Tax Updates

(Latest Republic Act, BIR Issuances

and Court Decisions)

15 June 2015

Republic Act

1
Republic Act No.10653

(Republic Act 10653 was signed into law on

February 12, 2015 and published on
February 15, 2014 in two newspapers of
general circulation (Manila Bulletin and
Philippine Star). RA 10653 became
effective on March 1, 2015)

1. Higher tax-exempt ceiling – Increase

the tax-exempt threshold for 13th
month pay and other benefits from
P30,000 to P82,000.

2. Indexation scheme - Mandates the

President to adjust the threshold for
inflation. The indexation or inflation
adjustment should be done every three (3)
years using the Consumer Price Index (CPI)
as published by the National Statistics
Office (NSO).

2
Impact of RA 10653 on net take home
P82,000

Additional 52,000
tax-free13th month pay

13th month pay and other benefits

& other benefits

Marginal Tax Rate Additional Net Take

P30,000 (MTR) Home Pay
(MTR x P52,000)
32% P 16,640
and other benefits

30% P 15,600
13th month pay

25% P 13,000
20% P 10,400
15% P 7,800
10% P 5,200
5% P 2,600
RA 8424 RA 10653

The new P82,000 tax-exempt ceiling shall apply to the 13th

month pay and other benefits which are paid OR accrued
beginning January 1, 2015.

The case shall not apply to other

compensation received by
January 1 employees such as basic salary
and other allowances.

The exclusion shall not also apply

to self-employed individuals and
income generated from business.

(Revenue Regulations No. 3-2015, March 13, 2015)

3
Composition of P82,000 tax-exempt threshold

"Other benefits" covers

benefits, other than the 13th
month pay, such as the annual
Christmas bonus, productivity
incentive bonus, loyalty award,
gifts in cash or in kind and other
benefits of similar nature
received by an employee in a
calendar year.
[2.78.1(B)(11), RR 2-98, as
amended]

Tax Incentives Management and

Transparency Act (TIMTA)

4
 TIMTA Features

TIMTA creates a monitoring system for tax incentives by

investment promotion agencies (IPAs) and other government
agencies (OGAs) for policy decision making purposes

• CREATION OF TAX INCENTIVES TRACKING

SUBMISSION OF ANNUAL REPORTS
An annual report should be submitted by registered
business entities and qualified private individuals and
corporations to the IPAs or OGAs containing information
•
such as amount of tax incentives availed, investments
made, and taxes and licenses and fees paid.
• President and Congress, as part of annual Budget of
PROGRAM
The DOF, Bureau of Internal Revenue (BIR) and
Bureau of Customs (BOC) shall create a Tax
Incentives Tracking Program for purposes of
monitoring tax incentives, project tax incentives, and
evaluate impact of tax incentives on the Philippine
economy. The program shall also be used for
preparing the annual TII report to be submitted to the
Expenditure and Sources Financing (BESF)

SUBMISSION OF TAX INCENTIVES INFORMATION

(TII) REPORT BY APAs and OGAs
IPAs and OGAs shall submit an annual report in the
form of TII Report which should be submitted to the
Department of Finance (DOF) within six (6) from the
deadline of filing of tax returns.
9

TIMTA Features
Tax Incentives Information (TII) Data
1. Actual tax incentive claims for at least one (1) full year
2. Estimated claims immediately preceding the current year
3. Programmed for the current year
4. Projected tax incentives for the following year.

PENALTY
Failure of a registered business entity or qualified private individual or corporation to
submit a complete annual TII report shall be a ground for the suspension of incentives
being enjoyed for the taxable year. Repeated violation shall be penalized with the
cancellation of registration of the registered business entity or qualified private individual
or corporation.

10

5
 BIR Issuances

Additional de
minimis benefits
(Revenue Regulations No.
1-2015, January 5, 2015)

6
 “(k) Benefits received by an employee by virtue of a
collective bargaining agreement (CBA) and productivity
incentive schemes provided that the total annual
monetary value received from both CBA and productivity
incentive schemes combined do not exceed ten
thousand pesos (Php 10,000) per employee per taxable
year.”

YES or NO ?
o Should productivity incentives scheme be part of CBA
benefits to be considered a de minimis benefit?
o Is the productivity incentive scheme separate and
independent of productivity incentives under Section
32(B)(7)(e) of the Tax Code subject to P82,000
threshold?
o Are there any conditions required to be complied before
productivity incentives may be considered a de minimis
benefit?
o If CBA includes other de minimis benefits, should it be
subject to the P10,000 limit on CBA benefits?

7
Taxability of productivity incentives as de minimis
and/or “other benefits”

Tax Treatment
13th month Productivity
Productivity Incentive Productivity incentive
Scenario pay Incentive
subject to P10K de + 13th month pay
minimis, excess of P10K should not exceed
is subject to P82,000 P82,000 limit
limit)
A 82,000 10,000 PI (10,000) - Exempt PI (10,000) –Taxable
B 70,000 15,000 PI (10,000) – Exempt as PI (12,000) – Exempt
de minimis under RR 1- PI (3,000) – Taxable
2015
PI (5,000) – exempt since
when combined with
P70,000 does not exceed
P 82,000.

Tax treatment of productivity incentives

Assume: 13th month pay = P72,000

Productivity Incentive = 22,000

Scenario A (13th month pay + PI = Scenario B (13th month pay = P82,000; PI

P82,00) subject to P10K de minimis, excess P10K PI
subject to P82,000 limit)
13th month pay - P72,000
13th month pay - P72,000
Productive incentive - 22,000
Productive incentive - 22,000
94,000
94,000
Tax Treatment:
Tax Treatment:

P94,000 – P82,000 = P12,000

(Taxable since it exceeds P82K)
(P12,000 is subject to withholding
tax on compensation whether
recipient is a rank-and-file employee
or managerial/supervisory
employee.
P72,000 – Exempt (Not exceeding P82,000)
P22,000 – P10,000 (Exempt as de minimis)
P10,000 (Exempt 10K+72K = P82,000)
P 2,000 [Taxable (72K+10K+2K,
exceeds P82K]
(P2,000 excess is subject to WT on compensation
if recipient is a rank-and-file employee, FBT if
managerial/supervisory employee.

8
Submission of BIR
Form 2307 and 2316
on DVD-R
(Revenue Regulations 02-
15, March 5, 2015)

Coverage of RR 02-2015

Submission of BIR Form 2316 and 2307 on DVD-R, in

lieu of hard copies

Optional –
Mandatory – Non-Large Taxpayer
Large Taxpayer (Irrevocable once
chosen)

9
Submission of PDF Copies of BIR Form 2307 and
2316 on DVD-R

2. Convert the scanned BIR

Form 2316 and 2307 in PDF
Format

3. Store the PDF Files on a

1. Scan hard copy of BIR DVD-R Disc
Form 2307 and 2316

File name arrangement and DVD-R label

requirement

BIR Form 2307

File Name Arrangement

1. BIR Registered name of the taxpayer-payor

2. TIN, including the head office or branch
code of the payor
3. Taxable period

Example:
Rizal Mftg. Corp._131885220000_09312014
Registered Name Taxable
TIN Period

10
File Name arrangement and DVD-R label
requirement

BIR Form 2316

File Name Arrangement

1. Surname of the employee

2. TIN of the employee
3. Taxable period

Example:

Quizon_101885220000_12312014

Surname
TIN Taxable
Period

Filing venue

Submission of DVD-R
The duly accomplished DVD-R containing the soft copies of
BIR Form 2316 or BIR Form 2307 should be submitted to
the BIR where the taxpayer is duly registered.
DVD-R should be submitted together with notarized
certification duly signed by the authorized representative of
the taxpayer certifying that the soft copies are complete
and exact copies of the original. Label of the DVD-R
should also be duly signed.

