Client Advisory Letter (January 2021)

Discovery plus

When the five-year prescriptive period for Tax Code violations starts to run

Under Section 281 of the Tax Code, all Tax Code violations prescribe after five years. The prescriptive period begins to run from the day that the violation was committed or, if the violation is not yet known at the time, from the discovery of the violation and the institution of judicial proceedings for its investigation and punishment.

Hence, if the period from the institution of proceedings for a tax fraud investigation up to the filing of the Information in court already exceeded five years, the government’s right to file a criminal action has prescribed. In this regard, the CTA held that the prescriptive period began to run on the date when the BIR filed its Joint Complaint-Affidavit with the Department of Justice for preliminary investigation.

(CTA EB Crim No. 69, promulgated 6 January 2021)

Hard evidence

Requirements for input VAT refund claims of contractors of RE developers

A taxpayer sought a refund of input VAT attributable to its VAT zero-rated sales to renewable energy (RE) developers. According to the CTA, for the latter sales to qualify for VAT zero-rating as contemplated under Republic Act No. 9513, the taxpayer must be able to present the following documents of the RE developer:

1. Department of Energy (DOE) Certificate of Registration;

2. Registration with the Board of lnvestments; and

3. DOE Certificate of Endorsement.

(CTA Case No. 9670, promulgated 11 January 2021)

Tobacco warning

Amendments to Tax Code provisions on excise taxes and VAT

The Commissioner of Internal Revenue circularized Republic Act No. 11467 which amended or introduced the following Tax Code provisions:

• Excise tax imposition and administration with respect to distilled spirits, wines, fermented liquors, tobacco products, heated tobacco products and vapor products

• Definition of “vapor products”

• Fines on the unlawful possession or removal of articles subject to excise tax without payment thereof, selling of heated tobacco products and vapor products at a lower price than the combined excise tax and VAT, and offenses relating to stamps 

• Disposition of revenues from excise taxes on sugar-sweetened beverages, alcohol, and heated tobacco products and vapor products

• Creation of a Joint Congressional Oversight Committee on Illicit Trade on Excisable Products

• VAT-exempt sale or importation of certain prescription drugs and medicines

Note:  RMC No. 113-2020 clarified that RA No. 11467 took effect on 23 January 2020, the date of publication in the Official Gazette website.

(Revenue Memorandum Circular No. 8-2021, issued 11 January 2021)

Cutting the tape

Hastening the removal of excessive regulation within the BIR

The Commissioner of Internal Revenue disseminated Administrative Order No. 23 issued by President Rodrigo Duterte for purposes of eliminating overregulation at all levels of government in order to promote efficiency. In this regard, the following are mandated in all national government agencies:

• Retention of only the necessary steps, procedures and requirements to fulfill the legal mandate and policy objectives of the agency

• Removal of redundant or burdensome processes

• Scrutiny of entire processes, including the most established and longstanding ones

• Compliance monitoring by the Anti-Red Tape Authority, in coordination with the Anti-Red Tape Unit in each covered agency

• Submission of a Compliance Report by all national government agencies to the President

• Filing of administrative cases in case of non-compliance

(Revenue Memorandum Circular No. 9-2021, issued 11 January 2021)

Module upgrade

Release of updated Alphalist Data Entry and Validation Module

The updated Alphalist Data Entry and Validation Module Version 7.0 is already available and can be downloaded from www.bir.gov.ph. It now includes the alphalists for BIR Form Nos. 1600-PT, 1600-VT, 1604-C, 1604-F, 1604-E and 1621. Furthermore, the generation process of the annual alphalists for BIR Form Nos. 1604-E and 1604-F has been simplified under the Quarterly Alphalists of Payees, dispensing the need of manually re-encoding the information.

With respect to the following alphalists, all concerned taxpayers using their own extract program should strictly observe the revised file structures and standard file naming convention prescribed under Annexes “A”, “B” and “C” of RMC No. 7-2021:

1. Monthly Alphalist of Payees under BIR Form Nos. 1600-VT and 1600-PT;

2. Quarterly Alphalist of Payees under BIR Form Nos. 1601-FQ, 1601-EQ and 1621; and

3. Annual Alphalist of Payees under BIR Form Nos. 1604C, 1604E and 1604F.

(Revenue Memorandum Circular No. 7-2021, issued 8 January 2021)

Mineral return

Availability of the newly revised BIR Form No. 2200-M

The Bureau of Internal Revenue issued the newly revised BIR Form No. 2200-M (Excise Tax Return for Mineral Products). This may be downloaded by manual filers from www.bir.gov.ph under the BIR Forms-Excise Tax Return Section.

