Miyerkules, Setyembre 10, 2014

GPPs not required to present tax exemption ruling

General professional partnerships (GPPs) are not included among the persons or entities that are required to present a tax exemption certificate or ruling pursuant to Revenue Memorandum Circular No. (RMC) 8-2014 in order to be exempt from creditable withholding tax on income payments they receive.
Under RMC 8-2014, all entities or persons claiming exemption are required to provide a copy of their valid, current and subsisting exemption certificate or ruling. Failure on the part of the taxpayer to present the tax exemption certificate or ruling shall subject him to the payment of appropriate withholding taxes due on the transaction. 
The BIR clarified that under RMC 03-2012, income payments made to GPPs in consideration of their professional services are not subject to income tax and, consequently, to withholding tax prescribed in RR 2-98, as amended. Hence, the requirement to present a tax exemption certificate or ruling does not apply to GPPs.
Revenue Memorandum Circular No. 60-2014, July 24, 2014
Tax Brief
Punongbayan and Araullo

Martes, Setyembre 9, 2014

VAT exempt sale of real property

While the sale of low-cost housing units that exceed the price ceiling of P750,000 per unit is not eligible for VAT exemption for low-cost housing under Section 109(P) of the Tax Code, the sale may still be exempt from VAT if the selling price of the property held primarily for sale to customers does not exceed the thresholds of P1,919,500 on sale of residential lots, and P3,199,200 for sale of house and lot and other residential dwellings pursuant to the same provisions of Section 109(P) of the Tax Code.

Under Section 109(P) of the Tax Code, as implemented by Section 4.109-1 of RR 16-05, sale of real property utilized for low-cost housing wherein the unit selling price is within the selling price per unit of P750,000 is exempt from VAT. Moreover, Section 109 further provides that the sale of properties held primarily for sale to customers with a selling price not exceeding the thresholds of P1,919,500 on sale of residential lots, and P3,199,200 for sale of house and lot and other residential dwellings are exempt from VAT.

The BIR held that while the selling price of P1,250,000 of the low-cost housing units sold by a real estate company does not qualify under the classification of a low-cost housing, the selling price still meets the VAT-exempt threshold of P3,190,200 for sale of house and lot and other residential dwellings under Section 109(P) of the Tax Code. 

Hence, the sale of the housing units with selling price of P1,250,000 is exempt from VAT.

BIR Ruling No. 285-2014, July 9, 2014
Tax Brief

Punongbayan and Araullo

Biyernes, Abril 4, 2014

RMC 20-2014 Guidelines for 2013 ITRs

The BIR has issued Revenue Memorandum Circular No. 20-2014 which covers the guidelines in the filing, receiving and processing of 2013 Income Tax Returns BIR Form Nos. 1700, 1701, 1702-RT, 1702-EX and 1702-MX, All June 2013 ENCS version under Revenue Regulations No. 2-2014. 

For Non-eFPS Filers
For expediency, ease and convenience in filling-up the ITRs, all Non-eFPS taxpayers are encouraged to use the offline eBIRForms package which can be accessed and downloaded from the BIR website (www.bir.gov.ph) through the “eBIRForms” link. Taxpayers using the said package can directly encode data, validate the entries as it can do automatic computations, edit, save, delete, view, print and  submit their tax returns. 

For eFPS Filers
Taxpayers who are mandated to use eFPS, particularly the Large Taxpayers (LTs) under the jurisdiction of the Large Taxpayers Service and other eFPS users (e.g. Top 20,000 Corporations, Top 5,000 Individuals, Government bidders, etc.) shall use the eFPS facility for the filing and payment of ITRs