Any principal officers duly designated through

Board Resolution, and sworn to by such officer
and by the corporate treasurer or assistant
treasurer.

11
PDF File Name for BIR Form 2307 (Same Taxpayer,
Same TIN, Same Taxable Period)

In case of multiple
BIR Form 2307 issued
by the same taxpayer and
same taxable period, each
BIR Form 2307should be
converted in PDF and
stored on DVD-R
as separate file using
the file format below:

Rizal Mftg. Corp._131885220000_09312014_1

Rizal Mftg. Corp._131885220000_09312014_2
Rizal Mftg. Corp._131885220000_09312014_3
Rizal Mftg. Corp._131885220000_09312014_4

Payee allowed to store/save all these images

in a single PDF file.

Technical specifications
DVD-R- single sided
and single layered

Taxpayer may use

any device in
capturing image
(flatbed scanner,
camera, etc.)

Printing of BIR logo

is optional. Taxpayer
may print its own
logo
Scanned images should
be at least 200 dot-per-inch
(dpi) set to black and white

12
Effectivity of RR 02-2015

Revenue Regulations (RR) No. 2-

2015 was published on March 6,
2015, and it became effective after
fifteen days from its publication, i.e.,
on March 21, 2015.

March 06, 2015 March 21, 2015

The mandatory submission shall take effect on BIR Form 2307 and 2316 to be
attached to the SAWT required to be submitted starting March 21, 2015.

Transitory requirements: Taxpayers shall have the option to submit the required BIR
Form 2307, either in hard copy or in scanned copies together with the quarterly ITRs
due to be submitted on or before April 30, 2015. For quarterly filings with deadline
beyond April 30, 2015, taxpayers are mandated to submit BIR Form 2307 in scanned
copies.

Revised Schedule of
Compromise
Penalties
(Revenue Memorandum
Order No. 7-2015, March 23,
2015)

13
1. Increase the minimum amount of compromise
penalty from P200 to P1,000

NEW OLD

2. Compromise penalty for SLSP/I, Annual Alphalist of

Payees and/or Employees Subjected to Withholding
Taxes

P1,000 shall be imposed for each failure to submit the

SLSP/I and Annual Alphalists not to exceed P25,000
during a calendar year.

Failure to supply the required information for each buyer

or seller of goods and services shall constitute a single
punishable act or omission.

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Willful failure or neglect to file or submit the required
complete SLSP/I or Annual Alphalists is tantamount to fraud
that cannot be compromised.

o Failure to submit SLSP/I at least two times in a taxable year

o Failure to submit for at least two consecutive years Annual
Alphalists of Payees from whom taxes were withheld
o Submission not in the prescribed format
o Submission of falsified information

Complete Summary Lists refers to the set of Summary Lists of Sales (SLS) and
Summary Lists of Purchases (SLP). In the case of those with importations,
completeness shall include not only SLS and SLP, but also the Summary Lists of
Importations (SLI). Failure to submit the full/complete lists shall be counted as one
violation. Submission of erroneous lists shall be considered an act of non-
submission.

3. Subsequent offenses (second or third offense, as the

case may be) shall be considered willful failure and
shall not be subject to compromise.

Examples:

o Failure of the printer to submit the required quarterly report

o Failure or refusal to issue receipts or commercial invoices
o Issuance of receipts with missing information on the amount
of transaction
o Issuance of receipts that do not reflect and/or contain the
required information
o Duplicate copy of invoice is blank but original copy is
detached from the booklet and cannot be accounted for
o Use of unregistered receipts or cash registered machines
o Use of receipts or invoices without authority to print
o Unlawful possession of cigarette paper in bobbins or rolls,
cigarette tipping paper or cigarette filter tips

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4. Untaxed articles shall be subject to forfeiture in addition to the
payment of compromise penalty:

o Unlawful possession of cigarette paper in bobbins or rolls,

cigarette tipping paper or cigarette filter tips
o Unlawful use of denatured alcohol
o Unlawful recovery or attempt to recover by distillation or
other process any denatured alcohol, or knowingly
disposing of alcohol so recovered or distilled
o Shipment or removal of liquor or tobacco products under
false name or brand or an imitation of any existing name or
brand
o Unlawful possession of locally manufactured articles
subject to excise tax without payment of the tax
o Unlawful removal of untaxed articles subject to excise tax
from the place of production.

Advance Business
Tax on Sugar
(Revenue Regulation No. 4,
6 and 8-2015, and RMC 25-
2015)

16
 • Sale of sugar (except raw cane
sugar) is subject to payment of
advance VAT or Percentage Tax
which should be paid by the
owner/seller before any warehouse
receipt or Quedans are issued, or
before the sugar is withdrawn from
any sugar refinery/mill.

Exemption from payment of advance VAT

1. Withdrawal of raw cane sugar, including muscovado

2. Withdrawal of sugar duly accredited and registered
agricultural cooperative of good standing.
3. Withdrawal of sugar by duly accredited and registered
agricultural cooperative which is sold to another
agricultural cooperative.

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Credits for advance tax payments

o The advance VAT is allowed as credit against the output

tax based on the actual gross selling price of sugar. The
Certificate of Advance Payment of the VAT/percentage
tax and a copy of the payment form shall be attached to
the monthly/quarterly return to support the claim for
credit or advance VAT/percentage tax payment.

Base of advance business tax

• Advance VAT - The advance VAT shall be applied on

the base price of P1,400 per 50 kg. bag for sugar.

• Advance Percentage Tax - The advance percent tax

shall be equivalent to three percent (3%) of the gross
sales or receipts.

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Unutilized Advance Tax Payment

• The advance tax payment which remain unutilized at the

end of the taxpayer’s taxable year where the advance
payment was made may at the option of the owner/seller
be available for the issuance of tax credit certificate (TCC)
within two years from the date of filing of the 4th quarter VAT
return of the year such advance payments were made, or if
filed out of time, from the last ay prescribed by law for the
filing of the return.
• Unutilized advance tax payments which have subject to
application for issuance of TCC may not be carried over in
succeeding month/quarter/year. Issuance of TCC shall be
limited to unutilized advance payments, and should not
include excess input tax.

CWT on income
payments to sugar
planters/owners
(Revenue Regulation No. 6 -
2015)

19
1. Proprietors or operators of sugar mills/refineries on their
mill share, and buyers of Quedans or Molasses Storage
Certificates from the sugar planters on locally produced raw
cane sugar, raw sugar and molasses shall withhold one
percent (1%) on their gross payments on purchases of sugar
based on the following:

a. For locally produced raw cane sugar and raw sugar,

the base price of P1,000 for every 50 kilograms or
actual selling price, whichever is higher.
b. For molasses, the base price of P4,000 for every
metric ton, or actual selling price, whichever is higher.

2. Buyers of refined sugar, whether locally produced or

imported, shall apply the one percent (1%) creditable income
tax based on the actual selling price of the refined sugar.

