Ruling on Income Payment to NRFC for Services Outside Phils
-
Upload
jomz-arvesu -
Category
Documents
-
view
171 -
download
0
description
Transcript of Ruling on Income Payment to NRFC for Services Outside Phils
1
Tax Bulletin August 2012
2 Tax Bulletin
HighlightsBIR Rulings
• PaymentstoaforeigncorporationforservicesperformedentirelyoutsidethePhilippinesareexemptfromincometaxandvalue-addedtax(VAT).(Page 4)
• DividendspaidbyadomesticcorporationtoanAustraliancorporationaresubjecttothe15%finalwithholdingtax(FWT)underSection28(B)(5)(b)oftheTaxCode.(Page 4)
• IncomederivedfrominvestmentsinthePhilippinesbyforeigngovernmentsisexemptfromincometaxand,consequently,fromwithholdingtax.(Page 5)
• Anupstreammergerwherethesurvivingparentcompanywillnotissuesharesinexchangefortheassetsoftheabsorbedsubsidiaryisnotconsideredatax-freemergerunderSection40(C)(2)oftheTaxCode.(Page 5)
• InatransactionwheretwopersonsexchangedsharesofstockintwocompaniesforsharesofstockinathirdcorporationinseparateDeedsofAssignment,asaresultofwhichthefirstpersongainscontrolof58.15%,andthesecondpersongainscontrolof24.33%,ofthevotingstockofthetransferee-corporation,onlythetransferofthefirstpersonwillbeconsideredatax-freeexchangeunderSection40(C)(2)oftheTaxCode.(Page 6)
BIR Issuances
• RevenueRegulations(RR)No.11-2012amendsSection3ofRRNo.1-2011onexemptionfromdocumentarystamptax(DST)ofremittancesofOverseasContractWorkers(OCWs)orOverseasFilipinoWorkers(OFWs).(Page 7)
• RevenueMemorandumCircular(RMC)No.34-2012clarifiesthetaximplicationsofintegratingtheDomesticPassengerServiceCharge(DPSC)atthepointofsaleofairlinetickets,andprescribesrulesfortheinvoicingandrecordingoftheDPSCinthebooksofairlinecompaniesandairportauthorities.(Page 8)
• RMCNo.35-2012clarifiesthetaxabilityofclubsorganizedandoperatedexclusivelyforpleasure,recreation,andothernon-profitpurposes.(Page 9)
• RMCNo.36-2012clarifieswhetherdocumentsmentionedinSection199oftheTaxCode,asamendedbyRepublicAct(RA)No.9243,aresubjecttotheP15.00DSTprescribedinSection188oftheTaxCode.(Page 10)
• RMCNo.37-2012clarifiesSection11ofRRNo.06-08bymakingitclearthataCertificateAuthorizingRegistration(CAR)isstillnecessarybeforesharesofstocknottradedinthestockexchangemaybetransferred.(Page 10)
• RMCNo.38-2012furtherclarifiesinQuestionandAnswerformattheprovisionsofRRNo.7-2010,asamendedbyRRNo.8-2010,implementingthetaxprivilegesgrantedunderRANo.9994,otherwiseknownasthe“ExpandedSeniorCitizensActof2010.”(Page 11)
• RMCNo.39-2012mandatesthewithholdingofincometaxonbackwages,allowances,andbenefitsreceivedbyemployeesthroughgarnishmentofdebtsorcreditspursuanttoalabordisputeaward.(Page 14)
3
• RMCNo.40-2012prescribesaprescriptiveperiodforrulingsissuedpursuanttoSection40(C)(2)oftheTaxCode.(Page 15)
• RMCNo.47-2012prescribestherulesanddeadlinesforthefilingofapplicationsforenrollmentintheVATTaxCreditCertificate(TCC)MonetizationProgram,pursuanttotheDepartmentofFinance(DOF),DepartmentofBudgetandManagement(DBM)andBIRJointCircularNo.2-2012datedMay31,2012.(Page 15)
BOC Issuances
• CustomsAdministrativeOrder(CAO)No.1-2012establishestheAuthorizedEconomicOperator(AEO)Programforexporters.(Page 16)
• CustomsMemorandumOrder(CMO)No.9-2012requirespriorapprovalfromtheCommissionerofCustomsortheDeputyCommissionerfortheManagementInformationSystemandTechnologyGroup(MISTG)forthemanualprocessingofimportentriesinordertoeffecttheclearanceandreleaseofimportedgoods.(Page 18)
PSE Issuance
• PhilippineStockExchange(PSE)MemorandumCNNo.2012-0046remindstheinvestingpublicoftheeffectsofthefailureoflistedcompaniestocomplywiththeminimumpublicownership(MPO)requirementbyDecember31,2012.(Page 19)
SEC Issuances
• SECMemorandumCircular(MC)No.6dispenseswithsomerequirementsinsomeregistrationactivities.(Page 19)
• Foracorporationtopurchase,acquireorownlandinthePhilippines,atleast60%ofthetotalcapitalstockofthecorporationmustbewholly-ownedbyFilipinocitizens.(Page 20)
• AcorporationneedstoamenditsArticlesofIncorporation(AOI)toreflectthechangeofaddressfromonebuildingtoanother,evenifthesecondbuildingiswithinthesamecityormunicipality.(Page 21)
• Indeterminingthecitizenshipofsharesbeingheldintrust,thenationalityofboththetrusteeandthebeneficiaryshouldbeconsidered.(Page 21)
BSP Issuances
