Tax Treatment of Deposits/Advances for Expenses Received by Taxpayers

The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) Nos. 89-2012 (dated December 28, 2012) and 16-2013 (dated February 15, 2013) providing for guidelines to be observed in the accounting and recording of deposits / advances for the payment of the pertinent expenses received by taxpayers.

Previous issuance, RMC No. 89-2012, clarifies the tax implications of deposits/advances, as well as accounting and liquidation of pertinent expenses specific to GPPs and/or their clients/customers.

The latest issuance, RMC 16-2013, spells out policies and guidelines on deposits/advances as part of gross receipts, claims for deduction of expenses, income payments which are subject to expanded withholding taxes, the issuance of official receipts (OR) and pro-forma accounting entries specific to taxpayers other than GPPs and their clients/customers.

The subject RMCs state that for every cash deposit or advances received by taxpayers from clients/customers, an OR covering the entire amount shall be issued and the same shall be booked as outright income and shall be subject to VAT or Percentage Tax, if applicable. The said income payment shall in turn be deductible as expense by the client/customer.

The RMCs stressed that receipts incurred, paid for an issued in the name of the taxpayer shall be recorded as its own expenses for income tax purposes and may be claimed as deductions from gross income provided that they are duly substantiated by official receipts/invoices.

All clients/customers, upon payment of deposits/advances, shall withhold, if applicable, the relevant expanded withholding tax (EWT), as prescribed in Revenue Regulations (RR) No. 2-98, as amended, and shall remit the same on or before the 10th day of the following month except those withheld on the month of December which shall be remitted on or before the 15th day of January. For the Electronic Fling and Payment System (eFPS) users, they shall follow the pertinent eFPS regulations.

The RMCs also provides pro-forma accounting entries and recording of deposits/advances of taxpayers and their clients/customers.

DOF News Correspondent

Source: http://www.dof.gov.ph/?p=5699

Reminder on issuance of withholding tax statement

The BIR reminded all withholding agents on their obligation to issue withholding tax statement on income payments subjected to final or creditable withholding taxes.

Based on Section 2.58(B) of RR 2-98, as amended, the withholding tax statement (BIR Form 2307) is required to be submitted within 20 days following the close of taxable quarter employed by the payee in filing his/its quarterly income tax return. The payor is required to retain a copy of the duly issued BIR Form 2307. Failure to furnish the same shall be grounds for the mandatory audit of payor’s income tax liabilities (including withholding tax) upon verified complaint of the payee.

For final withholding taxes, the withholding tax statement should be given to the payee on or before January 31 of the succeeding year or upon request of the payee.

(Revenue Memorandum Circular No. 85-2012, December 26, 2012)

Tax Brief – January 2013

Punongbayan and Araullo

Inheritance Taxes

GOV’T DRIVE:  The government is taking a closer look at its collection of estate taxes, especially from wealthy Filipinos.  Inheritance taxes are no longer being levied on recipients of legacies from parents or other relatives.  The tax assessments are due from the “transmitter” of wealth which is the estate itself.  Estate taxes are graduated based on the total value of the estate of the deceased.  Recent amendments of the Tax Code set rates that are kinder to those leaving smaller estates.

Finance Secretary Cesar V. Purisima noted that estate tax collections are very low – averaging only P800 million to P1 billion per year.  This is despite the escalation of zonal values of realties, which serve as basis for estate tax computation.  For net estates with values of P10 million and above, the tax rate is 20%.  For estates worth P15 million – the tax rate is 15%.  Family homes worth P1 million are exempt – and the first P1 million of the estate is also exempt.

FORMALITIES:  Within sixty (60) days from the death of a taxpayer, his heirs or administrator must file with the Revenue District of his last residence, a Notice of Death.  Counting from said date of death, the Estate Tax Return must be filed within six (6) months.  The return must be accompanied by certificates of residence and total landholdings of the decedent in every given local government unit.

Proofs of relationship between the deceased and heirs must be shown, more so in intestate succession.  Certified true copies of realty titles and tax declarations must be submitted.  The estate values of lands are based on zonal valuation – while taxable amounts of improvements are based on market values per tax declaration.  Estate tax must be paid upon filing, within the period provided.  Late filings subject the estate to surcharges (25%), interest (20 %. p.a.) and compromise penalties.