However, it is not yet available in the Electronic Filing and Payment System (eFPS) and Electronic BIR Forms (eBIRForms). Hence, eFPS and eBIRForms filers shall continue to use the BIR Form No. 2200-M version in the eFPS and the offline eBIRForms Package Version 7.7.

(Revenue Memorandum Circular No. 6-2021, issued 8 January 2021)

CAS made easy

Removing the requirement to secure Permit to Use CAS, CBA and/or its Components

The Bureau of Internal Revenue issued simplified policies for the Application for Registration of Computerized Accounting System (CAS), Computerized Books of Accounts (CBA) and/or its Components, including the Electronic Storage System (ESS), Middleware and Other Similar Systems (the “Systems”).

All taxpayers intending to use the Systems are no longer required to secure a Permit to Use (PTU). Instead, they will be registered subject to the following policies:

1. The Systems should be registered by submitting the requirements under the Checklist of Documentary Requirements (Annex “A” of RMC No. 5-2021). BIR Form No. 1900 is no longer required to be submitted.

2. The Systems should comply with the standards under Annex “B” of RMC No. 5-2021.

3. Upon submission of the complete documentary requirements, an Acknowledgment Certificate shall be issued by the concerned Revenue District Office (RDO) within three working days.

4. System demonstration or pre-evaluation shall not be required prior to the use of the System. However, post-evaluation shall be conducted by the concerned RDO.

5. Taxpayers with existing PTU CAS, CBA and/or its Components shall not be required to apply for registration. Approved PTUs previously issued shall remain valid except:

   1. When the PTU was revoked due to non-compliance with existing revenue issuances during audit, Tax Compliance Verification Drive or post-evaluation; or

   2. When there is a major system enhancement or upgrade which will require the filing of a new application for registration of the System.

6. A new application for registration is required in instances such as the following in cases where they have a direct effect on the financial aspect of the system:

   1. Change in the functionalities of the system;

   2. Addition or removal of modules or submodules;

   3. Change in the system/software Version of Release Number; or

   4. All other enhancements that will be deemed as major system enhancement based on the recommendation of the technical evaluators.

7. In case of minor system enhancements such as user interface modification, bug fixes or performance improvements, the taxpayer must formally notify the concerned Revenue District Office / Large Taxpayers office.

(Revenue Memorandum Circular No. 5-2021, issued 8 January 2021)

Tax filing reminders

Guidelines in the filing of tax returns and payment of taxes

The following guidelines must be observed in the filing of tax returns and their attachments, and in the payment of taxes:

1. Electronic filing and payment

   1. Electronic Bureau of Internal Revenue Forms (eBIRForms)

eBIRForms filers shall pay taxes through any of the following facilities:

1. With Authorized Agent Banks (AABs) under the jurisdiction of the concerned Revenue District Office (RDO)

2. In areas with no AABs, with Revenue Collection Officers (RCOs) in the concerned RDO

3. Electronic 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 for depositors of RCBC, Robinsons Bank and Union 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

• Mobile payment (GCash/PayMaya)

The following are required to use eBIRForms:

1. Top withholding agents

2. Accredited tax agents/practitioners and all their client-taxpayers

3. Accredited printers of principal and supplementary receipts/invoices

4. ONETT taxpayers classified as real estate dealers/developers, taxpayers habitually engaged in the sale of real property using BIR Form No. 1606, and regular taxpayers already covered by eBIRForms

5. Taxpayers filing a “No-Payment Return”

6. Government- Owned and -Controlled Corporations

7. Local government units except barangays

8. Cooperatives registered with the National Electrification Administration and Local Water Utilities Administration

1. Electronic Filing and Payment System (eFPS) filers shall file their returns electronically and pay taxes through the eFPS-AABs where they are enrolled. The following are required to use the eFPS:

   1. Taxpayer Account Management Program (TAMP) taxpayers

   2. Accredited importers and prospective importers

   3. National government agencies

   4. Licensed local contractors

   5. Taxpayers enjoying fiscal incentives

   6. Top 5,000 individual taxpayers

   7. Corporations with authorized capital stock of at least PHP10m

   8. Corporations with complete Computerized Accounting Systems

   9. Government corporations insofar as remittance of withholding VAT is concerned

   10. Government bidders

   11. Insurance companies and stockbrokers

   12. Large Taxpayers

   13. Top 20,000 private corporations

The above taxpayers who are not yet enrolled in the eFPS and have not yet enrolled in any eFPS-AAB shall use eBIRForms for electronic filing and shall pay taxes through the available payment facilities.