• CircularNo.762amendstheregulationsonDepositsforStockSubscriptionsofbanks/quasi-banks.(Page 22)
• CircularNo.763providesforregulatoryrelieftobanksunderrehabilitationprogram.(Page 25)
• CircularNo.764prescribestheRevisedOutsourcingFrameworkforNon-BankFinancialInstitutions(NBFIs).(Page 25)
• CircularNo.765prescribestheRevisedOutsourcingFrameworkforBanks.(Page 26)
4 Tax Bulletin
• CircularNo.766prescribestheGuidelinesinStrengtheningCorporateGovernanceandRiskManagementPracticesonTrust,OtherFiduciaryBusiness,andInvestmentManagementActivities.(Page 27)
Court Decision
• Afterreceivinganoticeofassessment,ataxpayermayfilewithin60daysawrittenprotestwiththelocaltreasurer,whichshalldecideonitwithin60days.ThetaxpayercanmakeanappealtotheRegionalTimeCourt(RTC)within30daysfromreceivingthedenialoftheprotest,orfromthelapseofthe60-dayperiodtodecideontheprotest.Thereafter,thetaxpayercanappealthedecisionoftheRTCtotheCourtofTaxAppeals(CTA)within30daysafterreceivingthedecision.(Page 29)
BIR Rulings
BIR Ruling No. 458-2012 dated July 10, 2012
Facts:
BCo.,anon-residentSingaporeancorporation,renderedservicesforFCo.,adomesticcorporation.TheseserviceswereperformedbyBCo.entirelyinIndonesia.FCo.paidservicefeestoBCo.
Issue:
AretheservicefeespaidbyFCo.toBCo.subjecttoPhilippineincometaxandVAT?
Ruling:
1. No.UnderSection23(F)oftheTaxCode,anon-residentforeigncorporationistaxableonlyonincomederivedfromsourceswithinthePhilippines,andunderSection42(A)(3),incomefromservicesisconsideredderivedfromsourceswithinthePhilippinesonlyiftheservicesareperformedinthePhilippines.Hence,incomefromservicesperformedbyanon-residentforeigncorporationentirelyoutsidethePhilippinesisexemptfromPhilippineincometax.
2. No.UnderSection108(A)oftheTaxCode,paymentsforservicesaresubjecttoVATonlyiftheservicesareperformedinthePhilippines.
BIR Ruling No. 465-2012 dated July 17, 2012
Facts:
PCo.declaredcashdividendstoitsstockholderswhichincludeDCo.,anon-residentAustraliancorporation.UnderAustraliantaxlaws,foreigndividendsreceivedinAustraliaareexemptfromincometax.
Issue:
ArethecashdividendspaidbyPCo.toDCo.subjecttothe15%FWTunderSection28(B)(5)(b)oftheTaxCode?
PaymentstoaforeigncorporationforservicesperformedentirelyoutsidethePhilippinesareexemptfromincometaxandVAT.
DividendspaidbyadomesticcorporationtoanAustraliancorporationaresubjecttothe15%FWTunderSection28(B)(5)(b)oftheTaxCode.
5
Ruling:
Yes.UnderSection28(B)(5)(b)oftheTaxCode,cashand/orpropertydividendsreceivedbyanon-residentforeigncorporationfromadomesticcorporationshallbesubjecttoa15%FWTonthedividendsreceived,subjecttotheconditionthatthecountryinwhichthenon-residentforeigncorporationisdomiciledshallallowacreditagainstthetaxduefromthenon-residentforeigncorporationtaxesdeemedtohavebeenpaidinthePhilippinesequivalentto15%ofthedividend.Thepreferential15%FWTrateappliessinceAustralianlawstreatforeigndividendsreceivedinAustraliaasexemptfromincometax.
However,thefollowingrequirementsmustbecompliedwithwithinareasonabletimepursuanttoRMCNo.80-91:
a) ShowthatthedividendsreceivedbyDCo.fromPCo.werenotamongtheitemsconsideredinarrivingattheincometaxduefromDCo;
b) PresenttheincometaxreturnofDCo.forthetaxableyearwhenthesubjectdividendswerereceived;and
c) SubmitanyauthenticateddocumentsshowingthattheAustralianGovernmentdidnotimposeanytaxonthesubjectdividends.
BIR Ruling No. 495-2012 dated July 31, 2012
Facts:
KCo.,anautonomousgovernmentbodyresponsibleforthemanagementandadministrationofsomeofKuwait’sfunds,derivesincomefromitsinvestmentsinthePhilippinessuchasgovernmentbonds,corporatebondsandbankdeposits.
Issue:
IstheincomederivedbyKCo.frominvestmentsinthePhilippinesexemptfromPhilippineincometax?
Ruling:
Yes.UnderSection32(B)(7)(a)(i)oftheTaxCode,incomederivedbyforeigngovernmentsfrominvestmentsinthePhilippinesisexemptfromincometaxand,consequently,fromwithholdingtax.
BIR Ruling No. 508-2012 dated August 3, 2012
Facts:
ACo.,adomesticcorporation,effectedamergerwithitswholly-ownedsubsidiary,BCo.,anotherdomesticcorporation,whereACo.willbethesurvivingcorporation.Asaresultofthemerger,BCo.willtransferitsassetstoACo.However,sinceBCo.isawholly-ownedsubsidiaryofACo.,ACo.willnolongerissueanysharesofstockinconsiderationfortheassetstransferredbyBCo.pursuanttothemerger.
