This is a publication about developments in Philippine taxation. The contents usually include latest Republic Acts, Bureau of Internal Revenue issuances, Customs regulations, Court decisions, BSP circulars, SEC circulars, Department of Justice opinions and Executive Orders relevant to Tax practice.
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Taxes, compliance matters, assessments, and refunds
Settlement of dues
Condominium dues, fees and other assessments are not subject to tax
A condominium corporation filed a case seeking to invalidate RMC No. 65-2012, which subjects condominium association dues, membership fees and other assessments to income tax and VAT.
The Supreme Court affirmed that RMC No. 65-2012 is invalid based on the following:
- A condominium corporation is not designed to engage in activities that generate profit. The collection of association dues, membership fees, and other assessments/charges is purely for the benefit of the condominium owners. It is a necessary incident to the purpose of effectively overseeing, maintaining, or even improving the common areas of the condominium, as well as its governance.
- Association dues, membership fees, and other assessments/charges are not subject to income tax, VAT and withholding tax.
- They are not subject to income tax, because they are not included as sources of gross income under Section 32 of the Tax Code, and they do not constitute profit or gain. Consequently, they are not subject to withholding tax.
- They are also not subject to VAT, because they neither arise from transactions involving the sale, barter, or exchange of goods or property nor are generated by the performance of services.
- The CIR is empowered to interpret our tax laws but not to expand or to alter them. In the case of RMC No. 65-2012, the CIR went beyond, if not gravely abused, such authority.
(G.R. No. 215801 & 218924, promulgated 15 January 2020)
Holding the fort
The sale of Fort Bonifacio lands by the BCDA is exempt from income tax
Under Section 8 of RA No. 7227,[1] proceeds from the sale of portions of Metro Manila military camps by the Bases Conversion and Development Authority (BCDA) are deemed appropriated for specific purposes and recipients and are exempt from all forms of taxes and fees.
The Supreme Court ruled that Section 27(C) of the Tax Code, a general law that imposes income taxes on government-owned and -controlled corporations, did not impliedly repeal the tax exemption provision of Section 8 of RA No. 7227, a special law. It further held that the special law prevails over a general law because a special law reveals the legislative intent more clearly than a general law does.
In this light, the proceeds from the sale of Bonifacio Global City real properties do not constitute income of the BCDA. Hence, they are not subject to income tax and, consequently, withholding tax.
(G.R. No. 217898, promulgated 15 January 2020)
[1] Otherwise known as the Bases Conversion and Development Act of 1992.
Direct costs
Minimum corporate income tax of life insurance companies
For purposes of computing the minimum corporate income tax, Section 27(E)(4) of the Tax Code defines “cost of services” as all direct costs and expenses necessarily incurred to provide the services required by the customers and clients.
According to the Supreme Court, a cost or expense is deemed direct when it is readily attributable to the production of goods or for the rendition of service. In this light, the Supreme Court held that the 5% percentage tax and documentary stamp tax (DST) on life insurance premiums do not constitute direct costs of a life insurance company because they are incurred after the service has been rendered.
Moreover, it cannot be readily said that it was the life insurance company who necessarily incurred the expense since it never disputed charging the DST to its clients.
(G.R. Nos. 199729-30 & 199732-33, promulgated 27 February 2019)
Greens fee
The environmental tax under the Davao City Watershed Code is not a tax
The Sangguniang Panlungsod of Davao City enacted a Watershed Code imposing an environmental tax on persons engaged in agricultural and other economic undertakings on lands covered by growership contracts and other agreements.
Although the charge is named as an environmental tax, it is not a tax but a regulation fee. Its purpose is not to raise revenue but to implement the Watershed Code, defray the related operational expenses and support watershed protection, conservation and management programs and projects.
Therefore, a protest of said environmental tax assessment is not considered a “local tax case” which is appealable to the Court of Tax Appeals.
