Monday December 22 , 2014
Tax Updates

Tax Updates

A compilation of recent legislation and issuances of the Bureau of Internal Revenue and other government agencies relevant to the field of taxation and corporate practice.

Documents

Revenue Memorandum Order No. 34-2014 - Clarifies certain provisions of RMO No. 20-2013, as amended by RMO No. 28-2013, on the issuance of Tax Exemption Rulings for Qualified Non-Stock, Non-Profit Corporations and Associations under Section 30 of the Revenue Memorandum Order No. 34-2014 - Clarifies certain provisions of RMO No. 20-2013, as amended by RMO No. 28-2013, on the issuance of Tax Exemption Rulings for Qualified Non-Stock, Non-Profit Corporations and Associations under Section 30 of the

Revenue Memorandum Order (RMO) No. 34-2014 was issued by the Bureau of Internal Revenue (BIR) on September 18, 2014 clarifying that absence of a valid, current and subsisting tax exemption ruling will not divest such qualified entities of their tax exemption privilege. However, those who fail to secure such tax exemption rulings will just have to prove that they have complied with the conditions set forth in the law for tax exemption during tax investigation.

Revenue Memorandum Order (RMO) No. 33-2014 - Amending the Policies, Guidelines and Procedures in the Issuance of Importer’s Clearance Certificate (ICC) and Customs Broker’s Clearance Certificate (BCC) relative to Accreditation as Importer or Customs Revenue Memorandum Order (RMO) No. 33-2014 - Amending the Policies, Guidelines and Procedures in the Issuance of Importer’s Clearance Certificate (ICC) and Customs Broker’s Clearance Certificate (BCC) relative to Accreditation as Importer or Customs

Revenue Memorandum Order No. 33-2014 - Amending the Policies, Guidelines and Procedures in the Issuance of Importer’s Clearance Certificate (ICC) and Customs Broker’s Clearance Certificate (BCC) relative to Accreditation as Importer or Customs Broker

On September 11, 2014, the Bureau of Internal Revenue (BIR) issued RMO No. 33-2014 amending certain provisions of RMO No. 10-2014 and RMO No. 22-2014.

RMO No. 10-2014 required importers and customs brokers to submit certain documentary requirements in their application for accreditation, such as certified true copies (CTCs) of the applicant’s BIR Certificates of Registration (COR), Annual ITRs and DTI COR of Business Name, among others.

 

Revenue Memorandum Circular  No. 73-2014 - Withholding Tax Rates on Dividend Payments to Philippine Central Depository (PCD) Nominees Revenue Memorandum Circular No. 73-2014 - Withholding Tax Rates on Dividend Payments to Philippine Central Depository (PCD) Nominees

Revenue Memorandum Circular (RMC) No. 73-2014 - Withholding Tax Rates on Dividend Payments to Philippine Central Depository (PCD) Nominees

The BIR recently issued Revenue Memorandum Circular (RMC) No. 73-2014 dated September 12, 2014 clarifying the withholding tax rates on dividend payments to PCD Nominees. Under this circular, a PCD Nominee-Filipino is deemed to be an individual subject to final withholding tax of 10% under Section 24(B)2 of the Tax Code, unless it is satisfactorily shown that the actual equity investor is a domestic corporation.  A PCD Nominee – Non Filipino is deemed to be a non-resident foreign corporation subject to final withholding tax of 30% under Section 28(B)1 of the  Tax Code,  unless it is satisfactorily shown that the actual equity investor is a resident alien, non-resident alien engaged or not engaged in trade or business in the Philippines or resident foreign corporation.

The BIR Regulations did not mention anything about the applicability of reduced withholding rates under existing tax treaties.  It can however be presumed that if the non-resident recipient, whether individual or corporate, is qualified to avail of the reduced treaty rates, then such should be the rate applicable.