Issue:
IsthemergerbetweenACo.andBCo.consideredatax-freemergerunderSection40(C)(2)oftheTaxCode?
IncomederivedfrominvestmentsinthePhilippinesbyforeigngovernmentsisexemptfromincometaxand,consequently,fromwithholdingtax.
Anupstreammergerwherethesurvivingparentcompanywillnotissuesharesinexchangefortheassetsoftheabsorbedsubsidiaryisnotconsideredatax-freemergerunderSection40(C)(2)oftheTaxCode.
6 Tax Bulletin
Ruling:
No.Thereorganizationisanupstreammergerbetweenaparentcompanyandasubsidiary,wheretheparentcompanywillnotbeissuinganysharestothesubsidiaryinexchangefortheassetstobetransferredasaresultofthemerger.Ineffect,thetransferpartakesofthenatureofadonationmadebyasubsidiarytoitsparentcompany,contrarytowhatiscontemplatedinSection40(C)(2)oftheTaxCode.Inthesamemanner,theintendedmergeralsohastheeffectofdissolvingandliquidatingthesubsidiarywithoutpaymentofcorrespondingtaxes.
[Editor’s Note: This ruling revokes previous rulings such as BIR Ruling [DA-(S40M-001) 007-09] dated January 13, 2009, BIR Ruling [DA-(S40-M018) 436-08] dated November 14, 2008 and BIR Ruling [DA-(S40M-014) 387-08] dated November 4, 2008. In these rulings, the BIR ruled that the non-issuance of shares by the surviving corporation to the absorbed corporations does not affect the tax-free nature of the mergers since the mergers were between or among affiliated companies ultimately owned by the same parent, or between a parent and a subsidiary (with the parent as the surviving corporation). In these rulings, the BIR also ruled that the transfer of properties as a consequence of mergers is not subject to donor’s tax as there is no intention to donate on the part of any of the parties to the mergers, and the mergers were undertaken for bona fide business purposes.]
BIR Ruling No. 515-2012 dated August 3, 2012
Facts:
Mr.AownssharesinACo.,whileMr.BownssharesinBCo.Mr.AandMr.BexecutedseparateDeedsofAssignmenttotransfertheirrespectivesharesinACo.andBCo.infavorofXCo.,bothinexchangeforXCo.shares.Asaresultofthetransfer,Mr.AandMr.BwillgaincontrolofXCo.byowning58.15%and24.33%,respectively,ofthetotalvotingstockofXCo.
Issues:
1. IsthetransferbyMr.AofhissharesinACo.toXCo.exemptfromCGTandDST?
2. IsthetransferbyMr.BofhissharesinBCo.toXCo.exemptfromCGTandDST?
Ruling:
1. Yes.UnderSection40(C)(2)and6(c)oftheTaxCode,nogainorlossshallberecognizedifpropertyistransferredtoacorporationbyaperson,inexchangeforstockinsuchcorporation,asaresultofwhichsaidperson,aloneortogetherwithothers,notexceedingfourpersons,gainscontrolofsaidcorporation.Theterm“control”shallmeanownershipofatleast51%ofthetotalvotingsharesinthecorporation.
Indeterminingthe51%stockownership,onlythosepersonswhotransferredpropertyforstockinthesametransactionmaybecounteduptoamaximumoffive.Inshort,combiningallthesharestobereceivedbythetransferors,thesameshouldtotaltoatleast51%ofthevotingpowerofallclassesentitledtovote.
WiththeexchangeofsharesofMr.Aalone,healreadygainscontrolofXCo.byacquiring58.15%ofitsvotingshares.Hence,nogainorlossshall
InatransactionwheretwopersonsexchangedsharesofstockintwocompaniesforsharesofstockinathirdcorporationinseparateDeedsofAssignment,asaresultofwhichthefirstpersongainscontrolof58.15%,andthesecondpersongainscontrolof24.33%,ofthevotingstockofthetransferee-corporation,onlythetransferofthefirstpersonwillbeconsideredatax-freeexchangeunderSection40(C)(2)oftheTaxCode.
7
berecognizedwithrespecttothetransferbyMr.AofhisACo.sharesinexchangeforsharesofstockofXCo.ThereisnoneedtocombineMr.A’sshareswiththesharesofMr.BtodetermineMr.A’scompliancewiththe51%stockownership.
However,thefollowingrequirementsmustbecompliedwith:
A. Mr.Amustfilewithhisincometaxreturnforthetaxableyearinwhichtheexchangetransactionwasconsummatedacompletestatementofallfactspertinenttotheexchange,including:
1. Adescriptionofthepropertieshetransferred,orhisinterestinsuchproperties,withastatementoftheoriginalacquisitioncost/adjustmentcostbasisorotherbasisatthetimeoftransfer;
2. Thekindsofstockreceivedandpreferences,ifany;3. Thenumberofsharesofeachclassreceived;and4. Thefairmarketvaluepershareofeachclassatthedateofthe
exchange.
