Proper remedy in contesting LBT assessment

Under Section 195 of the Local Government Code (LGC), if a taxpayer is dissatisfied with a local treasurer’s denial of his protest or if there is no action regarding his protest over an assessment, the taxpayer has 30 days within which to appeal to the court of competent jurisdiction.

The CTA held that the wordings of Section 195 of the LGC is plain, unequivocal and mandatory that the taxpayer “shall” have 30 days, reckoned from the taxpayer’s receipt of the denial of his protest, within which to appeal the denial with the court of competent jurisdiction.  Otherwise, the assessment shall become final and unappealable.

Instead of filing an appeal with the court of competent jurisdiction (i.e., Regional Trial Court) within the 30-day period after receiving the LGU’s denial of its protest with finality, the taxpayer wrote a letter to the office of the treasurer reiterating its stand that it is not subject to local business tax (LBT). It was after receiving the notices of seizure, garnishment and warrant of levy that the taxpayer filed a petition with the court for the issuance of temporary restraining order against the notices for the collection of its unpaid LBT.

The CTA ruled that since no appeal was filed by the taxpayer to the court within the 30-day period provided under Section 195 of the LGC, the assessment for LBT had become conclusive and appealable.

Considering that the taxpayer failed to assail the validity of its LBT assessment by filing a timely appeal with the court, the taxpayer lost its right to question the validity of the assessment, and consequently, it could not seek judicial action to enjoin the concerned LGU in enforcing the collection of its unpaid LBT through the civil remedies provided under the LGC.

(Benguet Electric Cooperative v. Municipality of La Trinidad, Benguet and Municipal Treasurer, CTA AC No. 85, June 7, 2013)

Tax Brief – July 2013

Punongbayan and Araullo

Classification of real estate service practitioners for withholding tax purposes

Income derived by a licensed real estate practitioner (real estate consultant, real estate appraisers and real estate brokers) in his practice of profession shall be considered professional fee subject to 15% creditable withholding tax (CWT) if his gross income for the current year exceeds P720,000, and 10% if otherwise under Section 2.57.2(A)(1) of RR 2-98, as amended.

In the case of real estate service practitioners (RESPs) who failed or did not take up the licensure examination given by the Real Estate Service and are not registered with the Real Estate Service under the Professional Regulations Commission (PRC), their income shall be subject to 10% CWT under Section 2.57.2(G) of RR 2-98, as amended.

The 10% or 10%/15% withholding tax rates shall apply to income payments paid or payable to real estate practitioners starting June 1, 2013.

(Revenue Regulations No. 10-2013, June 6, 2013)

Tax Brief – July 2013

Punongbayan and Araullo

Submission of BIR Form 2316 to the BIR

The Bureau of Internal Revenue (BIR) has required all employers to submit the duplicate copy of BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld) of their employees who are qualified for substituted filing to the BIR.

Under Section 2.83 of Revenue Regulations No. (RR) 2-98, as amended, every employer is required to furnish its employees (including minimum wage earners) BIR Form 2316 on or before January 31 of the succeeding calendar year, or if employment is terminated before the close of such calendar year, on the day on which last payment of compensation is made. Failure to furnish BIR Form 2316 shall be grounds for the mandatory audit of payor’s income tax liabilities (including withholding tax) upon verified complaint of the payee.

In addition to the requirement to furnish BIR Form 2316 to employees, the BIR now requires that all employers submit the duplicate copy of BIR Form 2316 to the BIR not later than February 28 following the close of the calendar year. Failure to submit/file BIR Form 2316 on or before February 28 following the close of the calendar year will merit a penalty of P1,000 for each failure, or a maximum amount of P25,000 for all such failures during a calendar year.

In case the employer fails to comply with the filing or submission of BIR Form 2316 for two consecutive years, the employer shall be liable to a fine in the amount of P10,000 and suffer imprisonment of not less than one year but not more than 10 years upon conviction, in accordance with Section 255 of the Tax Code.

This is in addition to other penalties provided by law. In settlement, a compromise fee of P1,000 for each BIR Form 2316 not filed without any maximum threshold shall be collected by the BIR.

(Revenue Regulations No. 11-2013, June 6, 2013)

Tax Brief – July 2013

Punongbayan and Araullo

ATP work-around procedures

The BIR issued the following policies and procedures in the processing of Authority to Print (ATP) on Official Receipts (ORs), Sales Invoices (SIs) and Commercial Invoices (CIs) in the interim period until the availability of the online ATP system.