(The Authority to Release Locally Produced Raw Sugar/Raw Case

Sugar/Molasses shall be issued by the BIR Regional
Director/Revenue District Officer only after the copies of proof of
payment of the creditable withholding tax (duly validated BIR Form
1601E and Bank Payment/Deposit Slip/Revenue Official Receipts
(BIR Form 2524) shall have been submitted and attached to the
written request for authorization)

20
Sugar owners planting their own sugar whose gross
receipts are less than P300,000 are required to file their
ITR and comply with the following simplified rules of
registration and bookkeeping:

a. Exemption from payment of registration fee after

submission of the following minimal basic
documentary requirements
b. Sworn statement of income for the year
c. NSO Certified Birth Certificate
d. Exemption from compliance with the issuance of
registered receipts or sales/commercial invoices

f. Exemption from attaching Financial Statements or Account

Information Form to the filed Income Tax Return
g. Exemption from filing of monthly Percentage Tax, the
advance Percentage Tax collected from the sale of their
sugar shall be considered substantial compliance for the
filing of the monthly percentage tax required under the Tax
Code.

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Revenue Regulation No. 05-2015
and Revenue Memorandum Circular
Nos. 10, 11, 12, 13, 14,
15, 16, 17, 18, 19, 20, 21 and
22- 2015

eBIRForms - an alternative mode of preparing and

filing tax returns.

Types:

(a) Offline eBIRForms Package

(b) Online eBIRForms System

22
eBIRForms System Overview

1. www.knowyourtaxes.com If successfully filed, the

2. http://www.dof.gov.ph system display the FRN
3. http://goo.gl/UCr8XS and page will display “The
4. www.bir.gov.ph form has been
successfully filed”.

Online

Offline

Coverage of eBIRForms (RR 6-2014)

A. Taxpayer
Mandatory Optional

1. Accredited Tax Agents/Practitioners and all Other Non- eFPS taxpayers

its client-taxpayers;
2. Accredited Printers of Principal and
Supplementary Receipts/Invoices;
3. One-Time Transaction (ONETT) taxpayers;
4. Those who shall file a “No Payment”
Return;
5. Government-Owned or -Controlled
Corporations (GOCCs);
6. Local Government Units (LGUs), except
barangays; and
7. Cooperatives registered with National
Electrification Administration (NEA) and
Local Water Utilities Administration (LWUA)

23
1. Accredited Tax agents/Practitioners and all its client-
taxpayers

Accredited Tax Agents (ATAs) - are also known as

accredited tax practitioners, who are engaged in
tax practice included in the List of Accredited Tax
Practitioners as published in the BIR website. (RR 06-
2014)

“Client-taxpayer” – refers to taxpayers who are otherwise

authorizing their tax agents/practitioners to file on their
behalf. Client taxpayers whose tax agents/ practitioners
only sign the audit certificate but have no authority to file
returns in their behalf are not covered by RR 06-2014.
(RMC 11-2015)

2. Non-eFPS Taxpayers with No payment return - refers to

the tax return that is not accompanied by any payment
where the same is filed with any authorized BIR
receiving office (e.g. breakeven, no transaction,
refundable or second installment tax return).

Once a non-eFPS taxpayer files a “no payment” return, it

is required to enroll in the eBIRForms System and
henceforth, file its return electronically using eBIRForms
even if on the succeeding months, its tax returns are
with payment or no payment (RMC 19-2015).

24
Individuals with “No Payment Returns” who are exempt
from using eBIRForm online (RMC 12-2015)

1. Senior citizens or persons with disabilities filing for their

own tax returns;
2. Employees deriving purely compensation income and the
income tax of which has been withheld correctly showing
tax due is equal tax withheld whether single or multiple
employers (with two or more employers concurrently and
successively at anytime during the taxable year.
3. Employees qualified for substituted filing but opted to file
for an ITR and are filing for purposes of promotion, loans,
scholarships, foreign travel requirements, etc.

Chronological list of BIR issuances on eBIRForms /2015 Tax

Filings

RR 06-2014 RR 5-2015 RMC 10-2015

- Non-eFPS filers covered 1. LT employees

-Mandates select non-
eFPS taxpayers to enroll
and use eBIRForms on
returns for filing starting
September 01, 2014.
by eBIRForms shall
mandatorily submit
electronically all their tax
returns.
registered with the RDO
where LT is physically
located – file manually
using eBIRForms and if
with payment with AAB

- Option given to submit - Imposes a penalty of

tax returns manually using
the eBIRForms Offline
Package or electronically
using Online eBIRForms
System.
P1,000 and 25%
surcharge per return
- Non-compliant
taxpayers shall also be
included in the list of
taxpayer for priority audit
by the BIR.
2. LT employee registered
where the LT employer is
registered following RR 7-
2012 and using eTIS1
should file their no
payment ITR with the
concerned LT office or pay
in AABs (ITR with
payment) of LT.