B. XCo.mustfilealongwithitsincometaxreturnforthesametaxableyearthefollowing:
1. Acompletedescriptionofthepropertiesreceivedfromthetransferor;
2. Astatementoforiginalacquisitioncostorotherbasisofthepropertiesinthehandsofthetransferorandtheadjustedcostbasisthereofatthetimeofthetransfer;and
3. Informationwithrespecttothecapitalstockofthecorporationincluding:
i. Totalissuedandoutstandingcapitalstockimmediatelypriortoandimmediatelyaftertheexchange;
ii. Classesofstockandnumberofsharesissuedtothetransferorintheexchange;and
iii. Thefairmarketvalueasofthedateoftheexchangeofthecapitalstockissuedtothetransferor.
Lastly,within90daysfromreceiptoftheBIRRuling,thepartiestothetransactionmustsubmitacertifiedtruecopyofthedulyannotatedcertificatesofstockinrespectofthetransferredshares.
2. No.ThetransferbyMr.B,resultinginownershipofonly24.33%ofthetotalvotingsharesinXCo.,shallbetreatedasaseparatetransfersubjecttoCGTandDST.
[Editor’s Note: Section 40(C)(2) allows non-recognition of gain or loss on property-for-share transfers by transferors not exceeding five, as long as the 51% control requirement is met. Since up to five transferors are allowed to not recognize gain or loss on these exchanges, it stands to reason that the shares of the transferee-corporation received by the transferors not exceeding five, would be aggregated to determine compliance with the 51% control requirement. While this particular ruling did not specifically say so, it is possible that the BIR treated the transfer by Mr. B as a transfer separate from the transfer by Mr. A, and therefore did not add the X Co. shares received by Mr. B to the X Co. shares received by Mr. A as part of the 51% control requirement, because the transfers were effected in separate Deeds of Assignment.)
8 Tax Bulletin
BIR Issuances
Revenue Regulations No. 11-2012 dated August 17, 2012
• Section3ofRRNo.1-2011isamendedtoreadasfollows:
“Section3.TaxTreatment-xxx
C) OtherTaxesandFees:-xxx
TheremittancesofallOCWsorOFWs,uponshowingoftheOverseasExitClearance(OEC),validOverseasWorkersWelfareAdministration(OWWA)MembershipCertificate,or electronic receipt (e-receipt) issued by POEA,bytheOCWsorOFWbeneficiaryorrecipient,shallbeexemptfromthepaymentofdocumentarystamptax(DST)asimposedunderSection181oftheNationalInternalRevenueCodeof1997,asamended.Forthispurpose,inadditiontotheoriginalcopy,aduplicatecopyoracertifiedtruecopyofthevalidproofofentitlementreferredtoaboveshallbesecuredbytheOCWorOFWfromthePOEAorOWWA,whichshallbeheldandusedbyhis/herbeneficiaryintheavailmentoftheDSTexemption.
IncaseofOCWsorOFWswhoseremittancesaresentthroughthebankingsystem,creditedtobeneficiariesorrecipient’saccountinthePhilippinesandwithdrawnthroughanautomatictellermachine(ATM),or sent through non-bank money transfer agents,itshallbetheresponsibilityoftheOCWorOFWtoshowthevalidproofofentitlementwhenmakingarrangementforhis/herremittancetransfers.
xxx”
• Localbanksandnon-bankmoneytransferagentsarerequiredtodocumentremittancesmadebyOCWsorOFWsfollowingtheformatbelow,formonitoringpurposes:
OFW Remittances for the First Quarter of 2012
(ExemptfromDSTimposedunderSec.181oftheNIRC,asamended,perR.A.No.10022)
NameofOCW/OFW
Sender
NameofRecipient
AmountinPesoorPesoEquivalent
ProofofEntitlement
toDSTexemption(i.e.,OEC,e-receipt,orOWWA
MembershipCertificate
DateofTransaction
RemittanceDate
EncashmentDate
1.JuandelaCruz
JanedelaCruz
20,000 **** Feb1,2012 Feb1,2012
****[IndicateControlNumberprovidedbythePOEA]
• Theaboveinformationisrequiredtobefurnished,onaquarterlybasis,totheRevenueDistrictOffice(RDO)orAuditDivisionundertheLargeTaxpayersService(LTS)wherethebanksandnon-bankmoneytransferagentsareregistered,tobesubmittedonorbeforethe20thdayfollowingthecloseofthequarter.
RRNo.11-2012amendsSection3ofRRNo.1-2011onexemptionfromDSTofremittancesofOCWsorOFWs.
9
• TheseRegulationsshalltakeeffectafter15daysfromdateofpublicationinanewspaperofgeneralcirculation.
(Editor’s Note: RR No. 11-2012 was published in the ManilaBulletin on August 24, 2012.)
Revenue Memorandum Circular No. 34-2012 dated July 13, 2012
Background
• InaMemorandumofAgreementdatedMay17,2012,theManilaInternationalAirportAuthority(MIAA)andthedomesticairlinecompanieshaveagreedthattheDPSC,whichusedtobecollectedbyMIAAfromdepartingpassengersthroughcounterslocatedintheairport,shallbeintegratedwiththesaleofairlinetickets.
• TheDPSCshallbecollectedfromthepassengersatthetimetheypurchaseairlineticketsfromairlinecompaniesorgeneralsalesagents/travelagents.
• TheDPSCshallthenberemittedtotheMIAAwhichshall,inturn,bechargedservicefeesbytheairlinecompaniesascompensationforcollectingtheDPSConbehalfoftheMIAA.