(CTA AC No. 215, promulgated 25 June 2020)
VAT refunds
New deadlines for filing VAT refund claims
The BIR announced the following extended deadlines in the filing of VAT refund claims:
Period |
Extended deadline |
Calendar quarter ending 31 March 2018 |
15 July 2020 |
Fiscal quarter ending 30 April 2018 |
31 July 2020 |
Fiscal quarter ending 31 May 2018 |
15 August 2020 |
Calendar quarter ending 30 June 2018 |
31 August 2020 |
However, with respect to areas not yet in a state of general community quarantine, the deadline shall either be thirty (30) days after the lifting of the enhanced community quarantine (ECQ) or modified ECQ, or the above deadlines, whichever comes later.
Given the anticipated difficulties to be encountered by the BIR with the expected influx of VAT refund claims, the 90-day period for processing VAT refund claims shall be suspended in areas under ECQ and modified ECQ.
(Revenue Regulations No. 16-2020, published 27 June 2020)
Full extension
Extending the Tax Amnesty on Delinquencies deadline to 31 December
The 23 April 2020 deadline for availing the Tax Amnesty on Delinquencies that was extended for several times has been further extended to 31 December 2020.
Furthermore, the procedures for availment have been amended to incorporate this new deadline and to include the following:
- Step 1 – The concerned BIR office receiving the request for Certificate of Delinquencies/Tax Liabilities shall issue the same within three working days from the date of request. In case of denial, said BIR office should state its legal and factual basis in writing.
- Step 2 – The concerned Revenue District Office / Large Taxpayers Division / Large Taxpayer Collection Enforcement Division shall endorse the duly accomplished Tax Amnesty Return and Acceptance Payment Form within one working day from receipt of complete documents.
(Revenue Regulations No. 15-2020, published 20 June 2020 and Revenue Memorandum Circular No. 61-2020, issued 25 June 2020)
Drug related
Publishing the VAT-exempt prescription drugs and medicines
The BIR published the “List of Prescription Drugs and Medicines for Diabetes, High-Cholesterol and Hypertension Exempt from VAT beginning 27 January 2020” recently issued by the Food and Drug Administration. Said List is attached to Revenue Memorandum Circular No. 62-2020, which may be accessed at www.bir.gov.ph.
(Revenue Memorandum Circular No. 62-2020, issued 23 June 2020)
Compliance reminders
Tax obligations of persons conducting business through electronic means
All persons doing business and earning income, specifically those using electronic platforms and media and other digital means should ensure that their businesses are registered and that they are tax compliant. These persons include partner sellers/merchants, payment gateways, delivery channels, internet service providers and other facilitators.
The tax registration guidelines and requirements are provided in Annex “A” of Revenue Memorandum Circular No. 60-2020. All persons who register on or before
31 July 2020 shall not be penalized for late registration. However, they are encouraged to voluntarily declare past transactions and pay corresponding taxes, which shall not be subject to penalties if paid on or before
31 July 2020.
Persons found doing business without complying with registration requirements or who did not declare past due/unpaid taxes shall be subject to applicable penalties.
Newly registered businesses and existing registrants must comply with applicable BIR issuances, particularly, the following:
- Issuances or sales invoice or official receipts;
- Keeping of books of accounts and other accounting records;
- Withholding taxes;
- Filing of required tax returns; and
- Timely payment of correct taxes.
(Revenue Memorandum Circular No. 60-2020, issued 10 June 2020)
Temporary receipts
Workaround procedures in complying with receipting/invoicing requirements
The BIR amended the guidelines in Revenue Memorandum Circular (RMC) No. 47-2020, which provide temporary measures to be adopted by taxpayers in complying with receipting/invoicing requirements. The amendments pertain to the following:
- The workaround procedures shall be applicable not only to taxpayers registered in areas under enhanced community quarantine (ECQ) but also to taxpayers registered in areas under modified ECQ.
- All taxpayers adopting the workaround procedures and temporary measures in RMC No. 47-2020 are required to submit their Summary of Temporary Receipts/Invoices Issued within ninety (90) days from the date of lifting of the ECQ and/or modified ECQ.
