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At a glance IFRS IC decision
Updates, reiterations, and clarifications on
selected topics
on interest and
penalties related
Taxes, compliance matters, assessments, and refunds
Enact before you tax....................................................................... 4 to income taxes
Not zero, VAT 12............................................................................... 4
Redeemed dividends...................................................................... 4
You don’t earn capital...................................................................... 5
No magic in FDDA........................................................................... 5
Misdirected action........................................................................... 5
The TRAIN is rolling......................................................................... 6 Issue
TRAIN work-arounds....................................................................... 7
Special sweetener........................................................................... 8 The IFRS Interpretations Committee (IC) issued an
Single window policy....................................................................... 8 agenda decision in September 2017 on interest and
PEZA eCAR processing.................................................................. 9 penalties related to income taxes.
Much-awaited leniency ................................................................. 9
Tax on microfinance NGOs ............................................................ 9 IFRIC 23, ‘Uncertainty over income tax treatments’,
applies to income taxes within the scope of IAS 12,
Latest on regulatory landscape ‘Income taxes’. It does not address the accounting for
PSE TRAIN ride ............................................................................ 10 interest and penalties related to income taxes. The IC
Long-lasting gift check.................................................................. 10 considered whether it should develop guidance and
Beware of virtual currency............................................................ 10 concluded that the benefits of improvements in financial
Clearing of sugar............................................................................ 10 reporting from a project to consider interest and penalties
Good deeds....................................................................................11 would not outweigh the costs. It therefore decided that
More time to be holy ......................................................................11 it should not develop guidance, and it issued an agenda
Outside retail .................................................................................11 decision.
Acquiring control of HMOs ...........................................................11
All for one.........................................................................................11 The IC observed in the agenda decision that entities do
Entity identity.................................................................................. 12 not have an accounting policy choice between applying
New contractor’s licensing .......................................................... 12 IAS 12 and applying IAS 37, ‘Provisions, contingent
Window for registration ................................................................ 12 liabilities and contingent assets’, to interest and penalties.
Revised FX Manual ....................................................................... 13 If an entity considers that particular amount payable or
receivable for interest and penalties is an income tax, IAS
12 is applied to that amount. If an entity does not apply
IAS 12 to an amount payable or receivable for interest
About our cover photo and penalties, it applies IAS 37 to that amount.
Adam (middle, Assurance), Allan (left, Tax), and The IC also observed that:
Abram (right, Assurance) are all sons of former • an entity discloses its judgment in this respect applying
Tax Principal George J. Lavadia. With their early paragraph 122 of IAS 1, ‘Presentation of financial
statements’, if it has a significant effect on the amounts
exposure to the industry, it was a no-brainer for the
recognized in the financial statements; and
siblings to follow the footsteps of their father. Having • regardless of whether an entity applies IAS 12 or
all the support and guidance from their parents, IAS 37 when accounting for interest and penalties,
the Lavadia brothers are determined to continue the entity discloses information about those items
their father’s legacy of excellence by helping foster a if material, because both IAS 12 and IAS 37 provide
disclosure requirements.
professional and holistic workplace with their peers.
Insight
Redeemed dividends
Gain on redemption of shares is not a
dividend, but a capital gain subject to CGT
The taxpayer redeemed its preferred shares issued to a
US resident corporation. The redemption price consisted
of par value of the shares plus the amount of dividends
accrued and unpaid at the date of redemption. The
taxpayer withheld 15% FWT on the difference between the
Glossary redemption price and the par value of the shares redeemed.
Realizing that the transaction is not a payment of dividends
CGT - Capital Gains Tax
subject to 15% FWT, the taxpayer filed a claim for refund.
CTA EB - Court of Tax Appeals En Banc
FWT - Final Withholding Tax
SEC - Securities and Exchange Commission
RPT - Real Property Tax
VAT - Value-Added Tax
Glossary
BIR - Bureau of Internal Revenue
BOC - Bureau of Customs
PD - Presidential Decree
RA - Republic Act
RR - Revenue Regulations
TRAIN - Tax Reform for Acceleration and Inclusion
VAT - Value-Added Tax
The revised tax rates imposed on tobacco products, amending Section 3, Items B(4) and B(5) of RR No. 17-2012, are as
follows:
Product 1 January 2018 1 July 2018 until 1 January 2020 until 1 January 2022 1 January 2024
until 30 June 2018 31 December 2019 31 December 2021 until 31 December onwards
2023
xxx
B. Tobacco
Products
xxx
Per Pack Per Pack Per Pack Per Pack Effective
(4) Cigarettes PHP32.50 PHP35.00 PHP37.50 PHP40.00 1 January 2024,
packed by hand the specific tax rate
shall be increased
(5) Cigarettes PHP32.50 PHP35.00 PHP37.50 PHP40.00
by 4% every year
packed by
thereafter
machine
(Revenue Regulations No. 3-2018 dated 5 January 2018)
• Transitory guidelines on payment and filing of excise To streamline the processing of transactions at the Revenue
tax returns District Offices and to enhance frontline services, the BIR
is adopting a Single Window Policy, which designates a
In accordance with the new excise tax rates, all concerned single counter for receiving and releasing documentary
taxpayers, subject to excise tax on cigars and cigarettes, requirements and permits to start a business. It also
petroleum products, automobiles and mineral products, mandates the revision of the queuing system to include a
and using the eFPS, must e-file and e-pay the corresponding new transaction named “New Business Registrants.”
excise taxes due on all removals effective 1 January (Revenue Memorandum Order No. 6-2018 dated 17 January 2018)
2018. The excise taxpayers are directed to continue using
Glossary
ATC - Alphanumeric Tax Code
BIR - Bureau of Internal Revenue
eFPS - Electronic Filing and Payment System
TRAIN - Tax Reform for Acceleration and Inclusion
Glossary
ATC - Alphanumeric Tax Code
BOC - Bureau of Customs
eFPS - Electronic Filing and Payment System
PSE - Philippine Stock Exchange
RA - Republic Act
SEC - Securities and Exchange Commission
TRAIN - Tax Reform for Acceleration and Inclusion
Entity identity (PCAB Board Resolution No. 201, series of 2017 dated 22 November 2017)
Glossary
BSP - Bangko Sentral ng Pilipinas
NGO - Non-Government Organization
PCAB - Philippine Contractors Accreditation Board
Glossary
FX - Foreign Exchange
Isla Cup 2018 players gather for a fun day of golf. Proceeds of the event go to the Seat of Hope program.
The Isla Lipana & Co. Foundation held the Isla Cup 2018
entitled “Swing for hope” at the Mount Malarayat Golf and
Country Club, Lipa City, Batangas on 18 January 2018.
Around 100 golfers and guests graced the event. Fun holes
were placed for additional prizes and bragging rights.
PwC Philippines’ Alex Cabrera (middle) receives his For accounting matters
Certificate of Appreciation from (at left) DOT Asst. Secretary
Maria Lourdes Japson, and DOT Director Danilo B. Intong
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Disclaimer
The contents of this advisory letter are summaries, in general terms, of selected issuances
from various government agencies. They do not necessarily reflect the official position of
Isla Lipana & Co. They are intended for guidance only and as such should not be regarded
as a substitute for professional advice.