Lunes, Pebrero 3, 2014

Protesting a real property tax assessment

Under Section 252 of the Local Government Code (LGC) of 1991, a taxpayer who is not satisfied with the assessment or reasonableness of a real property tax assessment may file a protest in writing within 30 days from payment of the tax to the provincial or city treasurer, or municipal treasurer in the case of a municipality within Metropolitan Manila Area. However, no protest to the real property tax assessment shall be entertained unless the taxpayer first pays the tax.
If the local treasurer denies the protest or fails to act upon it within the 60-day period, the taxpayer/real property owner may then appeal or directly file a verified petition with the Local Board of Assessment Appeal (LBAA) within 60 days from denial of the protest or receipt of the notice of assessment, as provided in Section 226 of RA 7160. If the taxpayer is not satisfied with the decision of the LBAA, he may elevate the same to the Central Board of Assessment Appeal (CBAA), which exercises exclusive jurisdiction to hear and decide all appeals from the decisions, orders and resolutions of the Local Boards involving contested assessments of real properties, claims for tax refund and/or tax credits or overpayments of taxes. An appeal may be taken to the CBAA by filing a notice of appeal within 30 days from receipt thereof.
The requirement to first pay the real property tax “under protest” also applies in cases where a taxpayer or real property owner claims an exemption from payment of real property tax. According to the SC, a claim for tax exemption, whether full or partial, does not deal with the authority of the local assessor to assess real property tax, but merely raises a question regarding the reasonableness or correctness of an assessment, which requires compliance with the payment of real property tax “under protest” under Section 252 of the LGC of 1991. 

(Camp John Hay Development Corporation v. Central Board of Assessment Appeal, GR 169234, October 2, 2013)
Tax Brief – November 2013
Punongbayan and Araullo

Lunes, Enero 20, 2014

VAT on sale of feed ingredients

Under Section 109 (B) of the Tax Code, sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds are exempt from VAT.

However, since the manufacture, importation, sale or distribution of feeds or feedstuff require prior registration and permit from the Bureau of Animal Industry (BAI) under Republic Act No. (RA) 1556, as amended by Presidential Decree No. 7, the certification in the nature and composition of the commodities/items as stated in the registration and import permit issued by BAI will govern the classification of the said items for purposes of VAT under Section 109(1)(B) of the Tax Code, as amended.

Considering that the BAI has issued a certification that the scrap products are no longer fit for human consumption and are indeed ingredients in the manufacture of feeds, its sale shall be exempt from the 12% VAT imposed on the sale of goods under Section 106(A) of the Tax Code, as amended.

(BIR Ruling No. 371-2013, October 10, 2013)
Tax Brief – December 2013
Punongbayan and Araullo

Lunes, Enero 13, 2014

Compliant alphalists as condition for deductibility of expenses

The submission of alphalists where the income payments and taxes withheld are lumped into one single amount (e.g. “various employees”, “various payees”, PCD nominees”, “Others”, etc.) shall no longer be allowed.  Such alphalists including any alphalist that does not conform to the prescribed format thereby resulting to the unsuccessful uploading into the BIR system shall be deemed not received and shall disqualify the deductibility of the expense for income tax purposes.

The alphalists cover those which are required to be attached in the annual information returns (BIR Forms1604CF/1604E) and monthly remittance returns (BIR Form 1601C, etc.).

Mandatory electronic submission of alphalists

Beginning January 31, 2014 and March 1, 2014, taxpayers with less than 10 employees/payees shall already be required to file their alphalists electronically.  Manual filing shall no longer be allowed. 

Hence, all withholding agents, regardless of the number of employees and payees, should submit electronically their alphabetical list of employees and list of payees using either of the following modes:       

   1) Attachment in the electronic filing and payment system (eFPS)
   2) Electronic submission using the BIR’s website (esubmission@bir.gov.ph)
   3) Electronic mail (email) at dedicated BIR address using the prescribed            CSV data file format.

Withholding agents without their own internet facility or do not have access to internet connection within their location should file their alphabetical lists through electronic mail (e-mail) using the e-lounge facility of the nearest revenue district office or revenue region of the BIR.

Tax Alerts
Punongbayan and Araullo

Planning the year ahead

AS THEY always say, the key to a fruitful year is to start the year right. Planning for the coming year is a key to starting it right. Not only do you need to plot your holiday getaways, you might also want to include in your to-do’s the submission of tax requirements related to the close of the taxable year that are in addition to the monthly requirements. Let’s go through the requirements based on the monthly deadlines.