Newly-created tax returns available in eBIRForms but not yet available in the eFPS facility shall be used by eFPS filers who shall pay through the payment facilities for eBIRForms.

1. Manual filing and payment

1. Taxpayers who are not required to or who opted not to file electronically (either through eBIRForms or eFPS) shall use the electronic or computer-generated returns or photocopied returns in their original format and in Folio/Legal size bond paper.

2. The corresponding taxes shall be paid through the following facilities:

1. With AABs under the jurisdiction of the concerned RDO

2. In areas with no AABs, with RCOs in the concerned RDO

Cash payments should not exceed PHP20,000 while check payments have no limit. In the accomplishment of checks, the “PAY TO THE ORDER OF” space should reflect the presenting/collecting bank or the bank where the payment is to be coursed, and “FAO Bureau of Internal Revenue” as payee.

For Manager’s or Cashier’s Checks, the issuing bank should indicate in the “PAY TO THE ORDER OF” space the presenting/collecting bank or the bank where the payment is to be coursed, and “FAO Bureau of Internal Revenue” as payee, and under the “Account Name” the taxpayer’s name and its Taxpayer Identification Number.

1. Submission of attachments

1. Taxpayers who electronically filed and/or paid tax returns using eBIRForms or eFPS where no attachment is required are not required to submit printed copies of electronically filed tax returns.

2. On the other hand, taxpayers who electronically filed and/or paid tax returns with required attachments such as the Summary Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax (SAWT), Quarterly Alphalist of Payees (QAP), Monthly Alphalist of Payees (MAP) or Summary List of Sales (SLS) or Summary List of Purchases (SLP) should submit the same through esubmission@bir.gov.ph.

3. For attachments to the annual and quarterly ITRs duly filed electronically, taxpayers who are not required to submit the claimed tax credits via SAWT may opt to submit the claimed tax credit certificates via the Electronic Audited Financial Statements (eAFS) system in lieu of attaching the physical copy of their tax credit certificates.

1. Filing of “No Payment Returns”

1. The filing of "No Payment Returns" by non-eFPS filers shall be made electronically through the eBIRForms facility.

2. Taxpayers who filed “No Payment Returns" electronically are already required to file their subsequent tax returns electronically, regardless of whether there are tax payments.

3. Notwithstanding, the following can manually file their own “No Payment Returns” with the concerned RDO using the electronic or computer-generated returns or photocopied returns in their original format and in Legal/Folio size bond paper:

1. Senior Citizens or Persons with Disabilities;

2. Employees deriving purely compensation income from two or more employers, concurrently or successively at any time during the taxable year, or from a single employer, although the income of which has been correctly subjected to withholding tax, but whose spouse is not entitled to substituted filing; and

3. Employees qualified for substituted filing but opted to file ITRs and are filing for purposes of promotion, loans, scholarships, foreign travel requirements, etc.

1. Unavailability of electronic filing/payment facility

The manual filing of returns and/or payment of taxes by a taxpayer required to file electronically is tantamount to a Wrong Venue filing pursuant to Section 248(A)(2) of the Tax Code. However, in case of unavailability of the eFPS covered by a duly released advisory, taxpayers shall electronically file through the eBIRForms facility and pay the corresponding tax due thereon through the payment facilities provided for eBIRForms.

In case of unavailability of both eFPS and eBIRForms facilities through a duly released advisory, taxpayers shall observe the procedures in manual filing and payment of taxes as provided above.

(Revenue Memorandum Circular No. 4-2021, issued 11 January 2021)

Wait list

Enlisting and delisting of Large Taxpayers

In connection with the postponement of the effectivity of the enlisted and delisted taxpayers of the Large Taxpayers Service (LTS) to 1 January 2021, the BIR issued the following clarifications:

• All transactions of affected enlisted taxpayers, effectivity of which was postponed to 1 January 2021, shall continue and remain to be handled by the Revenue District Offices (RDOs) where they are registered prior to 1 July 2020.