Revenue Regulation No. 6-2014-Prescribing the Mandatory Use of Electronic Bureau of Internal Revenue Forms (eBIR Forms)  Revenue Regulation No. 6-2014-Prescribing the Mandatory Use of Electronic Bureau of Internal Revenue Forms (eBIR Forms)

Revenue Regulation No. 6-2014-Prescribing the Mandatory Use of Electronic Bureau of Internal Revenue Forms (eBIR Forms)

Last September 5, 2014, the Bureau of Internal Revenue (BIR) issued Revenue Regulation 06-2014 prescribing the mandatory use of Electronic Bureau of Internal Revenue Forms (eBIR Forms) in filing of all tax returns by Non-Electronic Filing and Payment System (Non-eFPS) filers. Mandatory coverage of the Regulation are:

 

Revenue Memorandum Circular (RMC) No. 51-2014 – Clarifying the Inurement Prohibition under Section 30 of the National Internal Revenue Code of 1997 Revenue Memorandum Circular (RMC) No. 51-2014 – Clarifying the Inurement Prohibition under Section 30 of the National Internal Revenue Code of 1997

Last June 6, 2014, the Bureau of Internal Revenue issued Revenue Memorandum Circular (RMC) No. 51-2014 which clarifies the inurement prohibition of Section 30 of the National Internal Revenue Code relating to non-stock/non-profit corporations/associations/organizations which are exempt from income tax.

Revenue Memorandum Circular (RMC) No.  54-2014 – Clarifying Issues Relative to the Application for Value Added Tax (VAT) Refund/Credit under Section 112 of the Tax Code Revenue Memorandum Circular (RMC) No. 54-2014 – Clarifying Issues Relative to the Application for Value Added Tax (VAT) Refund/Credit under Section 112 of the Tax Code

Last June 11, 2014, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 54-2014 which clarified the issues relating to the application for Value Added Tax (VAT) refund or credit as provided under Section 12 of the Tax Code. The said RMC seeks to summarize the rules on VAT refunds as stated by the Supreme Court.

SEC Memorandum Circular No. 10-2014 - Guidelines and Directives to Assist Issuers of Securities Listed and Traded in the Philippine Stock Exchange in Complying with the Requirements of BIR Revenue Regulation No. 1-2014 SEC Memorandum Circular No. 10-2014 - Guidelines and Directives to Assist Issuers of Securities Listed and Traded in the Philippine Stock Exchange in Complying with the Requirements of BIR Revenue Regulation No. 1-2014

Guidelines and Directives to Assist Issuers of Securities Listed and Traded in the Philippine Stock Exchange in Complying with the Requirements of BIR Revenue Regulation No. 1-2014

Last May 22, 2014, the Securities and Exchange Commission (SEC) issued SEC Memorandum Circular No. 10, series of 2014 (MC 10-2014) which provides for the guidelines and directives to assist issuers of securities listed and traded in the Philippine Stock Exchange to comply with the requirements of BIR Revenue Regulation (RR) No. 1-2014. RR No. 1-2014 in turn provides for the requirements of Alphabetical List of Employees/Payees of Income Payments which are to be submitted to the BIR.

 

Revenue Memorandum Circular No. 37-2014 - Entry into Force, Effectively and Applicability of the Philippines-Kuwait Double Taxation Agreement Revenue Memorandum Circular No. 37-2014 - Entry into Force, Effectively and Applicability of the Philippines-Kuwait Double Taxation Agreement

On May 8, 2014, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 37-2014  regarding the applicability of the Philippines-Kuwait Double Taxation Agreement entitled “Agreement between the Government of the Philippines and the Government of the State of Kuwait for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income” which was entered into force on April 22, 2013.

The provisions on taxes on income of the Agreement shall apply to income derived or accrued beginning January 1, 2014.

Despite the Deutsche Case where the Supreme Court ruled for the automatic application of tax treaties, the BIR imposed a prerequisite before the Philippine-Kuwait Tax Treaty may take effect.  According to the BIR, Tax Treaty Relief Applications (TTRAs) invoking the Philippine-Kuwait Agreement should first be filed and addressed to the International Tax Affairs Division (ITAD) of the BIR, together with duly accomplished BIR Form 0901 (Application for Relief from Double Taxation) and other documentary  requirements pursuant to Revenue Memorandum Order (RMO) No. 72-2013 before the tax treaty relief may be enjoyed.

Revenue Memorandum Order No. 10-2014 – Policies, Guidelines and Procedure in the Accreditation of Importers and Customs Brokers and the Revocation Thereof Revenue Memorandum Order No. 10-2014 – Policies, Guidelines and Procedure in the Accreditation of Importers and Customs Brokers and the Revocation Thereof

Last February 10, 2014 the Office of the Commissioner of Internal Revenue issued RMO No. 10-2014 providing policies, guidelines and procedure in the accreditation of importers and customs brokers. The said RMO also emphasized  that  all importers and customs brokers, unless otherwise exempted, are required to secure accreditation from the BIR.