OPINIONS UNLIMITED 2013 :  Atty. Tony (APA) Acyatan : BIKOL REPORTER : Feb 17, 2013 

Minimum public ownership requirement for listed shares

In order to be subject to the ½ of 1% tax on the sale, barter or exchange of shares of stocks listed and traded through the local stock exchange under Section 127(A) of the Tax Code, publicly listed companies must meet the 10% public float or the minimum public ownership (MPO) as required by the Securities and Exchange Commission (SEC) or the Philippine Stock Exchange (PSE), whichever is higher.

Publicly listed companies that are non-compliant with the above percentages were allowed up to December 31, 2012 to comply with the MPO.

Transactions up to December 31, 2012 of publicly listed companies that failed to meet the MPO shall be subject to ½ of 1% tax on gross selling price under Section 127(A) of the Tax Code, while transactions made after December 31, 2012 shall be subject to a final tax of 5% or 10% on the net capital gains imposed on sales of shares of stocks not traded in the local stock exchange. The transfer of shares of stocks of non-compliant publicly-listed companies on their transactions after December 31, 2012 shall be subject to documentary stamp tax (DST) imposed under Section 175 of the Tax Code.

No sale, exchange, or transfer of shares of stock shall be registered in the books of the corporation unless the receipts of payment of the taxes and the Certificate Authorizing Registration (CAR) and/or Tax Clearance Certificate are filed with, and recorded by, the stock transfer agent or the secretary of the corporation.

(Revenue Regulations No. 16-2012, December 7, 2012)

Tax Brief – January 2013

Punongbayan and Araullo

Clarification on the taxation of long-term deposits

This Circular was issued to clarify the provisions of RR 14-2012 on the proper tax treatment of interest income from long-term deposits. The highlights of some of the issues and/or clarifications discussed in the Circular are as follows:

1. On investments of individuals in long-term trust invested by a bank’s trust department in a five-year corporate bond

Even if the individual does not withdraw his money from the trust agreement for at least five years, his interest income from the trust agreement will not be exempt from the final withholding tax as the underlying instrument is a corporate bond, even if such corporate bond has a maturity of five years. Corporate bonds or any other debt instrument issued by a non-bank corporation as underlying instrument will not meet the requirements of Section 22(FF) of the Tax Code since it is not issued by a bank.

2. On investments of individuals in long-term trust invested in long-term deposits placed under name of a bank’s trust department

If a bank’s trust department invests a fund in a long-term deposit or investment certificate in its own name without mentioning the particular individual for whom the investment is being made, this long-term deposit and investment are not exempt from the 20% final withholding tax. Only those made specifically in trust for the name of specific qualified individual investors may be exempt from income tax under the Tax Code.

3. On the tax treatment of investments of individuals in a long-term deposit or investments with remaining maturity of less than five years

The individual depositor or investor who acquired the instrument shall be subject to 20% final withholding tax on his interest income because the remaining maturity period is less than five years.

4. On the applicable tax rate in case of long-term deposits that have original tenor of more than five years but eventually held for less than five years upon exercise of call option

The individual depositor or investor who acquired the instrument with a maturity period of more than five years but eventually held the same for less than five years upon exercising his call option shall be subject to the graduated income tax rates of final withholding tax applicable to pre-terminated long-term deposits.

5. On the effectivity date of RR 14-2012 pertaining to the exemption of long-term deposits

Since RR 14-2012 merely implements, among others, the existing provisions of the Tax Code on long-term deposits, it shall apply to the following:

a. All pre-terminations/transfers, sale or acquisition of current outstanding long-term deposits or

investment certificates and new issues

b. All the interest coupon payments of current outstanding long-term deposits or investment certificates, as may be applicable, and new issues

c. All current outstanding underlying investments of investment certificates in the form of common or individual trust funds or investment management accounts and new issues upon the effectivity of the RR 14-2012 on November 23, 2012

(Revenue Memorandum Circular No. 81-2012, December 11, 2012)

Tax Brief – January 2013

Punongbayan and Araullo

Location restriction for tourism economic zone enterprises

Investors planning to establish tourism economic zones (TEZs) or who wish to locate as TEZ enterprises in Metro Manila, Cebu City, Mactan Island, and Boracay Island shall no longer enjoy the following tax incentives enjoyed by economic zone developers and locator enterprises:

1. 5% gross income tax incentive granted to economic zone developers of TEZs

2. Income tax holiday (ITH) and 5% gross income tax to locator enterprises of TEZs, except for tax and duty-free importation and zero-VAT rating on their local purchase of capital equipment

Existing TEZ developers/operators as well as TEZ locator enterprises in Metro Manila, Cebu City, Mactan Island and Boracay Island shall continue to enjoy the tax incentives granted to them by the Philippine Economic Zone Authority (PEZA). However, TEZ developers/operators and locator enterprises in the aforesaid areas that have not signed their registration agreements with PEZA shall be covered by the new PEZA policy.

Henceforth, no more new TEZs shall be allowed to be established in the said areas.

(PEZA Board Resolution No. 12-610, November 13, 2012)

Tax Brief – January 2013

Punongbayan and Araullo

Online processing of ATP

The BIR issued the following in the processing of ATP [Authority to Print] official receipts, sales invoices and other commercial invoices using the online ATP system.

All persons engaged in business shall secure/apply for an ATP and submit the required documents using the online ATP system for its principal (i.e., VAT official receipt/invoices, and non-VAT official receipt/sales invoice) and supplementary receipts/invoices (e.g., delivery receipts, billing statement, debit and/or credit memo and cash receipt). In case of downtime, the taxpayer shall apply for ATP and submit the required documents at the RDO or concerned Large Taxpayer (LT) office having jurisdiction over the taxpayer’s head office.

All applications for ATP of the head office (HO) and all its branches shall be done online, except in case of downtime as officially posted in the BIR website where application may be manually filed, and corresponding ATP shall be manually issued through alternative off-line ATP system by the concerned RDO or LT office. There shall be one ATP application per establishment (HO or branch) to be filed with RDO/LT office where the HO is registered. Each application shall be issued a separate ATP.

The principal and supplementary receipts/invoices of the HO and each branch shall have their own independent series of serial numbers and shall reflect the exact address of the branch, the tax identification number (TIN) and the branch code to the TIN.

The approved ATP shall be valid only upon full usage of the inclusive serial numbers of principal and supplementary invoices/receipts reflected in the ATP, or five years from the issuance of the same, whichever comes first.

All unused/unissued principal and supplementary receipts/invoices printed prior to January 18, 2012 (the date of effectivity of the regulations) shall be valid until June 30, 2012. A taxpayer with expiring ATP for its invoices/receipts (principal and supplementary) shall apply for a new ATP not later than 60 days prior to actual expiry date. All unused/unissued principal/supplementary receipts/invoices shall be surrendered to the RDO where the taxpayer is registered on or before the 10th day after the expiration of the validity period of the receipts/invoices for destruction. An inventory listing of the receipts/invoices shall be submitted.

(Revenue Regulations No. 18-2012, December 28, 2012)

Tax Brief – January 2013

Punongbayan and Araullo

The news: Not fit for print

I love the printed page. The musty smell of old books, the crisp sound of a new page being turned, the slam of a hardbound novel being closed, mentions of Salinger’s Holden Caulfield and Hilton’s Shangri-La, all remind me of my formative years when I dreamt about being a publisher of some sort and of building libraries all over Manila. With the steady buildup of my digital library in recent years, however, I have come to reassess this long-held dream. And the recent Newsweek announcement has pulled down the blinds on this childhood wish.

Newsweek is a news magazine that, at its peak, had a global circulation of over 4 million. Last October, it announced that it was ceasing print publication with its year-end issue to focus on an all-digital format. The event, one of the most high-profile newspaper/news magazine death announcements, portends the future of news print publication—and quite possibly all manner of print publication—around the world.

In developed countries with mature markets, the statistics do not paint a rosy outlook for the industry. Combined data for the US, UK and Canada show that the paid circulation of news dailies has been steadily decreasing from almost 100% of total households in the 1950s to under 40% of total households in 2010.1

Media developments in the form of consumer radio, broadcast and cable television—and in relatively recent times, the Internet—have clearly had a profound negative impact on the print format. And recent shifts by nearly all newspapers, even the ones in the Philippines, to “go digital” suggest that the Internet medium is a most formidable opponent of the printing press.