Collection of the DPSC from passengers
• TheairlinecompanyshallcollecttheDPSCfromthepassengersandshallincludetheDPSCintheofficialreceipt(OR)tobeissuedbytheairlinecompanyfortheairlineticketofthepassenger.
• TheDPSCshallconsistoftheShareofAirportAuthority,whichshallbesubjecttoa12%VAT,andtheAviationSecurityFee(ASF),whichshallbeVAT-exempt.
►• TheVATreceipttobeissuedbytheairlinecompaniesshouldreflecttheVAT-taxableandVAT-exemptcomponentsoftheDPSC.
• TheVATcomponentoftheDPSCshouldbeincludedinthetotalVAT,whichwillincludetheVATontheairlineticket.
• TheShareofAirportAuthorityandtheASFmaybereportedinthefinancialstatementsoftheairlinecompanyasotherincome/expense.
Payment of DPSC by airline company to airport authority
►• TheDPSCcollectedbytheairlinecompanyshallbepaidtotheairportauthority,whichshallthenissueanORtotheairlinecompany,indicatingthefullamountoftheDPSCanditsVAT-taxableandVAT-exemptcomponents.
►• TheDPSCshallnotformpartofthegrossreceiptsoftheairportauthorityinitsdeterminationofcreditablewithholdingtaxesdue.
Payment of Service Fees by airport authority to airline company
• Theservicefeespaidbytheairportauthoritytoairlinecompaniesshallbesubjecttoa5%withholdingVATand2%expandedwithholdingtaxongrosspayments.
• Uponpaymentoftheservicefees,theairlinecompanyshallissueaVATOR.
• ThiscircularshalltakeeffectonAugust1,2012.
RMCNo.34-2012clarifiesthetaximplicationsofintegratingtheDomesticPassengerServiceCharge(DPSC)atthepointofsaleofairlinetickets,andprescribesrulesfortheinvoicingandrecordingoftheDPSCinthebooksofairlinecompaniesandairportauthorities.
10 Tax Bulletin
Revenue Memorandum Circular No. 35-2012 dated August 3, 2012
• Incomefromwhateversource,includingbutnotlimitedtomembershipfees,assessmentdues,rentalincomeandservicefees,ofclubsorganizedandoperatedexclusivelyforpleasure,recreation,andothernon-profitpurposes,aresubjecttoincometax.
TheprovisionintheTaxCodeof1977,whichgrantedincometaxexemptiontorecreationalclubs,wasomittedinthecurrentlistoftax-exemptcorporationsundertheTaxCodeof1997,asamended.
• Grossreceiptsofrecreationalclubs,includingbutnotlimitedtomembershipfees,assessmentdues,rentalincomeandservicefees,aresubjecttoVAT.
Section105oftheTaxCodeprovidesthatanypersonwho,inthecourseoftradeorbusiness,sells,barters,exchanges,leasesgoodsorproperties,rendersservices,andanypersonwhoimportsgoods,shallbesubjecttoVAT.Thephrase“inthecourseoftradeorbusiness”meanstheregularconductorpursuitofacommercialoraneconomicactivity,includingtransactionsincidentalthereto,byanypersonregardlessofwhetherthepersonengagedthereinisanon-stock,non-profitprivateorganization.Thus,evenanon-stock,non-profitorganizationorgovernmententityisliabletopayVATonthesaleofgoodsorservices.ThisconclusionwasalsoaffirmedbytheSupremeCourtinCommissioner of Internal Revenue vs. Court of Appeals and Commonwealth Management and Services Corporation, G. R. No. 125355, March 30, 2000.
Revenue Memorandum Circular No. 36-2012 dated August 3, 2012
►• Onlyinstruments,documentsandpapersexpresslyenumeratedinSection199oftheTaxCodeareexemptfromDST.
►• ThefollowingcertificatesandothernecessarydocumentsissuedbytheConstructionIndustryAuthorityofthePhilippinesaresubjecttotheP15.00DSTimposedinSection188oftheTaxCode:
1. CertificateofRegistrationofOverseasContractors;2. CertificateofRenewalofRegistrationofOverseasContractors;3. Contractor’sLicense(Original);4. Certificateofwhetheracertaincontractorislicensed;5. Certifiedtruecopiesoflicensecertificates;6. Certifiedtruecopiesofdocuments,suchasAffidavitofUndertakingof
SustainingTechnicalEmployee(STE)andCurriculumVitaeofSTE;7. CertificateofAccreditationofArbitrators;and8. CasedocumentstobeusedtosupportpetitionorappealintheCourtof
Appeals.
Revenue Memorandum Circular No. 37-2012 dated August 3, 2012
►• Section11ofRRNo.06-08providesthatnosale,exchange,transferorsimilartransactionintendedtoconveyownershipof,ortitleto,anyshareofstockshallberegisteredinthebooksofthecorporationunlessthereceiptsofpaymentofthetaxhereinimposedisfiledwith,andrecordedby,thestocktransferagentorsecretaryofthecorporation.
►►• TheaboveprovisionofRRNo.06-08hascreatedconfusiononwhetheraCertificateAuthorizingRegistration(CAR)isstillnecessarybeforesharesofstocknottradedinthestockexchangemaybetransferred.
RMCNo.36-2012clarifieswhetherdocumentsmentionedinSection199oftheTaxCode,asamendedbyRANo.9243,aresubjecttotheP15.00DSTprescribedinSection188oftheTaxCode.