Moreover, RMO No. 10-2014 defines the duties and responsibilities of designated Bureau of Internal Revenue (BIR) offices in the accreditation and dis-accreditation of the importers and customs brokers. It also prescribes the reportorial requirements for the proper monitoring of accredited importers and customs brokers.

Revenue Memorandum Circular No. 8-2014 - Presentation of Tax Exemption Certificate or Ruling by Exempt Individuals and Entities Revenue Memorandum Circular No. 8-2014 - Presentation of Tax Exemption Certificate or Ruling by Exempt Individuals and Entities

Last February 6, 2014, the Office of the Commissioner of the Bureau of Internal Revenue issued RMC NO. 8-2014, mandating all concerned withholding agents to require all individuals and entities claiming tax exemption, to provide a copy of a valid, current and subsisting tax exemption certificate or ruling, before payment of income.

The RMO further provides that the failure on the part of the taxpayer to present the said exemption certificate or ruling as required, shall subject him to the payment of appropriate withholding taxes due on the transaction and that the failure of the withholding agent to withhold, notwithstanding the lack of tax exemption certificate or ruling shall, cause the imposition of penalties under the Tax Code.

Revenue Memorandum Order (RMO) No. 09-2014 – Requests for Rulings with the Law and Legislative Division Revenue Memorandum Order (RMO) No. 09-2014 – Requests for Rulings with the Law and Legislative Division

Revenue Memorandum Order (RMO) No. 09-2014 – Requests for Rulings with the Law and Legislative Division

On February 6, 2014, the Office of the Commissioner of Internal Revenue issued RMO No. 09-2014. In Sections 2 and 3 thereof, the Bureau enumerated the instances where it will not issue rulings, these are:
1. Non-compliance with any of the requirements under the Circular;
2. The Bureau does not give tax planning advice and does “not” approve tax planning arrangements;
3. The Bureau will not resolve an issue through a ruling if it can be determined in another process (e.g. appeal);
4. A taxpayer has directed a similar inquiry to another office of the Bureau;
5. The same issue involving the same taxpayer or related taxpayer is pending in a case in litigation;
6. The same issue involving the same taxpayer, is a subject of a pending investigation, on -  going audit, administrative protest, claim for refund or issuance of tax credit certificate, or collection proceeding; and
7. In case of hypothetical questions.

The suggested format in a request for ruling before the Law / Legislative Division as well as the general documentary requirements are discussed in Sections 4 and 5, respectively.

The order shall take effect immediately.

Revenue Regulation No. 2-2014 -the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 2-2014 prescribing the new BIR forms to be used for the filing of the income tax returns (ITRs) for the taxable year ending December 31, 2013 Revenue Regulation No. 2-2014 -the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 2-2014 prescribing the new BIR forms to be used for the filing of the income tax returns (ITRs) for the taxable year ending December 31, 2013

Revenure Regulations No. 2-2014 - New Income Tax Forms

RR 2-2014 shall take effect starting the taxable year ended December 31, 2013 and after fifteen (15) days following publication in two (2) newspapers of general circulation.

Taxpayers who filed their 2013 ITRs under the old form must re-file using the new income tax forms.

Revenue Memorandum Circular No. 5 – 2014 – Clarifying the Provisions of Revenue Regulations No. 1-2014 Pertaining to the Submission of Alphabetical List of Employees/Payees of Income Payments Revenue Memorandum Circular No. 5 – 2014 – Clarifying the Provisions of Revenue Regulations No. 1-2014 Pertaining to the Submission of Alphabetical List of Employees/Payees of Income Payments

Last January 29, 2014 the Office of the Commissioner of the Bureau of Internal Revenue issued RMC No. 5-2014  clarifying that there are only three modes of submission of the alphalist which can be used by the taxpayer, at its option, namely: a)as attachment in the Electronic Filing and Payment System (eFPS) b)electronic Submission (eSubmission)  using the BIR’s website address at esubmission@bir.gov.ph; and c)through Electronic Mail (email) submission at dedicated BIR email addresses using the data entry module of the Bureau of Internal Revenue (BIR). The option, however,  is not absolute, as some taxpayers are still required to submit alphalist through eSubmission.
It was also discussed in RMC No. 5-2013, the  step by step guideline in the submission of the alphalist.

Revenue Regulations No. 1-2014 - Requiring all withholding agents to submit alphalist of their respective employees and payees regardless of their number. Revenue Regulations No. 1-2014 - Requiring all withholding agents to submit alphalist of their respective employees and payees regardless of their number.