25
 RMC 11-2015
- Defines the term “client-
taxpayers” .
- The term refers to those
taxpayers who are otherwise
authorizing their tax
agents/practitioners to file on
their behalf.
- Client-taxpayers whose tax
agents/practitioners only sign
the audit certificate but have
no authority to file the returns
on their behalf are not
covered by the requirement to
use eBIRForms.
RMC 14-2015
- Taxpayers who have
filed manually their ITR
before April 15, 2015 are
mandated to re-file
electronically on or before
April 15, 2015
- The accompanying
attachments shall be
manually filed within 15
days after the electronic
filing.
- If no email received
from BIR within 2 hours
from submission, attach
XML file to an email and
send to BIR using
dedicated email.
RMC-12-2015 RMC 13-2015
RMC 12-2015 exempts the - Defers disclosure
following from the requirement requirement under the
to electronically file their tax supplemental portion of
returns: BIR Forms 1700 and 1701.
1. Senior citizens or persons
with disabilities filing for their
own tax returns;
2. Employees deriving purely
compensation income and the
income tax of which has been
withheld correctly showing tax
due is equal tax withheld with
two or more employers
concurrently and successively
during the taxable year.
3. Employees qualified for
substituted filing but opted to
file for an ITR
RMC 15-2015 RMC 16-2015
- Defers electronic filing - Taxpayers using
of withholding tax eBIRForms Package may
returns, i.e. returns submit their 2014 ITR via
must be filed on their email and subsequently
due date manually and enroll. Email submission
then refile allowed for 2014 ITR,
electronically from April whether enrolled or not to
15 to April 30. eBIRForms System
26
 RMC 17-2015
- Announces availability of
eBIRForms Package
4.07.08.
- Previously encoded
returns using eBIRForms
Package 4.07.07 may be
viewed and be used in
eBIRForms Package
version 4.07.08.
- If “Final Copy” was not yet
executed in eBIRForms
Package 4.07.07, it can be
submitted using version
4.07.08
- If “Final Copy” was already
executed or there is no
email received after 2 hours
or not successfully eFiled,
email to BIR
RMC 20-2015
- Taxpayers filing BIR Form
Nos. 1701Q and 1702Q with
no payment due on or before
April 15, 2015 may file
manually, and re-file
electronically using the BIR’s
systems on or before June
15, 2015.
- Taxpayers with payment
should use eBIRForms
package, submit the XML file
to the dedicated email of BIR.
Print eMail Notification as
evidence of eFiled return from
the BIR and the tax return,
then proceed to Authorized
Agent Bank/collection agent
for manual payment
RMC 18-2015
- No Payment returns
may be filed manually on
or before April 15 thru the
use of printed forms or
Offline eBIRForms
package.
- No payment returns filed
manually shall be filed
electronically on or before
June 15, 2015.
- Newly enrolled eFPS
with pending AAB
registration should file
electronically and pay
manually their income tax
due. Complete AAB
registration by June 15,
2015.
RMC 21-2015
- Taxpayers filing with
payment or no payment
using the Offline
eBIRForm should send
XML file to dedicated BIR
email for BIR Forms
2550M, 2550Q, 2551M
and 2551Q.
- eFPS taxpayers unable
to successfully file their
returns must secure
trouble ticket log from help
desk or reference number
from contact center, and
file and pay manually.
Refile electronically not
later than 30 days from
deadline.
RMC 19-2015
- Issues clarifications on
use of eBIRForms
- Micro Small and
Medium Enterprises
(MSME) not required to
file electronically
- Once a taxpayer files a
no payment return and
enrolled in eBIRForms,
henceforth will be required
to file electronically under
eBIRForms
RMC 22-2015
- Taxpayers filing with
payment or no payment
using the Offline
eBIRForm should send
XML file to dedicated BIR
email for BIR Forms
1601E and 1601C.
- eFPS taxpayers unable
to successfully file their
returns must secure
trouble ticket log from help
desk or reference number
from contact center, and
file and pay manually.
Refile electronically not
later than 30 days from
deadline.
27
 RMC 26-2015
- Taxpayers filing with
payment or no payment
using the Offline
eBIRForm should send
XML file to dedicated BIR
email for the BIR Forms. -
- eFPS taxpayers unable
to successfully file their
returns must secure
trouble ticket log from help
desk or reference number
from contact center, and
file and pay manually.
Refile electronically within
15 days after the statutory
deadline starting return
period April 2015 which
will be filed May 2015.
Prohibition on Issuance of
Provisional Permit-to-Use for
CRM/POS
(Revenue Memorandum Circular 30-
2015, June 8, 2015)
RMC 26-2015
- Announces the availability
of eBIRForms Package
Version 5.0
- eFPS filers can use the
package to fill-up the tax
returns offline and submit to
eFPS without the need to
click on final copy (available
for ITRs and BIR Form
2200A and 2200T.
- Tax payments can be
made through AABs,
collections officers, online
payment or GCash up to
P10,000.
- Taxpayers mandated to
efile but have already filed
manually their ITR are
required to electronically file
on or before June 15, 2015
28
o BIR shall no longer accept/approve applications for
issuance of provisional permit-to-use (PTUs) for cash
register machines (CRMs) and point-of-sale (POS)
machines.
o All existing provisional PTUs must be converted to final
PTU on or before July 31, 2015, otherwise, the same
shall be revoked.
o All existing final PTUs and provisional PTUs converted
to final PTUs on or before July 31, 2015 shall have a
validity period of five (5)
years upon registration and
approval of the final PTU.

PEZA enterprises
exempt from
securing ICC
(Revenue Memorandum
Circular 4-2015, January 13,
2015)

29
RMC 4-2015 circularizes Department of Finance (DOF)
Order No. 107-2014 exempting enterprises duly-
registered with the Philippine Economic Zone Authority
(PEZA) from the requirement to secure an importer’s
clearance certificate (ICC) from the BIR before applying
for accreditation as importers with the Bureau of Customs
- Account Management Office (BOC-AMO).

On January 13, 2015, BOC issued Customs

Memorandum Order 03-2015 prescribing the procedures
and documentary requirements on importer accreditation
of PEZA enterprises.

All importers and customs brokers

(individuals, partnerships,
corporations, cooperatives,
associations, unless exempted, are
required to secure accreditation from
both the BIR and BOC (DOF Order
Nos. 12-2014, 18-2014, 33-2014, and
46-2014, RMO 10-2014, RMO 22-
2014, RMO 33-2014, RMC 22-2014)

Two-phase accreditation
First phase – BIR accreditation (issuance of BIR Importer
Clearance Certificates and BIR Customs Broker
Clearance Certificates
Second phase - BOC accreditation (issuance of Importer
and Broker Accreditation

30
Common Issues on Accreditation of Importers

a. “Stop-Filer” cases
b. Taxpayer tagged as “delinquent taxpayer”
c. Unresolved issues with TRS-RELIEF
d. Issuance of SEC certificate of good standing
e. Personal appearance to the BIR ARMD
f. eFPS enrollment

Documentary Requirements for Corporations

1. Application for accreditation and registration
2. Executed and notarized Sworn and Certification and Undertaking
3. Executed and notarized Secretary’s Certificate
4. BOC receipt evidencing payment of registration fee
5. Certified true copy of SEC Certificate of Incorporation
6. GIS stamped received by SEC
7. Company profile, with picture of the Company’s profile with signage
and storage facilities
8. Print-out of CPRS profile (certified true copy)
9. Updated e-mail notification of “Stored CPRS) (certified true copy)
10. Valid PEZA Certificate of Registration (certified true copy)
11. Previous Certificate of BOC Accreditation (if previously accredited
(certified true copy)
12. For each responsible officer, NBI Clearance not earlier than three
months before application, two valid government issued IDs,
personal profile.
13. CD containing scanned copies of above documents

31
Procedures for application
1. Apply for registration under the BOC Client Profile
Registration System (CPRS) through BOC’s Value-Added
Service Providers (VASPs). After the application is stored in
the system, the applicant shall then print the CPRS profile
which shall form part of the application.
2. All applicants shall pay a processing fee equivalent to P1,000
upon submission of its application.
3. Documents to be submitted must be original copies, unless
indicated that certified true copies are acceptable.
4. Application and documents should be submitted to the BOC
Account Management Office (AMO) at Port Area, Manila.
5. BOC AMO shall notify applicant of decision within 15 days
from application. Once approved, accreditation valid until
PEZA registration is valid provided reporting requirement are
followed.

Reportorial Requirements

1. Updated General Information Sheet (GIS) and company

profile in case of corporations
2. Updated PEZA registration
3. Mayor’s Permit and Proof of Lawful Occupancy of Office

Annually –
Every March 31

32
BIR Rulings

Application of Deutsche Bank Case on

late filing of Tax Treaty Relief Application
(TTRA)

(BIR ITAD Ruling No. 058-15,

March 25, 2015)

33
 Recall

Late filing of TTRA should not deprive a taxpayer of

the benefit of a tax treaty.

Noncompliance with the prescribed period for prior

application of tax treaty relief should be remedied by
imposing a fine or penalty, and not by automatically
divesting a taxpayer of its entitlement to the tax treaty
relief.

(Deutsche Bank AG Manila Branch vs. Commissioner of

Internal Revenue, G.R. No. 188550, 19 August 2013)

FACTS OF THE CASE:

o PH Company “A” originally filed its request for TTRA on

dividends on May 19, 2012, i.e., the same day the dividends
were paid/received by its non-resident foreign corporation
shareholder.

o In BIR ITAD Ruling No. 042-13 (February 28, 2013), the BIR
denied the request for application of preferential tax rate
because its application was belatedly filed on May 19, 2012.

o BIR says filing should always be made before the transaction.

Under RMO 72-2010, transaction for purposes of filing the
TTRA means before the occurrence of the first taxable event.
o PH Company requested for review (filed on April 23, 2013) of
ruling with the DOF, and request endorsed to BIR on May 13,
2014.