• Transactions of delisted taxpayers may likewise now be accommodated and handled by the RDO having jurisdiction over the said taxpayers.

(Revenue Memorandum Circular No. 2-2021, issued 8 January 2021)

PERA rules

Guidelines on the utilization of the 5% tax credit under the PERA Act of 2008

The Commissioner of Internal Revenue prescribed the following guidelines regarding the utilization of the 5% tax credit under the incentive provisions of the Personal Equity and Retirement Account (PERA) Act of 2008:

• The PERA Tax Credit Certificate (TCC) constitutes evidence of the 5% tax credit.

• Only the following may request the issuance of a PERA TCC:

1. Qualified contributors; and

2. Qualified employees, in case of employers who contribute a share to the accounts of said qualified employees.

• The PERA TCC shall be applied against internal revenue taxes. The tax returns to be accomplished will depend on the source of income from which the savings or contributions were derived from.

• The amount of the PERA TCC should be indicated in the tax return as a tax deduction. The phrase “5% PERA TCC” and corresponding amount should also be indicated. If the PERA TCC amount is more than the tax due, net of creditable taxes, the excess shall not be considered for refund. However, it shall be eligible for issuance of PERA TCC.

• The tax return should be filed using the eBIRForms facility. The duly received hard copies of the return, together with copies of the PERA TCC and other required attachments, should be submitted to the concerned RDO.

• The PERA TCC should be submitted by the employee to the employer who shall apply the same against the withholding tax on compensation. The employer should keep the PERA TCC and present to the BIR upon request.

• The Annual Alphabetical List of Employees and BIR Form No. 2316 should include the applicable details of the PERA TCC.

• The employer’s share in its employee’s PERA contributions qualifies as a deductible expense for income tax purposes. For uniformity, the account name to be used should be “Share in Qualified Employee’s PERA Contribution.”

• Qualified contributors who use spurious PERA TCCs shall be liable to pay the amount utilized, a 50% penalty and 12% interest per annum, and shall be subject to criminal prosecution.

(Revenue Memorandum Circular No. 139-2020, issued
18 December 2020)

Covered years

Clarifying the taxable years 2020 and 2021 for NOLCO

Under the Bayanihan to Recover as One Act, businesses suffering net operating losses for taxable years 2020 and 2021 can carry-over the same as deductions from gross income for the next five consecutive taxable years immediately following the year of loss.

Revenue Regulations No. 25-2020 define the term “taxable year” as the calendar year or fiscal year (FY) ending during such calendar year, upon which basis net income is computed.  In this regard, taxable years 2020 and 2021, as contemplated by the Bayanihan to Recover as One Act, shall include FYs ending on or before
30 June 2021 and on or before 30 June 2022.

Accordingly, the following fiscal years fall under taxable years 2020 and 2021:

Refund procedures

Consolidated and updated guidelines for VAT credit/refund claims

The Commissioner of Internal Revenue consolidated and amended existing BIR issuances on the processing of VAT credit/refund claims under Sections 112 and 229 of the Tax Code. The uniform and standard policies are as follows:

1. All offices shall prioritize the processing of input VAT credit/ refund claims filed under Section 112 over other claims not requiring the immediate issuance of refund checks/Tax Credit Certificates (TCCs).

2. The processing offices authorized to receive the Application for Tax Credits/Refunds (BIR Form No. 1914) are the:

   1. VAT Credit Audit Division – for claims of direct exporters under Section 112

   2. Revenue District Office / Large Taxpayers Audit Division (RDO/LTAD) – for VAT zero-rated taxpayers (other than direct exporters) under Section 112

   3. RDO/LTAD – for claims of taxpayers whose VAT registration has been cancelled and for claims for recovery of erroneously or illegally assessed or collected VAT under Sections 112(B) and 229. 

3. The BIR shall receive only those applications with complete documentary requirements as enumerated in the Checklist of Requirements (see Annexes of RMO No. 47-2020).

4. The application shall not be accepted if the Delinquency Verification Certificate (DVC) shows delinquent accounts other than VAT.

5. Tax Verification Notices shall be issued to authorize the verification of VAT credit/refund claims filed under Sections 112 and 229

6. The 90-day period to grant input VAT refund claims is counted from the actual filing of the application with complete supporting documents duly received by the BIR processing office.

