PRE-BAR TAX LAW REVIEW

Atty. Rodolfo R. Nicolas, Jr., CPA

28 October 2017

A. COURT RULINGS

Basic Principle

1. New Hotels, Inc. vs. CIR (CTA - 27 Sept 2017)

Is withholding tax a tax?

When does the 3-year prescriptive period start to reckon in case of withholding taxes?
Can the overpayment of tax in one month be offset to next months tax due?
Income Taxes

2. ING Bank N.V. vs. CIR (SC - 22 Jul 2015)

What does upon receipt of the income mean in purview of withholding of taxes on
wages?
When is the right timing to withhold taxes on wages?

3. Liquigaz vs. CIR (CTA - 21 Sep 2015)

What is table assessment?

Does table assessment violate administrative due process requirement?
Who has burden of proof to specifically point out that assessment had prescribed?

4. FMS Cinemas vs. CIR (CTA - 2 Oct 2015)

What is reimbursement-at-cost?
When is reimbursement subject to withholding taxes?
Is overstatement of reported expenses subject to withholding tax equivalent to under
declaration of sales and income?
Is undeclared disbursement prohibited by law?

5. Davao City Water District vs. CIR (CTA - 2 Oct 2015)

What is BIR Form 2307?

Are judicial affidavits, independent CPA report, Annual ITR competent evidences in the
claim of excess CWT refund?
Can it be replaced by other documentary evidence in the claim of excess CWT Refund?

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6. Medtecs Intl. vs. CIR (CTA - 4 Nov 2015)

What is DST?
What are the tax benefits of PEZA entity?
How do you compute the 5% GIT?
What are allowable deductions on gross sales/revenues? (RR 11-2005)
What is required to prove the cost incurred are attributable to the PEZA-registered
products or goods?
Who between the lessor and PEZA entity (subject to 5% GIT) is liable for DST?

7. Central Azucarera vs. CIR (CTA- 23 Nov 2015)

What are intracompany advances?

What is the basis of the DST on intracompany advances?
Is DST computation based on year-end balances valid?
What are compromise penalties?
Is imposition of compromise penalties without conformity of taxpayer legal?

8. CIR vs. Shinko Industries (CTA- 4 Jan 2016)

What is the difference between a Sales Office and ROHQ?

Does the phrase promotion of parent companys products, quality control of products
will consider an ROHQ a sales office?

Value Added Taxes

8. Total Phils. vs. CIR (CTA- 14 Oct 2016)

When is there a refund of creditable input tax due or paid?

What is attributable to sale requisite in case of VAT refund?
What is the exception to the attributable to sale requisite?

Remedies

9. WCC, Inc. vs. CIR (CTA - 27 Oct 2015)

May BIR suspend business operations of a taxpayer even if it does not arise from
disputed assessments or refund?
Does other matters arising under NIRC? cover BIRs power to suspend business
operations of a taxpayer?
Where should a taxpayer appeal to nullify BIRs closure orders: CTA or RTC?
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10. CIR vs. Next Mobile (SC- 7 Dec 2015)

What are the requisites for a valid waiver to the statute of limitations?
Can an invalid waiver be validated?

11. P vs. Decena (CTA - 4 Jan 2016)

What does willful mean in the purview of non-payment of taxes?

When is the tax liability of a corporation extended to its responsible officer? (Sec. 253,
255, 256 NIRC)
What is the quantum of evidence to prove willfulness?
Who has the obligation to prove willfulness?
How is willfulness proven?

12. CIR vs. South Entertainment (CTA - 4 Jan 2016)

In case the taxpayer denies the receipt of the FAN sent through registered mail by BIR,
how can the CIR prove receipt?
Is presentation of the registry return card enough to show that FAN is validly issued?

13. P vs. Joel Mendez (CTA - 10 Feb 2016)

What are the requisites to be charged under Sec. 225, 255 of NIRC?

II. CONCEPTS

1. Tax sparing rule (BIR RMO 8-2017)

2. Tax pyramiding
3. Jeopardy Assessment
4. Table assessment
5. Tax shielding
6. Senior Citizen (R.A. 9994)
7. Foster Child (Sec. 4, R.A. 10165)
8. PWD (Sec. 4, RA 7277, as amended by R.A. 10754; RR No 5-2017)
9. Redound to the benefit of the employer rule
10. Public in deposit substitutes (Sec. 22 (Y), NIRC)
11. 19-lender rule (RR 14-2012)
12. Liquidating Dividends
13. Other benefits as exclusion to gross income
14. Gross-Up Monetary Value to compute Fringe Benefit Taxes
15. Closely-held corporations (Sec. 127, NIRC)
16. CBL Taxpayer
17. Microfinance NGO (RA 10693; BIR RR 3-2017)
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III. BIR ISSUANCES

Issued Prior to 2015

1. BIR RMC 63-2013: Can deductions be allowed if taxes are withheld but not in
accordance with Sec. 57 and 58 of NIRC?

2. BIR RMC 38-2011; 49-2011: Who has the obligation to withhold taxes on medical
benefit availment of its PHIC members which are paid to medical practitioners,
hospitals, clinics?