34
BIR revised its ruling

“In the light of SC Decision in the Deutsche Bank Case,

BIR Ruling No. ITAD-042-13 is revised accordingly”

NRFC shareholder was entitled to preferential tax rate.

Sale or transfer of real

properties by tax-exempt
corporations is subject to
tax

(BIR Ruling No. 061 and 062

2015, March 10, 2015)

35
 Under Section 30 of the Tax Code,
income received by non-stock,
non-profit organizations are exempt
from income.

However, the last paragraph of Section 30 provides

that any income of whatever kind and character
derived by tax-exempt organizations from any of
their properties, real or personal, or from any of
their activities conducted for profit, regardless of the
disposition made of such income, shall be subject
to tax.

FACTS OF THE CASE:

Under DA-307-2005 issued to the taxpayer, income from the

sale of property was not considered income from the
productive use of its property subject to income tax. The BIR
deemed the sale as being derived from a single and isolated
transaction and since the proceeds from the sale of property
will be used in furtherance of the purposes for which the
organization was organized, it is not subject to income tax.

BIR reviewed DA-307-2005

36
BIR:

o DA-307-2005 is contrary to law and jurisprudence and

as such, it revoked the ruling issued to the non-stock,
non-profit organization.

o The exemption granted to the charitable or cultural

organization is disallowed by the wording of the last
paragraph of Section 30 of the Tax Code which
mandates that the income of exempt organizations
from any real properties, real or personal, shall be
subject to tax.

Employees’ trust subject

to stock transaction tax

(BIR Ruling No. 152-2014,

May 29, 2014)

37
Section 60(B) of the Tax Code:

Any income from an employees’ trust which forms part of a

pension, stock bonus or profit-sharing plan for the benefit of
employees (e.g., retirement plans from investments in shares of
stocks) shall not be subject to tax imposed under Title II (Tax on
Income).

BIR: The tax incentive provided is expressly limited only to the

tax imposed by Title II of the Tax Code, which is income tax.

The stock transaction tax under Section 127(A) is in the nature of

percentage tax under Title IV of the Code which is not covered by
the exemption under Section 60(B).

Any income earned by an employees’ trust from investments in

shares of stock listed and traded through the Philippine Stock
Exchange is subject to stock transaction tax (STT).

38
VAT on income payments made by PEZA
companies to nonresident foreign
corporations

[BIR ITAD Ruling Nos. 311-14 (November 4, 2014) and 316-14

(November 24, 2014)]

Recall
Under Section 108 of the Tax Code, royalty payments
as well as fees paid for services rendered in the
Philippines by a nonresident foreign corporation are
subject to VAT.

The VAT imposed on payments to non-residents is

treated as a “passed on” VAT which shall be withheld
and paid by the resident withholding agent using BIR
Form No. 1600.

39
BIR: In case the recipient of the technical know-how and/or
services rendered within the Philippines by a nonresident
foreign corporation is a Philippine Economic Zone Authority
(PEZA)-registered enterprise, it cannot be charged the VAT.

A company registered with the PEZA as a resident

withholding agent operating within an economic zone cannot
bear the burden of VAT since it is an entity exempt from
internal revenue laws under Republic Act No. 7916 (PEZA
Law).

Economic zones are considered separate customs territories,

which means that in such zones there is the legal fiction of
foreign territory. Under the cross-border principle of VAT
system, no VAT shall form part of the cost of goods destined
for consumption outside the territorial border of the taxing
authority. [Commissioner of Internal Revenue v. Seagate
Technology (GR 153866, February 11, 2005)]

The transactions exempt from VAT pursuant to RA 7916 are

effectively zero-rated. However, instead of VAT zero-rating
which is not available to nonresident foreign suppliers, the
provision for exempt transactions under Section 109(K) of the
Tax Code shall apply. Hence, service as well as royalty fees
paid by PEZA-registered enterprises to the nonresident foreign
corporation shall be exempt from VAT.

40
Court Cases

A tax return is considered a false return

even with less than 30%
underdeclaration

(Next Mobile, Inc. v. Commissioner of Internal Revenue,

CTA EB No. 1059 re CTA Case No. 7970, March 16,
2015)

41
 Recall

GENERAL RULE

3 years

(Section 203, Tax Code)

EXCEPTION:

FAILURE to file return

10 FALSE return - implies any deviation from

truth, whether intentional or not)
FRAUDULENT - implies intentional and
deceitful entry with intent to
return
evade tax)

10 years from discovery of falsity,

fraud or omission (Section 222, Tax Code)

42
FACTS OF THE CASE:

o The taxpayer was assessed, among others, for

deficiency VAT due to its alleged undeclared gross
receipts. The assessment was issued beyond three
years from the filing of the VAT return but within the 10-
year period prescribed in the case of non-filing, or filing
of false or fraudulent return.

o The taxpayer contends that the 10-year prescriptive

period should not apply since the amount of the alleged
underdeclaration constitutes 5.32% of the gross receipts
declared per VAT return.

o Under Section 248(b) of the Tax Code, in order to

constitute false or fraudulent return, the amount of sales,
receipts, or income that the taxpayer failed to report
should exceed 30% of that declared per return.

43
CTA:

o Any deviation from the truth shall render a return filed

by a taxpayer as false even though the
underdeclaration does not amount to 30% of the gross
sales, receipts, or income. Thus, as long as there is
deviation from the truth, without need of considering
the percentage of underdeclaration or overstatement,
a taxpayer can still be considered as having filed a
false return.

o Section 248(b) of the Tax Code cited by the taxpayer

speaks of false or fraudulent return willfully made, and
the imposition of the penalty of 50% of the tax or
deficiency tax.
o Substantial declaration, which means 30% of the
taxable sales, receipts, or income was not reported and
more than 30% of the deductions exceeded the actual
deductions, shall constitute prima facie evidence of a
false or fraudulent return.
o Nowhere is it stated under Section 248(b) of the Tax
Code that in the event that the underdeclaration or
overstatement in a return is below 30%, the taxpayer
will not be liable for filing a false return.

44
 Validity of LAs covering audit of “unverified
prior years”

(People of the Philippines v. Edwin T. So, Raymond R. Lee,

Techpoint Computer Corporation, CTA EB Crim. No. 028,
March 6, 2015)

Recall

o Under Section 6(A) of the Tax Code, the Commissioner

of Internal Revenue (CIR) is granted the authority to
examine and to make an assessment to determine the
correct amount of tax due from a taxpayer.

o On the other hand, Section 13 of the Tax Code provides

that a Letter of Authority (LA) is the authority given to
the appropriate revenue officer enabling him to examine
the books of account and other accounting records of a
taxpayer for purposes of collecting the correct amount
of tax.

45
FACTS OF THE CASE:

o The taxpayer was issued a

Letter of Authority (LA) that
authorized BIR examiners
to conduct an examination
of the taxpayer’s books of
account and accounting
records for taxable year
2005 to “unverified prior
years”.

CTA Decision

o The CIR, acting through its revenue officers, went

beyond the scope of its authority when it issued the
LA covering the “unverified prior years”.
o The CTA cited the case of CIR v. Sony Philippines,
Inc. (G.R. 178697, November 17, 2010) where the
SC upheld the invalidity of the phrase “unverified prior
years” in LAs because it violates Section C of RMO
43-90, which prohibits the issuance of LAs covering
audit of “unverified prior years”.