The principal issue for newspapers is the speed at which news content is distributed and consumed by its audience. Before the Internet came along, reporters would prowl their beats and receive tips, write up their articles, then send them off to desk editors, who would finalize dailies with the printing press for overnight printing then distribution through various circulation channels, until it finally finds its way to your corner sari-sari store in time for your morning coffee. Quite a long and stressful process, albeit one that has been made efficient over the years.

Today, all it takes is a tweet and a link—and you have your news. Print will never be as fast as digital; today, I read the news on my smartphone, tablet or computer the night before the same articles and opinion pieces hit the newsstands the next day. I have no need, nor desire, to pick up a physical copy of something that is by then old news. Moreover, it is much more convenient to read the news on a gadget that fits the palm of your hand, as opposed to a broadsheet that when spread open spans more than two feet. Compound this with the fact that I often do not need to pay in order to read the digital version of the news and you have a serious business model dilemma for newspapers.

I’ve seen some resistance from those in the print media when it comes to recognizing their online counterparts. Some question the seriousness of bloggers, in particular, who haven’t experienced the rigorous on-the-ground training that newspaper reporters go through. They can scoff all they want; it’s not going to help them compete with new media. Like it or not, these new mediums are vying for readership and leadership, too—the liberal and opinionated youth are flocking to media that appeal to them, and in this regard, it looks like traditional newspapers are losing ground.

It would serve the print media well if they leveraged on what they do best: making sense of the world for all of us who are constantly bombarded with information. By banking on their collective experience, established network, and the gravitas that readers readily assign to them, newspapers are in the best position to direct our attention to the things that matter.

But even then, it seems the march towards an all-digital news format will continue unperturbed. Traditional news companies are developing digital strategies and creating stronger Internet presence, acquiring blogs to improve localization and specialized publications or hiring content writers to diversify their readership, such as what Rappler did when it signed up Margie Holmes. Some are implementing paywalls for special content to supplement advertising revenue (such as the New York Times), and integrating social media into their digital editions to promote interactivity and increase word-of-mouth. Some are even going purely digital—like Newsweek— and some, like the Huffington Post and Rappler, never even had a print edition to begin with.

Unfortunately, there is no one-size-fits-all strategy here for print to survive the digital age. But, as surely as one generation makes way for another, print will come to pass. A generation that fell in love with printed pages, the ruffling sound pages make when turned, and the unique smell of ink on paper will make way for the children of today who use smartphones and tablets at the age of two, who would rather type on a keyboard than put pen to paper, and who would be giddy with excitement once the prequel of Twilight pops up on their Kindles.

I’m in a special place: I’m in the middle of these two generations and the change is easy to accept. Although blinds may have blocked the sun, a little electricity may bring light to my dream.

Third S. Librea CPA, CISA, CRISC, IBM-CAD is a Partner with the Advisory Services Division of Punongbayan & Araullo.

Executive Brief – December 2012

Punongbayan and Araullo

Guidelines on the online accreditation of printers

To monitor compliance of printers in securing authority to print (ATP) on behalf of their clients and in the printing of official receipts, sales invoices and other commercial receipts and/or invoices, the Bureau of Internal Revenue (BIR) issued the following policies and guidelines on the online system for accreditation of printers.

Accreditation criteria

To qualify for accreditation, the applicant printer must comply with the following criteria:

1. The printer is registered with the BIR as an enterprise engaged in printing services

2. The printer has been in the printing business for no less than three years and has been operating based on a going concern principle

3. The printer has no delinquent accounts with the BIR at the time of filing of accreditation

4. The printer has a number of printing machines used in printing of principal and supplementary invoices/receipts, which are available for BIR inspection

5. The specified printing machines are capable of generating security/special markings/features in printing of the principal and supplementary invoices/receipts

6. The printer shall not require minimum number of booklets for printing of the principal and supplementary invoices/receipts

7. The printer shall verify compliance with the information requirements per prevailing revenue issuances to be printed on the principal and supplementary invoices/receipts of its customer/client

8. The printer shall comply with the provisions of the bookkeeping regulations and reportorial requirements of the BIR

9. The printer or any of its owners (if juridical entity) is not connected with the BIR nor related to any BIR official or employee within the fourth civil degree of consanguinity or affinity nor related to the relatives of any BIR official or employee within the fourth civil degree of consanguinity or affinity

Filing of application

The application for accreditation for printers shall be in the form of a sworn statement duly executed by the applicant-printer. The application shall be submitted using the Online System for Accreditation of Printers. All applicant printers are required to submit complete description and sample of the security/special markings/features in the printing of the principal and supplementary invoices/receipts.

