees' Retirement Benefit Plan. The said certificate is issued by the BIR upon
satisfaction of the conditions and prescribed requirements.
Only the amount received covered by the registered retirement plan will be exempt
from Income Tax, provided that the retirement and the receipt of the retirement benefits are
within the covered period. The amount in excess of what is within the retirement plan shall be
taxable. Under Sec. 32 (B) (6) of the Tax Code, as amended, retirement benefits received under
RA No. 7641(Retirement Pay Law) are not to be included in the gross income of the recipient
and are, therefore, tax exempt.
The said law provided that, "In the absence of a retirement plan or agreement providing
for retirement benefits of employees in the establishment, an employee upon reaching the age
of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the
compulsory retirement age, who has served at least five (5) years in the said establishment, may
retire xxx." RR No. 29-2020 requires the submission of the list of recipients of retirement
benefits and other income payments exempt from Income Tax paid by employers from June 5 to
December 31, 2020. The employees included in the said list are still to be included in the Annual
Alphabetical List of Employees required to be submitted on or before January 31 of each year
since the Annual Alphabetical List reflects the income received by the said employees for the
year, inclusive of retirement benefits and other income payments.
2. Publishes the full text of Joint Administrative Order No. 2-2018 entitled "Implementing
Guidelines on the Value-Added Tax (VAT) Exemption of the Sale of Drugs Prescribed for
Diabetes, High-Cholesterol and Hypertension under Republic Act No. 8424 Otherwise Known as
the National Internal Revenue Code of 1997, as Amended by Republic Act No. 10963"

REVENUE MEMORANDUM CIRCULAR NO. 2-2019 issued on January 10, 2019 publishes
the full text of Joint Administrative Order No. 2-2018, which established the general guidelines
in the implementation of the Value-Added Tax (VAT) exemption of the sale of drugs prescribed
for Diabetes, High-Cholesterol and Hypertension (under Republic Act (RA) No. 8424, as amended
by RA No. 10963), and delineates the roles of the Department of Finance (DOF), Department of
Health (DOH), BIR and Food and Drug Administration (FDA) In its proper implementation.

Said implementing guidelines shall apply to the sale by manufacturers, distributors, wholesalers
and retailers of drugs prescribed for the treatment of said illnesses in its final form. The said sale
of drugs shall be exempt from VAT imposed under Section 106 of the National Internal Revenue
Code of 1997, as amended, while the importation of the same shall be subject to VAT under
Section 107 of the same Code, as amended. The sale of drugs not included in the "List of VAT-
Exempt Diabetes, High Cholesterol and Hypertension Drugs" published by the FDA shall not be
exempt from VAT.

The VAT-exemption granted to persons under Republic Act (RA) No. 7432 (Senior Citizens Act of
1992), as amended, and RA No. 7277 (Magna Carta for Persons with Disability), as amended, on
the VAT-exempt sales of drugs to senior citizens and persons with disabilities, respectively, are
covered by the issuance.

All manufacturers, distributors and retailers shall report all drugs included in the VAT exemption
list in the Electronic Drug Price Monitoring Systems (EDPMS), in addition to the current list of
drugs that the DOH is monitoring through the EDPMS. They shall also submit to the DOH, within
60 days upon effectivity of these guidelines, a Sworn Statement containing the wholesale price,
suggested retail price and actual retail price prior to and after the effectivity of these guidelines.
The FDA shall provide the DOH and the BIR the "List of VAT-Exempt Diabetes, High Cholesterol
and Hypertension Drugs" and any update thereto thirty (30) days prior to the beginning of every
quarter. Said list and any updates thereto shall be published by the BIR through the issuance of
a Revenue Memorandum Circular.

The roles and responsibilities of the DOH, DOF, FDA and the BIR are specified in the guidelines.

3. Provides clarifications on certain provisions of RR Nos. 8-2018 and 11-2018 implementing the
Income Tax provisions of RA No. 10963 (TRAIN Act).

REVENUE MEMORANDUM CIRCULAR NO. 50-2018 issued on June 8, 2018 provides the
most frequently asked questions and the corresponding answer relative to the Income and
Withholding Tax provisions of Revenue Regulations (RR) Nos. 8-2018 and 11-2018, as amended
 by RR Nos. 15-2018 and 14-2018, respectively, implementing Republic Act No. 10963 (Tax
Reform for Acceleration and Inclusion [TRAIN] Law).

4. Prescribes the procedures on the use of Withholding Tax Table on Compensation Income and
advises on the change of Creditable Withholding Tax Rate on certain income payments to
individuals

REVENUE MEMORANDUM CIRCULAR NO. 1-2018 issued on January 5, 2018 prescribes

the procedures on the use of Withholding Tax Table on Compensation Income and advises on
the change of Creditable Withholding Tax Rate on certain income payments to individuals.

In general, every employers paying compensation to its employee's shall deduct and withhold
from such compensation a tax determined in accordance with the prescribed revised
Withholding Tax table, version 2 (Annex A of the Circular) using the following steps:

Step 1 Determine the total amount of monetary and non-monetary

compensation paid to an employee for the payroll period: monthly,
semi-monthly, weekly or daily, as the case may be, segregating non-
taxable benefits and mandatory contributions;
Step 2 Use the appropriate table (in Annex A) for the applicable payroll period;
Step 3 Determine the compensation range of the employee and apply the
applicable tax rates prescribed thereon; and
Step 4 Compute the Withholding Tax due by adding the tax predetermined in
the
compensation range indicated on the column used and the tax on the excess of
the total compensation over the minimum of the compensation range.

Sample computations using the Withholding Tax Table are provided in the Circular.

The following income payments to self-employed individuals or professionals shall be subject to

eight percent (8%) Creditable Withholding Tax:

a. Professional fees, talent fees, commissions, etc. for services rendered by individuals;
b. Income distribution to beneficiaries of Estates and Trusts;
c. Income payment to certain brokers and agents;
d. Income payment to partners of general professional partnership;
e. Professional fees paid to medical practitioners; and
f. Commission of independent and/or exclusive sales representatives, and marketing agents of
companies.

5. Prescribes the policy for the use of BIR Form No. 0605 for Excise Tax purposes

REVENUE MEMORANDUM CIRCULAR NO. 97-2020 issued on September 9, 2020 prescribes

the policy for the use of BIR Form No. 0605 for Excise Tax purposes. The use of BIR Form No.
0605 is now authorized only for the following:
A. Payment on export products pursuant to Product Replenishment Scheme under Revenue
Regulations No. 3-2008;
B. Payment for Excise Tax on Non-Essential Services for Excisable Cosmetic Procedures until
such time that BIR Form No. 2200-C will be available for use; and
C. Payment for deficiency Excise Tax.
D. All other Excise Tax payments on domestic removals of excisable articles shall use their
corresponding Excise Tax Returns (BIR Form 2200 series).