46
o A deficiency assessment issued without valid
authority is a nullity. Hence, considering that the LA
covers taxable year 2005 to “unverified prior years”,
which is prohibited, the CTA cancelled the deficiency
tax assessments issued against the taxpayer.

Proof of deductibility of interest expense

[(Phil Foods Properties, Inc. v. Commissioner of Internal

Revenue, CTA Case Nos. 8185 and 8238, April 16, 2015)

47
 FACTS OF THE CASE:

The taxpayer was assessed for deficiency income tax

due to disallowance of the interest expense it claimed
from its gross income. Although the claim for interest
expense has complied with Sections 3 and 4 of RR 13-
2000, the BIR maintains that such interest expense
claimed by the taxpayer should be disallowed because of
the taxpayer’s failure to present any official receipt in
support of its claim for deduction as prescribed under RR
13-2000.

RECALL:
Requisites for the deductibility of interest expense from gross income
(Section 3, RR 13-00)

a) There must be an indebtedness;

b) There should be an interest expense paid or incurred upon such
indebtedness;
c) The indebtedness must be that of the taxpayer,
d) The indebtedness must be connected with the taxpayer's trade, business
or exercise of profession;
e) The interest expense must have been paid or incurred during the taxable
year;
f) The interest must have been stipulated in writing;
g) The interest must be legally due;
h) The interest payment arrangement must not be between related taxpayers;
i) The interest must not be incurred to finance petroleum operations; and
j) In case of interest incurred to acquire property used in trade, business or
exercise of profession, the same was not treated as a capital expenditure.

48
Rules on deductibility of interest expense (Section 4, RR 13-00)

(a) General Rule. — In general, the amount of interest expense paid or

incurred within a taxable year on indebtedness in connection with the
taxpayer's trade, business or exercise of profession shall be allowed as a
deduction from the taxpayer's gross income.

(b) Limitation. — The amount of interest expense paid or incurred by a

taxpayer in connection with his trade, business or exercise of a profession
from an existing indebtedness shall be reduced by an amount equal to the
following percentages of the interest income earned which had been
subjected to final withholding tax depending on the year when the interest
income was earned, viz.

Forty-one percent (41%) beginning January 1, 1998;

Thirty-nine percent (39%) beginning January 1, 1999; and
Thirty-eight percent (38%).beginning January 1, 2000 and thereafter.

CTA:

o Nowhere does the word "official receipt" or the

requirement to substantiate a deduction for interest
expense with official receipt appear in RR 13-2000.
Hence, there is no basis for the BIR to claim that RR 13-
2000 requires an official receipt to support a claim for
deduction for interest expense.

49
o The case of Tambunting cited in Commissioner of
Internal Revenue vs. Isabela Cultural Corporation (ICC)
(G.R. No. 172231, February 12, 2007, 515 SCRA 556)
relied upon by the BIR where the Supreme Court
identified the following requisites for the deductibility of
ordinary and necessary trade, business, or professional
expenses, like expenses paid for legal and auditing
services, which include, among others, that the expense
must be supported by receipts, records or other pertinent
papers, does not apply.

o The issue in Tambunting and ICC refer to the

deductibility of ordinary and necessary expenses, and
not interest expense.

BIR letter as final decision on

assessment appealable to the CTA

(Brixton Investment Corporation v. Commissioner of

Internal Revenue, CTA EB 1099 re CTA Case No.
8379, April 06, 2015)

50
 o Under Section 228 of the Tax Code, a
taxpayer who received a tax
assessment (Formal Letter of Demand
or Final Assessment Notice) is given
30 days to submit a written protest
against the assessment by filing a
request for reconsideration or
reinvestigation.

o Within 60 days from the filing of the

protest, all relevant supporting
documents should be submitted.

o The CIR or his duly authorized representative has 180

days to render a decision on the protest. If an adverse
decision is rendered within 180 days, the taxpayer
may appeal the decision to the CTA within 30 days
from receipt of the decision.

o If no decision is rendered within the 180-day period,

the taxpayer has 30 days from the lapse thereof,
within which to appeal the inaction to the CTA.

51
FACTS OF THE CASE:

o The BIR issued a Formal Letter of Demand (FLD) which

was duly protested by the taxpayer. Subsequently, the
taxpayer received a letter from the concerned Revenue
District Officer stating that they were standing pat on
their assessments although the same were revised.
Believing that the letter the taxpayer received from the
Revenue District Officer is a decision on the disputed
assessment, the taxpayer appealed the decision to the
CTA.

o The taxpayer argued that the letter of the Revenue

District Officer and Formal Letter of Demand and
assessment notices qualify as a decision based on its
language and tenor, citing the Allied Banking case (GR
175097, February 5, 2010).

52
 CTA En Banc

o None of the BIR documents alleged by the taxpayer to

bespeak a decision of the Commissioner of Internal
Revenue (CIR) on the disputed assessments made
use of the terms "decision," "final decision," or
"appeal.“
o The FLD and its assessment notices signed by the
BIR Regional Director all used the word "assessment"
rather than "decision", and "protest" rather than
"appeal." The letter of the Revenue District Officer
likewise did not use the words "decision" and
"appeal."

o On the invocation of the "language used or the tenor

of the letter" clause in Allied Banking case, the
"language used or the tenor of the letter" mantra
pertinent to Section 228 of the NIRC has been
qualified by jurisprudence other than Allied Banking.

o In Surigao Electric Co., Inc. vs CTA (GR L-25289,

June 28, 1974), cited in Oceanic (GR No. 148380,
December 9, 2005), the Supreme Court qualified that
this language must be "clear and unequivocal" so as
to "indubitably" convey the CIR's "final determination
on the disputed assessment."

53
o In Oceanic, the BIR's demand letter clearly indicated
denial, on the ground of lack of supporting
documents, of the taxpayer's request for
reconsideration, and carried the warning that failure to
pay the deficiency tax assessment would result in the
"issuance of a warrant of distraint and levy to enforce
its collection without further notice.“

o Considering that there was no decision yet was made

on the disputed assessment rendered by the CIR or
her authorized representative against the taxpayer
and the period of inaction had not yet lapsed at the
time of the filing of the petition, the appeal was
deemed premature.

o The mistake in the pursuit of taxpayer's remedies

resulted in the expiration of the 180-day period for the
CIR to render a decision on the disputed assessment,
as well as of the 30-day window after the lapse of the
period for decision or inaction, within which the
taxpayer could appeal the inaction to the CTA.

54
 Refund of undeclared input taxes

[Coca-Cola Bottlers Philippines, Inc. v. Commissioner of

Internal Revenue, CTA EB 1100 (March 10, 2015) and 1061,
April 10, 2015)]

FACTS OF THE CASE

The taxpayer-refund claimant sought refund of its alleged

erroneously paid output VAT based on the difference between
the amounts shown in its VAT return and what the taxpayer
alleges it should be if all its input taxes were credited and
considered in the computation of its net VAT payable.

The alleged erroneous overpayment of VAT was due to the

taxpayer’s failure to claim some of the input taxes it incurred
from its purchases, which were recorded in its books of accounts
but not reported in its quarterly VAT returns. Also, considering
that the BIR already issued a letter of authority to the taxpayer,
the latter was unable to amend its VAT return to include its
undeclared input taxes. Hence, it filed instead a claim for refund
to recover its alleged overpayment.