Evaluation of application

The application shall be evaluated by the Regional/National Monitoring and Accreditation Board (RMAB/NMAB). As part of the evaluation process, the concerned RMAB/NMAB shall conduct an on-site inspection. A system generated “Certificate of Accreditation” shall be issued within five working days from receipt of the application for accreditation and submission of complete documentary requirements. The “Certification of Accreditation” shall reflect the system-generated printer’s accreditation number, which shall be permanent unless and/or until revoked by the BIR.

A list of all duly-accredited printers per Revenue District Office (RDO) shall be posted and regularly updated in the BIR website (www.bir.gov.ph) or portal (https://my.bir.gov.ph).

(Revenue Regulations No. 15-2012, December 5, 2012)

Tax Brief – January 2013

Punongbayan and Araullo

Restructuring of excise tax on alcohol and tobacco products

The law has restructured the excise tax on alcohol and tobacco products by adopting a combination of ad valorem and specific tax for distilled spirits and cigars and cigarettes, and gradually shifting the excise tax system to a unitary structure for fermented liquors and cigars and cigarettes by removing the price classification.

The law provides for a yearly increase in the excise tax rates on alcohol and tobacco products, and annual indexation by 4% of excise tax on wines, tobacco products and cigars effective January 1, 2014; distilled spirits effective January 1, 2016; and fermented liquor and cigarettes effective January 1, 2018.

Revised excise tax rates

The new excise tax rates on alcohol and tobacco products are as follows:

1. Distilled spirits

A specific tax of P20 plus 15% ad valorem tax of the net retail price (NRP) per proof liter shall be imposed effective January 1, 2013.

The ad valorem tax shall increase to 20% starting January 1, 2015, while the specific tax shall increase by 4% every year effective January 1, 2016

2. Wines

The following shall be the excise tax rates on wines effective January 1, 2013:

a. Sparkling wine/champagne regardless of proof, if the NRP per bottle of 750 mL volume capacity (excluding the excise tax and value-added tax) is:

1. P500 or less - P250

2. More than P500 - P700

b. Still wine and carbonated wine containing 14% alcohol by volume or less P30

c. Still wine and carbonated wine containing more than 14% but not more than 25% alcohol by volume P60

The excise tax on wine shall increase by 4% every year effective January 1, 2014.

3. Fermented liquors

For fermented liquor products with NRP per liter of volume capacity of P50.60 and less, the excise tax shall be P15 in 2013, P17 in 2014, P19 in 2015 and P21 in 2016.

In the case of fermented liquors with NRP of more than P50.60, the excise tax shall be P20 in 2013, P21 in 2014, P22 in 2015 and P23 in 2016.

A unitary tax of P23.50 per liter shall be imposed effective January 1, 2017, which shall be increased by 4% every year starting January 1, 2018.

4. Tobacco products

The excise tax on tobacco products shall increase to P1.75 effective January 1, 2013 on each kilogram of the following tobacco products:

a. Tobacco twisted by hand or reduced into a condition to be consumed in any manner other than the ordinary mode of drying and curing

b. Tobacco prepared or partially prepared with or without the use of any machine or instruments or without being pressed or sweetened except as otherwise provided hereunder

c. Fine-cut shorts and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco

For tobacco that is specially prepared for chewing and is unsuitable for use in any other manner, an excise tax of P1.50 on each kilogram shall be imposed effective January 1, 2013.

The excise tax rates on tobacco products shall be increased by 4% every year effective January 1, 2014.

5. Cigars and cigarettes

Cigars shall be subject to specific tax of P5 per cigar plus 20% ad valorem tax of the NRP effective January 1, 2013. The P5 specific tax imposed on cigar shall increase by 4% every year effective January 1, 2014.

For cigarettes packed by hand, the excise tax per pack shall be P12 in 2013, P15 in 2014, P18 in 2015, P21 in 2016, and P30 in 2017. Thereafter, the excise tax on cigarettes packed by hand shall increase by 4% every year effective January 1, 2018.