RMCNo.37-2012clarifiesSection11ofRRNo.06-08bymakingitclearthataCARisstillnecessarybeforesharesofstocknottradedinthestockexchangemaybetransferred.
RMCNo.35-2012clarifiesthetaxabilityofclubsorganizedandoperatedexclusivelyforpleasure,recreation,andothernon-profitpurposes.
11
►►• Inordertotransferownershipofsharesofstocknottradedinthestockexchange,itisnecessarytosecureaCARpursuanttoRevenueMemorandumOrder(RMO)No.15-03.ThereceiptsofpaymentofthetaxshouldalsobefiledandrecordedbythesecretaryofthecorporationpursuanttoSection11ofRRNo.06-08.
Revenue Memorandum Circular No. 38-2012 dated August 3, 2012
►• Incomputingthe20%discountandtheexemptionfromVAT,theformulais:
TotalBillingAmountless12%VATx20% = SeniorCitizen
No.ofCustomers Discount
Theaboveformulawillapplyifnoindividualizedfooditemcanbeorderedorifthetransactionwiththeseniorcitizenisnotprocessedseparately.Thetotalbillingamountusedinthecomputationofthe20%discountistheamountexclusiveoftheVAT.
►• Forrestaurants,thediscountshallbeforthesaleoffood,drinks,dessertandotherconsumableitemsservedbytheestablishments,includingvaluemealsandpromotionalmeals,offeredfortheconsumptionofthegeneralpublic.Condimentsandsideproductsfallwithintheambitof“otherconsumableitemsservedbytheestablishments.”
►• Innocaseshallthediscountgrantedtoseniorcitizensbelessthan20%.Thereshouldbenofixed,maximumamountorcapwhichwilllimitthediscountbelowthe20%rate.The20%discountshallbegiventogoodspurchasedbyseniorcitizensbasedonthesellingpriceexclusiveofVAT.
►• The20%discountandVATexemptionshallalsoapplytosetmealspurchasedbyseniorcitizens,provided,however,thatthemealshallbelimitedtoasingle-servingmealwithbeverageforanindividualseniorcitizen.
►►• The20%discountshallapplytodine-in,take-outandtake-homeorders(excludingbulkorders)aslongasitistheseniorcitizenhimself/herselfwhoispresentandpersonallyordersandcanshowavalidseniorcitizenidentification(ID)card.Iftheseniorcitizenmerelytakeshometheunfinishedorunconsumeddine-inorder,he/sheshallstillbeentitledtothe20%discount,providedtheleftoverisnotpartofbulkorders.
►►• Ifthegroupofdinersiscomposedofseniorcitizenswhoorderedgroupmealsorfooditemsforsharinginrestaurants,eachseniorcitizenwithavalidseniorcitizen’sIDcardshallbeentitledtothe20%discountandVATexemption.Ifnotalltheseniorcitizenshavetheirvalidseniorcitizen’sIDcards,thevalueofthefoodpurchasedattributabletoseniorcitizenswithseniorcitizen’scardsmaybecomputedusingtheformulaabove.
►►• Bulkordersarenotentitledtothe20%discountandVATexemptionsincetheyarewithinthecontextofpre-contractedorpre-arrangedgroupmealsorpackages.
►►• Mealsprimarilypreparedandintentionallymarketedforchildrenandnotforseniorcitizen’spersonalconsumptionarenotentitledtothe20%discount.
RMCNo.38-2012furtherclarifiesinQuestionandAnswerformattheprovisionsofRRNo.7-2010,asamendedbyRRNo.8-2010,implementingthetaxprivilegesgrantedunderRANo.9994,otherwiseknownasthe“ExpandedSeniorCitizensActof2010”.
12 Tax Bulletin
►►• TheMostExpensiveMealCombination(MEMC)isanamountcorrespondingtothecombinationofthemostexpensiveandbiggestsingle-servingmealwithbeverageservedinaquickservicerestaurant.TheMEMCisdeemedflexibleandisadjustedaccordinglybyfoodestablishmentstoestimateasinglefoodpurchaseofanindividualseniorcitizen.MEMCisappliedonlytotake-out,take-home,drive-thruanddeliveryorders.
►►• Pasalubongfooditemswhicharesingle-serving/solomealsforthepersonalandexclusiveconsumptionoftheseniorcitizenareentitledtothe20%discountandVATexemption.Otherpasalubongfooditems(e.g.,boxofbiscocho,bottlesofginamos,severalpacketsofmangopreserves)whicharenotforthepersonalandexclusiveconsumptionoftheseniorcitizenarenotentitledtothe20%discountandVATexemption.Thislimitationextendstonoveltyitemsornon-consumablessoldinrestaurants.
►►• Called-inorphoned-inordersareentitledto20%discountandVATexemption.Theyare,likewise,subjecttocertainconditions,i.e.,seniorcitizenIDcardnumbermustbegivenwhilemakingtheorderoverthetelephone;theseniorcitizenIDcardmustalsobepresentedupondeliverytoverifytheidentityoftheseniorcitizenentitledtothe20%discountandVATexemption.
►►• Incaseofcalled-inorphoned-inordersofgroupmeals,thefoodestablishmentsmustdeterminethenumberofseniorcitizenscomprisingthegroup,andthe20%discountshallbecomputedbasedonthevalueofthefoodattributabletothequalifiedseniorcitizens.TheseniorcitizenIDcardnumber/smustbegivenwhilemakingthecalled-inorphoned-inorderandtheIDcard/smustbepresentedupondelivery.