55
RECALL

Section 204 (C), Tax Code Section 112, Tax Code

Credit or refund taxes erroneously or
illegally received or penalties imposed
without authority which claim for credit
or refund should be made within two (2)
years after the payment of the tax or
penalty.
There are two instances when excess
input taxes may be claimed for refund,
to wit: (a) when they are attributable to
zero-rated or effectively zero-rated
sales; and (b) upon cancellation of VAT
registration due to retirement from or
cessation of business. Claim for refund
of excess input tax must be made within
two years after the close of taxable
quarter when the sales were made in
case of zero-rated sales while from the
date of cancellation of registration if due
to retirement or cessation of business.

CTA:

What the taxpayer is really claiming for tax refund/credit is its

undeclared input VAT, not erroneously paid taxes. Hence,
Section 112 of the Tax Code should be the proper basis for its
claim for refund, not Section 204(C), which applies to
erroneously or illegally assessed taxes.

56
o Under Section 112, there are only two instances when
excess input taxes may be claimed for refund, to wit: (a)
when they are attributable to zero-rated or effectively
zero-rated sales; and (b) upon cancellation of VAT
registration due to retirement from or cessation of
business.
o Taxpayer does not qualify for tax refund or credit since
its claim for refund or credit of its undeclared input taxes
does not fall under any of the instances provided by law.

FAN issued prior to the lapse of 15-day period to

reply to PAN violates due process

[Polymer Products (Phil.), Inc. v. Commissioner of Internal

Revenue, CTA Case No. 8299, January 30, 2015]

57
FACTS OF THE CASE:

The taxpayer received the PAN from

the BIR assessing it for deficiency
VAT and withholding tax. However,
even before the lapse of the 15-day
period within which the taxpayer
could file its reply to the PAN, the
BIR issued the Formal Letter of
Demand (FLD) and assessment
notices.

RECALL:

Under Section 228 of the Tax Code, as implemented by

Revenue Regulations (RR) No. 12-99, as amended, a
taxpayer who receives the Preliminary Assessment Notice
(PAN) is given 15 days from receipt of the PAN to file its
reply to the PAN.

Upon the lapse of the 15-day period, without any

response from the taxpayer, it shall be considered in
default and will trigger the issuance of the formal letter of
demand and assessment notice (FAN) by the Bureau of
Internal Revenue (BIR).

58
CTA:

o The right of taxpayer to respond to the PAN under

Section 228 of the Tax Code and RR 12-99 is an
important part of the due process requirement in the
issuance of a deficiency tax.

o In wantonly disregarding the taxpayer’s right to be heard

with regard its positions and arguments against the PAN,
the BIR clearly violated the taxpayer’s right to due
process. The procedural due process is not satisfied
with the mere issuance of a PAN, without giving the
taxpayer an opportunity to respond to it.

o While the taxpayer was given ample opportunity to

contest the FLD and assessment notices, this does not
cure the fatal infirmity that attended the issuance of the
FLD. Hence, on ground of non-observance of the 15-
day period granted to the taxpayer to respond to the
PAN, the CTA cancelled the deficiency tax assessments
against the taxpayer.

59
 FDDA issued prior to lapse of 60-day period for
submission of supporting documents
(AB Capital and Investment Corporation v. Commissioner of
Internal Revenue, CTA Case No. 8411, April 30, 2015) CTA
Case No. 8299, January 30, 2015]

FACTS OF THE CASE:

The taxpayer received the Final Decision on Disputed
Assessment (FDDA) denying its administrative protest
to the FAN even before it was able to submit the
required documents in support of its protest within the
60-day period.

The taxpayer argued that its right to due process was

violated when the BIR issued the FDDA prior to the
lapse of the 60-day period to submit the supporting
documents under Section 228 of the Tax Code, in
relation to RR 12-99.

60
 RECALL:

Under Section 228 of the Tax Code, as implemented by

RR 12-99, as amended, a taxpayer who receives the FAN
from the BIR is given 30 days from receipt of the
assessment to protest the FAN by either filing a request
for reconsideration or for reinvestigation.

In the case of a request for reinvestigation, the taxpayer

must submit all relevant documents in support of his
protest within 60 days from the date of filing of his letter of
protest; otherwise, the assessment shall become final,
executory, and demandable.

CTA:

The FDDA is considered void for failure to fully accord the

taxpayer the 60-day period to submit the documents, which
is part of the due process requirement" in the issuance of a
deficiency tax assessment.
However, despite the finding that the FDDA is void on the
ground of failure to observe the due process requirements,
the same does not result in the automatic declaration that
the disputed tax assessments subject of the FDDA are
likewise void.

61
CTA:
The law, rules, and jurisprudence spell out the grounds
when an assessment may be considered void, which
include, among others, prescription, failure to send a PAN,
and lack of factual and legal basis; prematurity in the
issuance of FDDA on ground of failure to observe the due
process requirements is not one of them.

The effect in this case is as if no FDDA was issued by the

BIR. Thus, as in a case where the BIR has not issued a
decision of disputed assessment (i.e., when there is
inaction on the part of the BIR), the case should be
resolved based on the merits, taking into consideration the
FAN, the taxpayer’s protest, and the corresponding
supporting documents submitted by the taxpayer.

50% disallowance rule on unsubstantiated

expenses

(Jumbo East Realty Inc. v. Commissioner of Internal

Revenue, CTA Case No. 8380, March 16, 2015)

62
RECALL
o In the absence of accounting records or other
documents necessary for the proper determination of the
taxpayer's internal revenue tax liability, Section 6 (B) of
the Tax Code requires that the assessment of the tax be
determined based on the "Best Evidence Obtainable".
o Under Section 2.4(c) of Revenue Memorandum Circular
(RMC) 23-2000, in case there is showing that the
expenses have been incurred by the taxpayer but the
exact amount of such expenses cannot be ascertained
due to absence of documentary evidence, the BIR can
make an estimate of the deduction that may be allowable
in computing the taxpayer’s taxable income, and the
disallowance of 50% of the taxpayer's claimed deduction
is valid.

FACTS OF THE CASE

While the taxpayer was able to submit the various official

receipts to support its deductions for operating expenses
and taxes and licenses, the same were denied admission
by the CTA for the taxpayer’s failure to present the
original copies for comparison.
Considering that the taxpayer’s claimed deductions were
not adequately supported by documentary evidence, the
operating expenses as well as taxes and licenses
claimed by the taxpayer were disallowed.

63
CTA:

Since the taxpayer actually incurred the expenses, it is

deemed proper to apply the 50% rule of approximation
provided under Sections 2.3 and 2.4(c) of RMC 23-2000.
Thus, in computing the taxable income of the taxpayer, the
taxpayer may only deduct 50% of the total amount it
claimed for operating expenses, including taxes and
licenses.

Simultaneous imposition of deficiency and

delinquency interest

(Philippine Aerospace Development Corporation v.

Commissioner of Internal Revenue, CTA EB 1035 re
CTA Case No. 7839, March 11, 2015)

64
o Under Section 249(B) of the Tax Code, the 20%
deficiency interest shall be assessed and collected on
the unpaid tax from the date prescribed from the
payment of the tax until the deficiency is fully paid.

o On the other hand, Section 249(C)(3) of the Tax Code

provides that a delinquency interest of 20% shall be
assessed and collected in case of failure to pay: (i) the
amount of tax due on any return required to be filed, (ii)
the amount of tax due for which no return is required, or
(iii) deficiency tax, or any surcharge or interest thereon
on the due date appearing in the notice and demand of
the Commissioner.