Policies

The requirement to secure a new ATP using the online ATP system covers all taxpayers engaged in business, government or private, using manually-issued receipts/invoices, and loose-leaf receipts/invoices. Taxpayers using receipts/invoices issued through Cash Register Machine (CRM)/Point-of-Sale (POS) Machines and/or Computerized Accounting System (CAS) shall be regulated in a separate revenue issuance.

Only BIR accredited printers shall be authorized to print principal and supplementary invoices. Printers that were issued provisional accreditation numbers shall also be allowed to print principal and supplementary receipts/invoices.

In the interim, i.e., until the online ATP system becomes available, all applications for ATP, together with the necessary documentary requirements, shall be submitted to the Revenue District Office (RDO)/Large Taxpayer Office (LT Office) having jurisdiction over the Head Office (HO) of the taxpayer-applicant. The principal and supplementary receipts and invoices of the HO and each of the branches shall have its own independent series of serial number.

A taxpayer with expiring principal and supplementary receipts/invoices shall apply for a new ATP not later than 60 days prior to the actual expiry date.

In the filing of application, the old BIR Form No. 1906 shall still be used until the revised form becomes available. The ATP shall be processed using the registration system of the Integrated Tax System (ITS), which shall generate the prescribed ATP. The issued ATP shall be printed on the inside back portion of the cardboard cover of each booklet/pad of the principal and supplementary receipts/ invoices printed.

Aside from the information required to be indicated under existing regulations in ORs/SIs/CIs — such as taxpayer’s registered name, address and TIN of the buyer, etc. — the bottom part of the ORs/SIs/CIs shall contain information such as the Taxpayer Identification Number (TIN) of senior citizens and persons with disability (PWD) (for taxpayers transacting with senior citizens and PWDs), printer’s accreditation number, and the phrase “This invoice/receipt shall be valid for five (5) years from the date of the ATP”. (For sample format of principal and supplementary receipts/invoices, check the Annexes of the RMO 12-2013).

All new set/s of principal and supplementary receipts/invoices to be printed that are compliant with the requirements set forth under this Order shall have a validity period of five years. All unused/expired/expiring ORs/SIs/CIs shall be surrendered together with an inventory listing to the BIR Office having jurisdiction over the taxpayer for destruction on or before the 10th day after the validity period of the expired receipts/invoices.

Filing procedure

A taxpayer applying for new ATP should follow the prescribed procedures below.

1. All taxpayers applying for ATP should submit an inventory listing and surrender the hardcopies of their unused/expired receipts/invoices together with photocopies of the old and new ATPs and corresponding Printer’s Certificate of Delivery (PCD) to the RDO where they are registered. Branch office/s shall submit and surrender the same to the RDO/LT Office concerned where the branch is registered.

2. The taxpayer should choose the BIR Accredited Printer from the updated list of duly accredited printers available in the BIR website.

3. The taxpayer, or his authorized representative, should file the application for ATP with the following supporting documents at the RDO/LT Office concerned where the Head Office is registered using BIR Form 1906:

a. Original copy of sample layout/template of OR/SI/CI

b. Original Printer’s Job Order c. Photocopy of previous ATP. If not available, the last series of the printed OR/SI/CI. New set of receipts/ invoices shall continue with the last serial number indicated in the previous ATP issued. However, for printing machines with limited capacity as to the maximum range of serial numbers, the serial number may start from one (1) and prefixed with a special/alpha code to avoid duplication (e.g., A0001)

d. Photocopy of Loose-leaf Permit, if applicable

4. Finally, the taxpayer should sign in the office logbook as proof of actual receipt of the approved ATP.

Transitory rules

All unused/unissued principal and supplementary receipts/invoices printed prior to January 19, 2013 (effectivity of RR 18-2012) and those printed by printers that are not compliant with the Order shall be valid until June 30, 2013.

An inventory listing of its unused/unissued principal and supplementary receipts/invoices should be submitted while the hardcopies of the receipts/invoices should be surrendered by the taxpayer on or before July 10, 2013.

Branch office/s shall submit and surrender the same to the concerned RDO/LT Office where the branch is registered.

(Revenue Memorandum Order No. 12-2013, May 3, 2013)

Tax Brief – June 2013

Punongbayan and Araullo