►►• Apurchaseofawholecakeorpizzamaybeconsideredasapurchaseofagroupmealormealforsharing.Ifthewholecakeorpizzapurchasedisgoodfor5personsandthegroupiscomposedof5seniorcitizens,eachwithavalidseniorcitizenIDcard,theyshallbeentitledtothe20%discountortheentirefoodpurchaseshallbeentitledtothe20%discount.Ifthegroupiscomposedofseniorcitizens,butnotallhavetheirvalidseniorcitizenIDcard/s,orcomposedofseniorcitizensandnon-seniorcitizens,thevalueofthecakeorpizzaattributabletothequalifiedseniorcitizen/sshallbecomputedusingtheformulaabove.Iftheseniorcitizenpurchasesasliceofcakeorpersonalservingofcake,heshallbeentitledtothe20%discount.
►►• Thepurchasebyaseniorcitizenofalcoholicbeveragesifservedasasingleservingdrinkisentitledtothe20%discountandVATexemption.Thediscountandexemptionshallnotbegiventopurchases“inbulk”,“inbuckets”,or“incases”.However,alcoholicbeveragespurchasedinabar,cluborcabaretareexemptfromVATbutsubjecttoamusementtaxof18%underSection125oftheTaxCode.Theseniorcitizenmaystillbeentitledtothe20%discountonthepurchaseofthealcoholicdrink,butshallonlybelimitedtoasingleservingofalcoholicdrink.
►• Cigarettes/cigarsarenotfoodoressentialitemsdeemedentitledtothe20%discount.
►• The20%discountandVATexemptionprivilegeshallalsoapplytomedicinespurchasedfromdrugstores,hospitalpharmacies,medicalandopticalclinics,andsimilarestablishments,includingnon-traditionaloutletsdispensingmedicines.
►►• Adeliveryfee/chargenotbilledseparatelyissubjecttothe20%discount.Ifthedeliveryfee/chargeisbilledseparately,itisnotentitledtothe20%discountandissubjecttoVAT.
►►• Tollfeesarenotsubjecttothe20%discount.
13
►►• Taxifaresaresubjecttothe20%discount.
►►• Inthepurchaseofgoodsandserviceswhichareonpromotionaldiscount,theseniorcitizenshallavailofeitherthepromotionaldiscountorthe20%discount,whicheverishigher.However,thediscountgiventotheseniorcitizenshallinnocasebelessthan20%.ThesaleofgoodsonpromotionaldiscountisstillVAT-exempt.
►►• The20%discountgivenbythebusinessestablishmentsisdeductiblefromtheirgrossincomeduringthesametaxableyearwhenthesaiddiscountsaregiven,andtheinputtaxattributabletotheVAT-exemptsaleisconsideredascostoranexpenseaccountofthebusinessestablishments.BoththediscountandinputVATthataretreatedascostorexpenseaccountsareabsorbedbytheState.
►►• IncaseofbusinessestablishmentswhicharenotsubjecttoVATbuttopercentagetaxbecausetheirgrossannualsales/receiptsdonotreachtheP1,919,500.00thresholdamountunderRRNo.16-2005asamendedbyRRNo.16-2011,seniorcitizensarenotexemptfromthepaymentofthepercentagetax.RANo.9994doesnotincludeexemptionfromthepaymentofpercentagetax.Theexemptiondoesnotcoverotherindirecttaxesthatmaybepassed-onbythesellertotheseniorcitizenbuyer,suchaspercentagetax.Insuchcase,thediscountmustbeonthetotalcostofthegoodsorserviceschargedbytheseller,exclusiveofthetax.
►►• Theamountofsalesthatmustbereportedfortaxpurposesistheundiscountedsellingpriceandnottheamountofsalesnetofdiscount.Thegrosssellingpriceandthesalesdiscountmustbeseparatelyindicatedintheofficialreceiptorsalesinvoiceissuedbytheestablishmentforthesaleofgoodsorservicestotheseniorcitizen.
►►• IfthesellerusesaPointofSaleMachineorCashRegisterMachine,themachinetapeshouldbeabletosegregatetheexemptsalefromthetaxablesale.Ifthemachinesareincapableofsegregation,theyshouldbere-programmedtocomplywiththerequirement.Inthemeantime,amanualinvoice/receiptshallbeissuedbytheseller.
►►• Thesellermayopttoissueaseparateinvoice/receiptonitssaletoseniorcitizens.Theseparateinvoice/receiptwillreflecttheamountofthediscountandthetotalamountpayable.Theword“VAT-ExemptSale”mustbewrittenorprintedprominentlyonthefaceoftheinvoice/receipt.
►►• Thesellermayissueoneinvoice/receiptfortheentiretransactionifthemerchandise/servicewassoldunderasingletransactioncomprisedofasaletoaseniorcitizenandasaletoanon-seniorcitizen,providingforaproperbreakdownoftheexemptsaleandtaxablesale.Theinvoicemustproperlyreflectthediscountontheexemptsale.TheVATdueonthetaxablesalemustbeseparatelybilledintheinvoice/receipt.
►►• Theincomestatementofthesellermustreflectthediscount,notasareductionofsalestoarriveatnetsales,butasadeductionfromitsgrossincome(saleslesscostofsales).Thus,the20%discountshallbetreatedasanecessaryandordinaryexpensedulydeductiblefromthegrossincome,providedthatthesellerdoesnotoptfortheOptionalStandardDeductionduringthetaxablequarter/year.