In case of cigarettes packed by machine, if the NRP per pack is P11.50, the excise tax shall be P12 in 2013, P17 in 2014, P21 in 2015 and P25 in 2016.

On the other hand, if the NRP of cigarettes packed by machine is more than P11, the excise tax shall be P25 in 2013, P27 in 2014, P28 in 2015, and P29 in 2016.

A uniform P30 excise tax on cigarettes packed by machine shall be imposed effective January 1, 2017. The excise tax on cigarettes packed by machine shall increase by 4% every year effective January 1, 2018.

Earmarking of incremental revenues

After deducting the allocations under Republic Act Nos. (RA) 7171 and 8240, 80% of the remaining balance of the incremental revenues shall be allocated for the universal health care under the National Health Insurance Program (NHIP), while 20% shall be allocated nationwide for medical assistance and health enhancement facilities program.

RA 10351 was signed into law on December 19, 2012, and took effect on January 1, 2013.

This law was implemented by Revenue Regulations No. (RR) 17-2012. For the initial classification of alcohol and tobacco products according to the tax rates prescribed under RA 10351, see Revenue Memorandum Circular (RMC) 90-2012.

Tax Brief – January 2013

Punongbayan and Araullo

VAT on construction services to BOI-registered enterprises

Services rendered by a VAT-registered construction company for the construction and expansion of the export facility of an export enterprise registered with the Board of Investments (BOI) does not qualify for VAT zero-rating; hence, it is subject to 12% VAT.

The BIR held that the sale of construction service to the BOI-registered enterprise is not among the services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed 70% of the total annual production, which is qualified for VAT zero-rating under Section 108(B) of the Tax Code.

The BIR further ruled that the construction service also does not qualify for VAT zero-rating under Section 4.106-5 of RR 16-05 because the construction service rendered for the BOI-registered enterprise does not directly form part or does not contribute to the goods or final products that are exported, i.e., they are not “supplies”, “raw materials”, and “semi-manufactured products” that are used in the manufacture, processing or production of the BOI-registered enterprise’s export products.

(BIR Ruling No. 610-2012, November 8, 2012)

Tax Brief – December 2012

Punongbayan and Araullo

Tax treatment of interest income on financial instruments

The BIR issued the following clarifications on the tax treatment of interest income on financial instruments under Revenue Regulations No. (RR) 14-2012.

1. On the tax treatment of interest income from government securities (Section 2, RR 14-2012)

Mere issuance of government debt instruments and securities shall be deemed falling within the coverage of “deposit substitutes,” regardless of the number of lenders at the time of origination. Such interest income derived from government debt instruments or securities is subject to 20% final withholding tax (FWT).

2. On the imposition of 20% FWT on government securities (Section 2, RR 14-2012)

In case of zero-coupon government debt instruments and securities, the FWT is payable upon original issuance; in case of interest-bearing government debt instruments and securities, the FWT shall be payable upon payment of the interest.

3. On the imposition of 20% CWT on interest income from other debt instruments not classified as “deposit substitutes” (Section 7, RR 14-2012)

The 20% creditable withholding tax (CWT) under the subsection (Y) of Sec. 2.57.2 of RR 2-98, as amended by RR 14-2012, shall be imposed on interest payment made beginning November 23, 2012, irrespective of when the instruments or securities were issued. The 20% CWT shall cover all interest income from current outstanding instruments, securities, or accounts as of November 23, 2012.

4. On the tax treatment of interest income from long term deposits or investment certificates (Section 3, RR 14-2012)

Interest income derived by domestic and resident foreign corporations from long-term deposits not issued by banks or investment certificates that are not considered deposit substitutes shall be subject to 20% CWT, and reported as part of taxable income of the domestic and resident foreign corporations subject to 30% regular corporate income tax.

5. On DST on assignments or re-assignments of debt instruments (Section 8, RR 14-2012)

The documentary stamp tax (DST) on assignment or re-assignment of debt instruments pursuant to Section 198 shall apply only to instances when the assignment or re-assignment of the debt instrument entails changing the maturity date or remaining period of coverage from the original instrument or carries with it a renewal or issuance of new instruments in the name of the transferee to replace the old ones.