January. Annual VAT/non-VAT registration fee of P500 is due on the 31st. However, for most companies, this is one of the requirements that is submitted and paid during the first week of the month since this is also one of the requirements for business permit renewal. The renewal of business permit is, on the other hand, due on the 20th. This involves the processing and payment of the local business tax, mayor’s permit fee, sanitary inspection fee, garbage fee, building inspection fee, fire inspection fee, mechanical inspection fee, plumbing inspection fee, business plate registration fee, and other charges imposed by different local government units (LGUs). The community tax certificate (CTC) is also one of the requirements for the renewal of business permit. The basic community tax amounts to P500, and the additional community tax is P2 for every P5,000, but the maximum amount for CTC for corporations is P10,500.

For those companies using a calendar year for its operations, books of accounts are to be submitted in January. The deadlines for submission would vary on what type of books of accounts the company maintains. Loose-leaf books of accounts are due for submission on the 15th, while the computerized books of accounts are due on the 30th.

Another requirement due for submission on the 30th is the list of inventory that remains on hand as of Dec. 31. This list is crucial since the Bureau of Internal Revenue (BIR) compares this with the amount that has been used in computing cost of goods sold in making their assessments. As much as possible, the amount to be declared should be the same as the audited figure or at least is close to the amount declared. For other companies, a notation is marked on the listing: “This is not yet the audited figure. The listing will be amended after audit procedures have been finalized.”

The annual information return of income tax withheld on compensation and final withholding taxes (BIR Form No. 1604CF) is due on the 31st. This contains a summary of withholding taxes related to compensation, final taxes, and fringe benefit taxes remitted to the government. This form includes the alphabetical list of employees for the year. As the form is finalized by the 31st, the BIR would also require the issuance of BIR Form 2316 to employees who are qualified for substituted filing. In 2013, the issue on substituted filing became a hot topic since many of the billionaires were not found on the list of top 500 individuals. To clarify the idea of substituted filing, employees are only entitled to substituted filing if the compensation income has been properly withheld during the year and that the employee receives only income from one employer in the Philippines during the year.

February. By the 28th, the BIR requires the submission of the duplicate copies of BIR Form 2316 that was furnished to its employees in January. This requirement has been disseminated through Revenue Regulations No. (RR) 11-2013. For non-compliance, it provided a penalty of P1,000 for each failure or a maximum of P25,000 for all such failures during the calendar year. However, if the employer fails to comply for two consecutive years, the employers shall be liable to a fine of P10,000 and suffer imprisonment of not less than one year but not more than 10 years upon conviction in addition to the P1,000 penalty for each failure, but this time without any maximum threshold.

March. Another annual information return that is due on the first day of March is your BIR Form 1604E, the summary of taxes withheld for your expanded withholding tax. This would include the alphabetical list of payees for both income payments wherein taxes were withheld and income payments that are exempt from withholding tax. Beware of the common mistake that the alphalist of payees for exempt income payments are not included in the items submitted.

April. On the 15th, the annual income tax return for calendar year 2013 is due for submission for both individuals and corporations. For manual filers, the attachments to the ITR are due for submission on the same day. On the other hand, EFPS filers are given until the 30th to submit all attachments, including audited financial statements, summary alphalist of withholding taxes, certificate of creditable withholding taxes, statement of management’s responsibility for annual ITR,proof of prior year’s excess credit, and proof of other tax payment/credit.

Companies that are unable to finalize their financial statements by April 15 should file a “tentative ITR” just to beat the deadline for submission. The BIR clarified last year through Revenue Memorandum Circular No. (RMC) 50-103 that the tentative ITR is considered the final ITR unless an amended return is submitted before the issuance of a Letter of Authority from the BIR. Once the Letter of Authority has been issued to the taxpayer, the Company can no longer amend the ITR. The Company’s only recourse is to wait for the assessment of the BIR for the deficiency taxes.

With regard to the supplement information to be filled out in the Annual ITR, RMC 21-2013 has clarified that for individual income tax filers, the requirement for the disclosure of supplemental information will be enforceable in taxable year 2013. For companies and other non-individual taxpayers, there have been no announcements yet if such requirement will be deferred. With these, companies must consolidate all information including its passive income for disclosure in the ITR.

With the above requirements plotted alongside our holiday getaways, may we enjoy work-life balance! Cheers to 2014!

Joanna Grace P. Manuel
Let’s Talk Tax
Punongbayan and Araullo