CTA Decision

o Double interests are allowed by law and equity. Section

249 of the Tax Code does not only allow but prescribes
the simultaneous imposition of both deficiency interest
and delinquency interest.
o In the case of First Lepanto Taisho Insurance
Corporation v. CIR (G.R. 197117, April 10, 2013), the
imposition of delinquency interest under Section 249 (c)
(3) of the Tax Code to be proper, because failure to pay
the deficiency tax assessed within the time prescribed
for its payment justifies the imposition of interest at the
rate of 20% per annum, which interest shall be assessed
and collected from the date prescribed for its payment
until full payment is made.

65
Proof of non-utilization of creditable
withholding taxes
(Philippine National Bank v. Commissioner of Internal
Revenue, GR 206019, March 18, 2015)

A taxpayer seeking for refund of its

creditable withholding taxes (CWT)
must comply with the following
conditions:

a. the claim is filed with the CIR within the two-year

period from the date of payment of the tax
b. it is shown on the return of the recipient that the
income payment received was declared as part
of the gross income; and
c. the fact of withholding is established by a copy of
a statement duly issued by the payor to the
payee showing the amount paid and the amount
of the tax withheld therefrom.

66
 In case of refund of erroneously withheld taxes where the
party claiming the refund is the withholding agent, it must
establish that the creditable withholding taxes were not
utilized by the income recipient or payee to pay for its tax
liabilities.

FACTS OF THE CASE:

o The taxpayer-refund claimant submitted, among

others, the Income Tax Returns (ITRs) of the payee,
BIR Form 1606 (Withholding Tax Remittance Return)
and certain unadjusted schedule of prepaid tax to
prove that the payee did not utilize the withheld taxes
to offset its tax liabilities.

o The CTA En Banc held that the ITRs of the payee

alone are not enough to support the taxpayer’s
contention that no part of the creditable withholding
tax sought to be refunded by the taxpayer-withholding
agent was utilized by the payee.

67
o To sufficiently prove that the payee did not utilize the
creditable taxes it withheld, the CTA En Banc held
that the withholding agent should have likewise
presented the BIR Forms No. 2307 issued to the
payee in relation to the creditable taxes withheld
reported in its tax returns.

Supreme Court (SC)

o In claims for excess and unutilized creditable

withholding tax, the submission of BIR Form 2307 is to
prove the fact of withholding of the excess creditable
withholding tax being claimed for refund.

o While it may be necessary to prove that the taxpayer

did not use the claimed creditable withholding tax to
pay for his/its tax liabilities, there is no basis in law or
jurisprudence that BIR Form No. 2307 is the only
evidence that may be adduced to prove such non-use.

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o There is nothing in BIR Form No. 2307 which would
establish either utilization or non-utilization, as the
case may be, of the creditable withholding tax. The
information contained in BIR Form 2307 may be very
well gathered from other documents already
presented by taxpayer.

o The taxpayer had already presented the Withholding

Tax Remittance Returns (BIR Form No. 1606) on the
transaction which contain, among others, the name of
the payor and the payee, the description of the
property subject of the transaction, and the
determination of the taxable base, and the tax rate
applied.

o Considering that the very same key information that

would be gathered from BIR Form No. 2307 can be
found in BIR Form 1606, the presentation of BIR Form
No. 2307 would be in the final analysis a superfluity, of
little or no value.
o The evidence on record sufficiently proves that the
claimed creditable withholding tax was withheld and
remitted to the BIR, that such withholding and
remittance was erroneous, and that the claimed
creditable withholding tax was not used by the payee
to settle its tax liabilities.

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 Submission of complete documents for
VAT refund purposes

(Commissioner of Internal Revenue v. Coral Bay Nickel

Corporation, CTA EB No. 1133 re CTA Case No. 8252,
January 7, 2015)

FACTS OF THE CASE:

The VAT-refund claimant is a PEZA-registered enterprise

under income tax holiday (ITH) that is engaged in the
manufacture of nickel/cobalt mixed sulfide for export. The
company filed an application for refund of its unutilized
input VAT from its domestic purchases of goods and
services attributable to its VAT zero-rated sales.

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BIR:

o The taxpayer’s refund should be denied due to its

failure to submit the complete documents, i.e., comply
with the prescribed checklist of requirements to be
submitted involving claim for VAT refund pursuant to
RMO No. 53-98, as amended.
o The BIR argued that the taxpayer’s filing of a judicial
claim for refund is premature since the 120-day
period had yet to run due to the taxpayer’s failure to
submit the complete documents.

CTA En Banc

o The term “relevant supporting documents” should be

understood as those documents necessary to
support the legal basis for disputing a tax
assessment. The BIR can only inform the taxpayer to
submit additional documents; it cannot dictate what
type of supporting documents should be submitted.
(Citing the case of Commissioner of Internal
Revenue v. First Express Pawnshop Company, Inc.
(GR 172045-46, June 16, 2009)

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o In the case of Team Sual v. Commissioner of Internal
Revenue (CTA EB Nos. 649 and 651, March 21,
2012), should the taxpayer decide to submit only
certain documents, or should the taxpayer fail or opt
not to submit any document at all in support of its
application for refund or tax credit certificate under
Section 112 of the Tax Code, it is reasonable and
logical to conclude that the 120-day period should be
reckoned from the filing of the application.

o The submission of supporting documents lies within

the sound discretion of the taxpayer. As the affected
party, the taxpayer is in the best position to determine
which documents are necessary and essential to
garnering a favorable decision.

o The taxpayer’s non-compliance with the submission

of documentary requirements prescribed under RMO
53-98, as amended, did not render the refund claim
premature considering that the taxpayer filed its
judicial claim for refund within the 120+30 day period
under Section 112(C) of the Tax Code, reckoned from
the filing of its application for refund with the BIR.

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Substantiation of input tax credits

[Nippon Express (Philippines) Corp. v. Commissioner of

Internal Revenue, G.R.185666, February 4, 2015]

Under Section 113 of the Tax Code, a VAT-registered

taxpayer must issue a VAT invoice for every sale, barter,
or exchange of goods or properties, while a VAT official
receipt should be issued for every lease of goods or
properties and for every sale, barter, or exchange of
services.

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FACTS OF THE CASE

• A taxpayer whose gross receipts were primarily

derived from rendering its services to PEZA-registered
clients, filed a claim for refund of its excess unutilized
input VAT arising from its zero-rated sales to PEZA
enterprises.
• In order to prove its zero-rated sales, the taxpayer-
refund claimant submitted the sales invoices, transfer
slips, and credit memos it issued for the services it
rendered to its clients registered with the Philippine
Economic Zone Authority (PEZA).

Supreme Court (SC)

o The VAT official receipt as proof of sale of services

cannot be interchanged with sales invoices that are
used for the sale of goods.
o The taxpayer’s sales, being sales of services, should
properly be supported by VAT official receipts only.
Section 113 of the Tax Code does not provide for any
other document that can be used as an alternative to,
or in lieu of, an invoice and official receipts.

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o The evidence submitted by the taxpayer -- i.e. sales
invoices, transfer slips, credit memos, cargo
manifests, and credit notes -- to prove its zero-rated
sales were not sufficient to entitle the taxpayer to a
refund of its excess input tax or to the issuance of a
tax credit certificates.

Questions?

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