Revenue Regulations No. 1-2014 - Requiring all withholding agents to submit alphalist of their respective employees and payees regardless of their number.

Last December 17, 2013, the Bureau of Internal Revenue (BIR) issued Revenue Regulation (RR) No. 1-2014 requiring all employers/withholding agents, regardless of their number of employees and payees, whether the employees/payees are exempt, to submit an alphabetical list (alphalist) of employees and list of payees on income payments subject to creditable and final withholding taxes to be attached as integral part of the Annual Information Returns (BIR Form No. 1604CF/1604E) and Monthly Remittance Returns (BIR Form No. 1601C, etc.).


Moreover, the submission, of alpha list must be made electronically and cannot be absolutely done manually. Further, in the event that it does not conform with the BIR prescribed format thereby resulting to the unsuccessful uploading into the BIR system, it shall be deemed not received and shall not qualify as a deductible expense for income tax purposes.

 RR 18-2013 - Revised Rules On Assessment Procedure RR 18-2013 - Revised Rules On Assessment Procedure

On November 28, 2013, the BIR and DOF issued Revenue Regulations No. 18-2013 amending certain procedures relative to the due process requirement in the issuance of tax assessments. Among the IMPORTANT CHANGES include:

1. Removed the requirement for the issuance of a letter of informal conference before a Preliminary Assessment (PAN) is issued.

2. Mandates the issuance of a Final Assessment (FAN) within 15 days from receipt of the protest to PAN.

3. Requires an identification of the kind of protest filed – whether a reconsideration or reinvestigation.  The submission of additional documents within 60 days from filing of protest is allowed only in the case of reinvestigation.  For motion for reconsideration, the decision of the BIR will be based only on documents already submitted to the BIR prior to the issuance of FAN and no new evidence will be accepted.

4. Mandates that protest should include the facts, law, rules, regulations on which the protest is based. Otherwise, the protest is void and of no effect.  For items in the assessment not properly protested, these shall become final and demandable and collection letters shall be issued immediately.

5. Required the imposition of a 20% delinquency interest per annum on assessments unpaid which shall be computed from the time stated for its payment in the FAN until paid.  This shall be in addition to the 20% deficiency interests imposed on assessments from time it is due until it is paid.  It is possible that annual interest penalty may amount to 40% per annum.

6. Final Decision on Disputed Assessment (FDDA) issued by an authorized representative of the Commissioner (such as the Regional Directors or Assistant Commissioner in the case of the Large Taxpayers Service) may be appealed to the Court of Tax Appeals (in a judicial appeal) or to the Commissioner (in an administrative appeal) within 30 days from receipt of decision. For administrative appeal, no new evidence can further be introduced.

7. Service of delivery of the PAN/FAN/FDDA can be served by personal mail, registered mail or by substituted delivery.

RMC No 63-2013 - Disallowance due to non-withholding, notwithstanding the payments of withholding tax at the time of audit, shall apply to audit investigation for taxable year 2013 RMC No 63-2013 - Disallowance due to non-withholding, notwithstanding the payments of withholding tax at the time of audit, shall apply to audit investigation for taxable year 2013

The BIR issued Revenue Memorandum Circular (RMC) No. 63-2013 clarifying Revenue Regulations (RR) No. 12-2013, which provides that no deduction will be allowed notwithstanding the payments of withholding tax at the time of audit or reinvestigation/reconsideration in cases where no withholding tax was made as required by the NIRC.

The BIR clarified that the provision of the RR shall apply to audit investigation for taxable year 2013.

Revenue Regulations No. 17-2013 on the preservation of books and other accounting records Revenue Regulations No. 17-2013 on the preservation of books and other accounting records

The BIR recently issued Revenue Regulations No.17-2013 dated September 27, 2013 relative to the retention periods and preservation of books and other accounting records.

Under this regulations, all taxpayers are required to preserve their books of accounts, including subsidiary books and other accounting records, for a period of ten (10) years reckoned from the day following the deadline in filing a return, or if filed after the deadline, from the date of the filing of the return.

If the taxpayer has any pending protest or claim for tax credit/refund of taxes, and the books and records concerned are material to the case, the taxpayer is required to preserve his/its books of accounts and other accounting records until the case is finally resolved.