3. BIR Ruling 219-08: Do BPO services fall under the category of professional services?

Issued in 2015

4. BIR Ruling 234-2015 (8 Jul 2015): What is the requirement for an old requirement
with expired life before it could reincorporate?

5. BIR Ruling 293-2015 (8 Jul 2015),: What is a CNA? Is performance bonus of Php
25,000 declared by DBM under the CNA exempt from income tax?

Issued in 2016

6. BIR RR 01-2016: What are the pre-conditions to join government bidding? What is a
tax clearance and when is it issued? (RA 9184; EO 398). What is the validity period of a
tax clearance?

7. BIR RR 03-2016: Can taxpayer pay internal revenue taxes through credit/debit/prepaid
card? Can merchant discount rate be deducted from the amount of tax due to BIR?

8. BIR RR 06 - 2016: What are the requirements to use CRM / POS? (RMC 29-2006)

9. BIR RMO 66-2016: Is confirmatory ruling from BIR required to exempt separation pay
on income taxes?

Issued in 2017

10. BIR RR 01-2017: Within what period the CIR should decide on the claim of tax credit
or refund on VAT? (Amending RMC 54-2014)

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11. BIR RR 2-2017: Upon whom the liability to pay the tax rest when it is paid with
authorised agent banks (AAB) in case of late remittance or non-remittance o taxes to the
BIR, despite the timely issuance of a valid confirmation receipt by the AAB?

12. BIR RMC 27-2017: What is the basis of the tax on the sale, exchange, or other
disposition of real properties? (GSP vs. FMV)

13. BIR RMO 08-2017 (amends RMO 72-2010 on Interest, Royalties, Dividends): Tax
treaty relief application. (to be discussed). Who are the 3 signatories required on the
new certificate of resident for tax treaty relief (CORTT)? What are the certification
made by the non-resident income earner.

IV. PROPOSED CHANGES IN NIRC

Income tax:

1. Individual income tax schedule for 2018.

2. After 2019, taxable income levels will be adjusted every 5 years.
3. Removal of tax exemption on minimum wages.
4. Removal of taxes on alien individual employees of ROHQ; OBU; Petroleum service
contractor and subcontractors.

Removal from exclusion from Gross Income:

1. 13th month pay and other benefits.

2. Annual Christmas bonus received by national and local government officials and
employees.
3. Those received by employees pursuant to P.D. 851
4. Productivity incentives and Christmas Bonuses
5. Personal exemptions

Lowered Fringe Benefits: (32% effective 1 Jan 2018; 30% effective 1 Jan 201)

Valued Added Taxes

1. Some transactions shall cease to be considered export sales

2. Some transactions shall cease to be zero-rated sales

VAT Exempt Tansactions

3. The following transactions shall no longer be VAT-exempt:

Importation of professional instruments and implements, wearing apparels, domestic
animals, and personal household effects of persons coming to settle in the Philippines.
Sale by agriculture cooperatives duly registered with CDA
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 Gross receipts from lending activities by credit or multi-purpose cooperatives duly
registered with CDA
Sale by non-agricultural, non-electric, and non-credit cooperatives duly registered with
CDA
Sale of of real property of low-cost and socialized housing, residential lot valid at Php
1.5 Million and below, and house and lot and the residential dwellings valued at Php
2.5 Million and below.
Lease of residential unit with monthly rental not exceeding Php 10,000.
Importation of fuel, goods, and supplies by persons engaged in international shipping
and air transport operations.
Sale or lease of goods or properties or the performance of services where the gross
annual sales and or receipts do not exceed Php 3 Million.

Excess of Input over Output

Excess of input at the end of the first 3 quarters shall be carried over to the succeeding
quarter;
Excess of input tax at the end of the last quarter of the year may not be carried over to the
succeeding year but may be refunded;
Accumulated excess of input taxes carried over from prior years to 2017 may be carried
over to the succeeding quarter or quarters of 2017; provided that such accumulated input
tax shall not be carried over to 2018 bu may be refunded at the end of the last taxable
quarter of 2017.

-end-

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