Otherwise, the assignment or re-assignment without any change in maturity date shall be exempt from DST as provided under Section 199(f) or (g) of the Tax Code.

(Revenue Memorandum Circular No. 77-2012, November 23, 2012)

Tax Brief – December 2012

Punongbayan and Araullo

RMC 65-2012

RMC 65-2012 CONDO CORP

QUESTION:  Required of TIN in Condo?

ANSWER:  SEC reqistration, Mayor’s Permit, BIR Form 1903

 

QUESTION:  Does 65-2012 only refer to the taxability of association dues/membership fees & other assessment collected by condominium corp? Does this also include membership fees from GOLF Clubs because starting Aug 2012 they are collecting from us Vat

ANSWER:  RMC 65-2012 only refers to condominium corp.

GOLF CLUBS falls under RMC 35-2012 which is now taxable and vatable

 

QUESTION:  How about non-stock non-profit association of professionals is also covered by the new regulations like condominium?

How about clubs organized & operated exclusively for recreation to members which also collects membership/association dues?

ANSWER:  This RMC covers condo corp only

Club – please refer to RMC 35-2012

 

QUESTION:  Are the following, which are billed in the statement of accounts together with the association dues, subject to 12% vat

realty taxes on common areas  -  x-vat exempt

insurance on common areas - yes

electric bill on my condo unit - yes

water bill on my condo unit - yes

 

QUESTION:  For electricity paid first by condo corp and billed or reimbursement later, can the condo corp claim the input tax? And how do we bill them? w/vat? And declare the output tax?

QUESTION:  It is vatable. Declare the output tax and deduct the input tax.

 

Question:  Di ba may vat na ang electric and water, how come it is still vatable? Double taxation? Bakit pati insurance pay vat na, subject pa rin to vat?

 

QUESTION:  Drs clinic/medical arts bldg covered by RMC 65-2012

ANSWER:  If not covered by condominium certificate of title, not covered by RMC 65-2012

 

QUESTION:  if the condo corp generates surplus or income for 2013. We would like to know if the 30% tax rate be apply to the total income for 2013 or only income generated for Nov & Dec income?

ANSWER:  applies to income for entire year 2012

 

QUESTION:  There is a principle in law that states of “equal applications of law”

in the case of Ceredo under the condominium law R.A 4726 it is prohibited to render services to non-member-owner.

So, how can you reconcile this principle?

ANSWER:  no answer from the BIR?

 

QUESTION:  shall the ff be subjected to vat?

a.       Real estate tax for the common areas actual mount paid being prorated to unit owners based on the size of their units.

b.      Bond for renovation of unit which is fully returned to the unit owner/tenant after inspection.

ANSWER:  Not services

 

c.       Dues and fees pertaining to periods before the effectivity of RMC 65-2012 (before Oct 31,2012)

ANSWER:  For referral to National Office

 

Shall the non-profit/non stock condo corp file & pay income tax for the year 2012 in pursuant to RMS 65-2012

ANSWER:  Yes

 

QUESTION:  Please reconcile the following:

RMC 65-2012 page 3 sec 108 stated that “performances of all kinds of services for others for a fee, remuneration or consideration. It includes the supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking or project”

 

How can the condominium corp be subject to vat when the condominium corp renders services to itself and not to other person because the condominium corp is the owner of common areas and land on which the condominium stands. How can you be subjected to tax if you are rendering services to yourself as mandated by RA 4726?

ANSWER:  The condo corp renders services to its members not itself

 

QUESTION:  Granting without admitting that the condominium corp is subject to vat , are the unit owners who refuse to use the facilities of the condominium be subject to vat for the monthly maintenance dues they pay?

ANSWER:  Yes

 

QUESTION:  May we know if RMC 65-2012 was published to the newspaper of general circulation? which newspaper and when?

ANSWER:  No publication since it is clarification of existing laws

ATP INVOICES / OR

QUESTION:  What happens to the newly printed invoice in 2012 (100 booklet)?

According to RR-18-2012 see 5 all unused invoices should be surrender to the BIR and all tax payer should print new invoices by June 30,2013.

We haven’t finish using the newly printed invoices , we should print new one, what a waste of money . Can there be extension?

ANSWER:  We will refer to the national office if there can be extension.