- Business entities covered under the general community quarantine (GCQ) and or modified GCQ should discontinue the use of said temporary measures. Otherwise, they shall be considered in violation of the receipting/invoicing requirements.
(Revenue Memorandum Circular No. 59-2020, issued 9 June 2020)
Streamlining registration
Removing the Mayor’s Permit requirement in BIR registration of a business
The BIR updated its policy and issued revised checklists of documentary requirements for business registration and other types of applications (see Annexes “A-1” to “A-11” of Revenue Memorandum Circular No. 59-2020). Notably, the Mayor’s Permit has been removed as one of the mandatory requirements.
Pursuant to the Implementing Rules and Regulations of Republic Act No. 11032,[1] the BIR shall only process complete applications or requests.
(Revenue Memorandum Circular No. 57-2020, issued 9 June 2020)
[1] Otherwise known as the “Ease of Doing Business and Effective Government Delivery Act of 2018”.
Microfinance NGOs
Updated List of Accredited Microfinance Non-Government Organizations (NGOs)
The BIR published the “Updated List of Microfinance NGOs Accredited by the Microfinance NGO Regulatory Council as of 26 May 2020”. It also reiterated the three-year validity period of Certificates of Accreditation under the Implementing Rules and Regulations of Republic Act No. 10693.
(Revenue Memorandum Circular No. 58-2020, issued 9 June 2020)
Tax filing options
Manner of paying taxes until 14 June 2020
The BIR clarified the manner of filing tax returns and payment of taxes until 14 June 2020 under Revenue Memorandum Circular No. 48-2020. In light of the clarifications, taxpayers have the following options:
- Tax returns may be filed with and taxes paid at the nearest authorized agent banks (AABs), regardless of revenue district office (RDO) jurisdiction;
- Tax returns may be filed with and taxes paid to Revenue Collection Officers (RCOs) of the nearest RDO, even in areas where there are AABs.
Cash payments should not exceed PHP20,000 while check payments have no limitation if made to the RCO of the district office on or before 14 June 2020. All check payments should be made payable to the Bureau of Internal Revenue, and the name and branch of the receiving AAB may no longer be indicated therein. - Tax returns may be filed through the eBIRForms facility and taxes paid as follows:
- Over-the-counter through AABs
- RCOs of the nearest RDO, even in areas where there are AABs
- Electronic / Online Payment:
- Land Bank of the Philippines (LBP) Link.biz Portal (for taxpayers who have ATM accounts with LBP and/or holders of BancNet ATM/Debit/Prepaid Card, and taxpayers utilizing PesoNet facility (depositors of RCBC and Robinsons Bank))
- Development Bank of the Philippines Pay Tax Online (for holders of Visa/Mastercard Credit Card and/or BancNet ATM/Debit Card)
- Union Bank Online Web and Mobile Payment Facility (for taxpayers who have accounts with Union Bank of the Philippines)
- Mobile payment (GCash/PayMaya)
Electronic Filing and Payment System (eFPS) taxpayers shall continue to file through the eFPS and settle the tax liabilities with the AABs where they are enrolled.
Taxpayers who are not required to file and pay electronically may opt to either use the eBIRForms facility or file manually. “No payment” returns shall be filed through the eBlRForms facility.
In case of unavailability of internet connection to electronically file, taxpayers shall manually file the returns and pay taxes through the above-mentioned payment venues.
(Revenue Memorandum Circular No. 56-2020, issued 2 June 2020)
Bank reminders
Policies in the acceptance of annual income tax returns and tax payments
The BIR reiterated the following responsibilities of authorized agent banks in relation to annual income tax returns (ITRs) for calendar year 2019 and the corresponding income tax payments:
- To accept annual ITRs until 15 June 2020 considering that 14 June 2020 falls on a weekend;
- To extend banking hours until 5PM on the acceptance of annual ITRs until 15 June 2020; and
- To accept tax payments from taxpayers who are already within the bank's premises by the close of the said extended banking hours.
(Bank Bulletin No. 2020-08, issued 10 June 2020)
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