Unless a longer period of retention is required under the NIRC or other relevant laws, the independent Certified Public Accountant (CPA) who audited the records and financial statements of the taxpayer has the responsibility to maintain and preserve copies of the audited financial statements for a period of ten (10) years from the due date of filing the annual income tax return or the actual date of filing thereof, whichever comes later.

Revenue Regulations No. 15-2013: Revenue Regulations Implementing Republic Act (RA) No. 10378 entitled “An Act Recognizing the Principle of Reciprocity as Basis for the Grant of Income Tax Exemptions to International Carriers and Rationalizing other Revenue Regulations No. 15-2013: Revenue Regulations Implementing Republic Act (RA) No. 10378 entitled “An Act Recognizing the Principle of Reciprocity as Basis for the Grant of Income Tax Exemptions to International Carriers and Rationalizing other

On September 20, 2013, BIR issued Revenue Regulations (RR) No. 15-2013, prescribing rules and regulations in the implementation of RA No. 10378, amending Sections 28(A)(3)(A), 109, 118 and 236 of the 1997 NIRC, pursuant to the preferential tax rates or exemption from income tax on the gross revenue which could be availed of by international carriers derived from the carriage of persons and their excess baggage based on the principle of reciprocity or an applicable tax treaty or international agreement.

Under the RR, an international carrier having flights or voyages originating from any port or point in the Philippines, irrespective of the place where passage documents are sold or issued, is subject to 2 ½% Gross Philippine Billings (GPB) Tax imposed under Section 28(A)(3)(a) and (b) of the 1997 NIRC, as amended by RA No. 10378, unless it is subject to a preferential rate or exemption on the basis of an applicable tax treaty or international agreement to which the Philippines is a signatory.

The RR also provides procedures on the application of tax treaties under preferential income tax rate or exemption of international carriers with flights or voyages originating from the Philippine ports. It allows the international carriers to invoke the reciprocity rule in order to avail the preferential income tax rate or exemption from payment of GPB tax based on the tax treaty it invokes.

However, off-line international carrier having a branch/office or a sales agent in the Philippines which sells passage documents without flights or voyage starting from or passing through any point in the Philippines, is not considered engaged in business as an international carrier in the Philippines, and therefore subject to regular income tax rate of 30%.

All others not defined under the RR shall be subject to regular income tax rate of 30%.

Meanwhile, international air carriers and international shipping carriers doing business in the Philippines engaged in the transport of cargo from the Philippines to another country shall pay a Common Carrier’s Tax (Percentage Tax on International Carriers) of 3% on their quarterly gross receipts pursuant to Section 118 of the 1997 NIRC, as amended by RA No. 10378.  However, the transport of passengers from the Philippines to a foreign port is exempt from both VAT and percentage tax.

The transport of cargo and passengers by international carriers doing business in the Philippines shall be exempt from VAT pursuant to Sections 109(1)(E) and (S), respectively, of the 1997 NIRC, as amended by RA 10378. However, the transport of cargo by international carriers doing business in the Philippines is subject to Common Carrier’s Tax (Percentage Tax on International Carriers) under Section 118 of the NIRC, as amended.

Revenue Regulations No. 14-2013- Amends pertinent provisions of Revenue Regulations (RR) No. 02-98 as last amended by RR Nos. 30-2003 and 17-2003 Revenue Regulations No. 14-2013- Amends pertinent provisions of Revenue Regulations (RR) No. 02-98 as last amended by RR Nos. 30-2003 and 17-2003

BIR Revenue Regulations (RR) No. 14-2013 dated September 20, 2013 further amends RR No. 2-98. Under this RR, the professional fees paid to medical practitioners shall be subject to creditable withholding tax to be withheld and remitted by the hospital, clinics, HMOs and similar establishments. The same shall be included in the total medical bill of the patient and shall not be directly paid to the medical practitioner.

This RR will not apply if no professional fee has been charged to the patient as evidenced by sworn declaration jointly executed between the medical practitioner and the patient or his duly authorized representative, in case the patient is a minor or otherwise incapacitated based on the form presented in the regulations.  Failure to submit such sworn statement shall be reported by the hospital or clinic he Revenue District Office having jurisdiction thereto.

The term ‘medical practitioners’ shall include doctors of medicine, doctors of veterinary science and dentists, medical technologists, allied health workers (e.g. occupational therapists, physical therapists, speech therapists, nurses, etc.) and other medical practitioners who are not under an employer-employee relationship with hospital, clinic or HMO and other similar establishments.

The date of effectivity of this RR is on October 1, 2013.

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