 

QUESTION:  We would like to know if we need to print new set of OR indicating VATregistered or we have to comsume all the OR’s still unused (non vat)?

ANSWER:  You need to print VAT OR

 

QUESTION:

Vat sales              _____

Vat                         _____

Total sales          _____

 

QUESTION:  Is this the right format for sales Invoice?

ANSWER:  Check with the registration & regulation unit/section for required date on invoices and receipts

 

QUESTION:  We are a company selling goods & services, if we have change sales transactions, we will record and issue charge invoices. What should we issue when payment are made after 30/60/90 days term of the customer? Is there a standard “receipt”

Note: OR are for cash only services only?

ANSWER:  You can issue a supplementary receipt such as collection receipt. See paragraph 3 of RR 18-2012

 

QUESTION:  What if the printing company is less than 3 years are they are not allowed to apply for accreditation?

ANSWER:  They cannot be accredited printer of OR and Invoices

 

QUESTION:  ATP

Our business is engage in selling of goods on cash and on term. During sales of goods on cash, we issue cash invoice; however if we sell on credit, we issue sales invoice, upon collection of payment, we issue official receipt to customer

Query: If this RR be implemented can we still follow our present practice?

ANSWER:  You must revise the procedure to follow the RR 18-2012

 

QUESTION:  Clarify security /special markings/features. We’re in the business (printing) for more than 5 years; we have machines like offset and letterpress. Does it mean that you will prescribe machines that will suit RR-18? This will entail additional capital.

ANSWER:  Special features to be explained in future revenue issuance

 

QUESTION:  How soon the BIR can issue accreditation to the printer?

Assuming that a taxpayer will exhaust his invoices by Feb 20, 2013, is the ATP on-line system of the BIR available for the TP to apply?

If yes, how about if there are no available printers who had no accreditation as at Feb. 1, 2013 and had no capabilities or machines to print security marking to the invoices as required

ANSWER:  Soon to be implemented

 

QUESTION:  Taxpayer printed 50 booklets of sales invoices only last year.

Does the taxpayer need to surrender the unused invoices?

ANSWER:  Yes, it is valid only until June 30, 2013

 

QUESTION:  Kung dati kang single prop na printer for long time tapos ngayon naging corp ka within 2 years pwede ka p ba mag apply ng accreditation

ANSWER:  Disclose in your application so that evaluator will be given this info for consideration

OTHERS

QUESTION:  If vatable OR would be the basis of output vat, and we were able to secure a vatable OR this January, what would be the basis of our output vat for December?

ANSWER:  CollectIon x 12/112 = vat payable

 

QUESTION:  During annual tax examination, if BIR issued LN or LOA to taxpayers, can the taxpayers request for the BIR’s computation of discrepancies?

ANSWER:  The BIR must issue a computation of discrepancies to assess deficiency taxes

 

QUESTION:  We issued a credit memo for item return by customer, can we claim input /output tax?

ANSWER:  No input tax allowed on returned good. Reduce output tax

 

QUESTION:  Advertising agent not belonging to the top corp payment made to media placement is subject to 2% w/tax expanded?

ANSWER:  Only those who are in top 20,000 corp should withheld 2% for media placement

INTEREST INCOME / EXPENSE

QUESTION:  Under 14-2012, interest expense paid to the bank by top 20,000 corp will be subject to 2% w/tax expanded?

ANSWER:  20% EWT

 

QUESTION:  Ang interest expense of top 20 corp is now subject to 2% w/tax expanded, correct? so that it can claim as deduction expense

ANSWER:  Interest expense 20%

ANNUAL INFORMATION BY ALL ACCREDITED TAX AGENTS/ PRACTITIONERS TO RNAM/RRAB FOR THE TAXABLE YEAR 2012

QUESTION:  January 31, 2013 is the last day of submission of the annual information by all accredited tax agents/ practitioners to RNAM/RRAB for the taxable year 2012.

What kinds of BIR form or format of what annual information is filed.

ANSWER:  Name of taxpayer, Tin no. Nature of Business & district that that has jurisdiction

 

QUESTION:  I just called a BIR region about this, ang sabi po niya hindi naman daw po requirement yun unless magre-renew. I told her about the said deadline found on the website, seems di rin yata nila alam talaga na may annual requirement

ANSWER:  File with the office of the regional director