7. The processing of a claim shall not be construed as an audit. Hence, the BIR may subsequently issue an electronic Letter of Authority for purposes of verifying the claim

8. The reports of verification shall be forwarded by the processing offices to the following for review prior to approval by the approving official:

Tax-sparing rules

Taxation of intercorporate dividends of nonresident foreign corporations

Under the Tax Code, intercorporate dividends paid by a domestic corporation to a nonresident foreign corporation (NRFC) are subject to the reduced 15% income tax if the NFRC’s country of residence shall allow a credit against its tax due taxes deemed to have been paid in the Philippines equivalent to 15%, which rate represents the difference between the 30% regular corporate income tax and the reduced 15% income tax on dividends.

In this light, the BIR issued the following guidelines and requirements for NRFCs intending to avail of said 15% reduced income tax:

1. The reduced 15% income tax rate may be applied to cash and/or property dividends declared by corporations, irrespective of their income tax regimes;

2. The domestic corporation paying the dividends may remit the dividends to the NRFC and apply the reduced 15% income tax rate without first securing a BIR ruling. However, it must determine whether the existing law of the country of domicile allows the NRFC a “deemed paid” tax credit equivalent to the 15% waived by the Philippines or exempts from tax the dividends paid.

3. Foreign law can be established by complying with the mandate of Sections 24 and 25 of Rule 132 of the Revised Rules of Court. If the country of domicile of the NRFC is a member of the Apostille Convention, foreign law can also be established by submitting an apostilled copy thereof.

4. Within ninety days from the remittance of the dividends or from the determination by the foreign tax authority of the deemed paid tax credit/non-imposition of tax due to the exemption, whichever is later, the NRFC or its authorized representative shall file a request for confirmatory ruling from the BIR.

Revenue Memorandum Order No. 46-2020 enumerates the general and special documentary requirements for the first and subsequent applications.

1. Holders of Philippine Depositary Receipts may also be entitled to the reduced rate subject to the certain conditions.

2. The Bureau of Internal Revenue (BIR) shall issue a certification signed by the Assistant Commissioner for Legal Service in lieu of a BIR ruling. In case of denial, a BIR ruling shall be issued containing the factual and legal bases therefor. Such denial is appealable to the Department of Finance within thirty days from receipt.

3. The NRFC may opt to avail of the 15% income tax rate under the Tax Code regardless of whether an applicable tax treaty exists. If the taxpayer is not entitled to the 15% Tax Code rate, the tax treaty shall automatically apply provided that the NRFC is able to prove entitlement to tax treaty benefits.

(Revenue Memorandum Order No. 46-2020, issued 23 December 2020)

Check, please!

Guidelines for AABs in their acceptance of checks as tax payments

All Authorized Agent Banks (AABs) are advised as follows:

1. Manager’s checks (MCs) and cashier’s checks (CCs) are acceptable modes of tax payments under Revenue Regulations No. 16-200. The MC/CC issuing bank shall indicate on the space for “PAY TO THE ORDER OF” the following:

   1. Presenting/collecting bank where the payment is to be coursed;

   2. “FAO Bureau of Internal Revenue” as payee; and

   3. Under the “Account Name”, the taxpayer’s name and its Taxpayer Identification Number (TIN).

An MC/CC with no taxpayer’s name and TIN shall not be accepted.

1. Checks that are not in accordance with the requirements of the Check Image Clearing System of the Philippine Clearing House Corporation are not acceptable.

2. When the taxpayer’s name and TIN are not pre-printed on the face of the check, the AAB shall require them to be typewritten or written legibly on the face/back of the check.

3. The following shall not be considered accommodation checks for the purpose of and should be accepted in payment of taxes:

1. Checks drawn against a joint or multiple account for paying taxes of any of the account holders thereof;

2. Checks drawn against the personal account of the owner of a single proprietorship in payment of the taxes of his/her business;

3. Checks drawn against the account of a single proprietorship in payment of the taxes of the owner; or

4. Checks issued by either of the spouses to pay their income tax liabilities.

1. Personal/company/partnership checks issued by tax/business agents/practitioners in payment of their clients’ tax liabilities are accommodation checks and are not acceptable.

2. One check shall be drawn for the payment of a single tax type. However, two or more checks and/or a combination of cash and check may be accepted in payment of a single tax type.

(Bank Bulletin No. 19-2020, issued 9 December 2020)