►►• Theinputtaxattributabletotheexemptsaleshallnotbeallowedasaninputtaxcreditbutmustbetreatedasacostoranexpenseaccountbytheseller.
14 Tax Bulletin
►• Businessestablishmentsgivingsalesdiscountstoqualifiedseniorcitizensarerequiredtokeepaseparateandaccuraterecordofsales,whichshallincludethenameoftheseniorcitizen-purchaser,OfficeforSeniorCitizensAffairs-ID,grosssales/receipts,salesdiscountsgranted,datesoftransactionsandinvoice/ORnumberforeverysaleortransactiontoseniorcitizen.TheinvoicingrequirementsinSection4.113-1ofRRNo.16-2005mustalsobecompliedwith.
►• Aspecialdiscountof5%oftheregularretailpriceofbasicnecessitiesandprimecommoditiesasdefinedundertheJointDepartmentofAgriculture(DA)andDepartmentofTradeandIndustry(DTI)AdministrativeOrderNo.10-02,Seriesof2010,shallbegrantedtoseniorcitizensontheirpurchases,takingintoaccountthatsaidpurchasesshallbeforthepersonalandexclusiveconsumptionand/orenjoymentoftheSeniorCitizen.
►►• PurchasesofbasicnecessitiesandprimecommoditiesbyseniorcitizensasdefinedunderSection2ofJointDTI-DAAdministrativeOrderNo.10-02,Seriesof2010,arenotexemptfromVAT.
►►• Toiletries,suchastoothpaste,bathsoapandtissuepaperarenotentitledtothe5%specialdiscount.OnlytheitemslistedunderRANo.7581orthePriceActareidentifiedasbasicnecessitiesandprimecommoditiessubjecttothe5%specialdiscount.However,powdered,liquid,barlaundryanddetergentsoapareconsideredbasicnecessitiessubjecttothe5%specialdiscount.
►►• “Maximumpurchaseperweek”meansthatseniorcitizensshallenjoyaspecialdiscountof5%oftheregularretailprice,withoutexceptionfromVAT,ofbasicnecessitiesandprimecommoditiesprovidedundertheJointDTI-DAAdministrativeOrderNo.10-02,providedthatthetotalamountofsaidpurchasesshallnotexceedthemaximumamountpercalendarweek.ThemaximumamountisP1,300.00percalendarweek,aftercombiningsetlimitsunderprimecommoditiesandbasicnecessities,withoutcarryoveroftheunusedamount.
Revenue Memorandum Circular No. 39-2012 dated August 3, 2012
►►• Backwages,allowances,andbenefitsawardedinalabordisputeconstituteremunerationforservicesthattheemployeewouldhaveperformedintheyearwhenactuallyreceived,orduringtheperiodofhisdismissalfromtheservicewhichwassubsequentlyruledasillegal.Theemployeeshouldreportasincomeandpaythecorrespondingincometaxesbyallocatingorspreadinghisbackwages,allowancesandbenefitsthroughtheyearsfromhisseparationuptothefinaldecisionofthecourtawardingthebackwages.Thebackwages,allowancesandbenefitsaresubjecttowithholdingtaxonwages(WTW).
►►►• Ifthejudgmentawardedinalabordisputeisenforcedthroughgarnishmentofdebtsduetotheemployerorothercreditstowhichtheemployerisentitled,thepersonowingsuchdebtsorhavingpossessionorcontrolofsuchcredits(e.g.,banksorotherfinancialinstitutions)wouldnormallyreleaseandpaytheentiregarnishedamounttotheemployee.Asaresult,employerswhoaremandatedtowithholdtaxesonwagescannotwithholdtheappropriatetaxduethereon.
►►►• UnderSection78(D)(1)oftheTaxCodeandSection2.78.4(A)ofRRNo.2-98,asamended,theterm“employer”includespersonshavingcontrolofthepaymentofwagesorsalaries.Inthiscase,thegarnisheesarethepersons
RMCNo.39-2012mandatesthewithholdingofincometaxonbackwages,allowances,andbenefitsreceivedbyemployeesthroughgarnishmentofdebtsorcreditspursuanttoalabordisputeaward.
15
owingdebtsduetotheemployerorinpossessionorcontrolofcreditstowhichtheemployerisentitled.Accordingly,theyareincontrolofthepaymentofbackwages,allowancesandbenefits,andtheyareauthorizedtodeductandwithholdtheincometaxduefromthebackwages,allowances,andbenefitstobepaidtotheemployees,andare,therefore,liableforsuchdeductions.
►►►• GarnisheesofajudgmentawardinalabordisputeareconstitutedaswithholdingagentswiththedutyofdeductingthecorrespondingWTWduethereonequivalentto5%oftheportionofthejudgmentawardrepresentingthetaxablewages,allowances,andbenefits.
Revenue Memorandum Circular No. 40-2012 dated August 3, 2012
►►►• Section40(C)(2)oftheTaxCodeprovidesforthenon-recognitionofgainorlossin(i)casesofmergersorconsolidations,and(ii)property-for-shareswapswherethetransferor,aloneortogetherwithothersnotexceedingfour,gainscontrolofthetransferee-corporation.
►►►►• RulingsissuedunderSection40(C)(2)ofTaxCodeshallbevalidonlyfor90days,countedfromthedateofthereceiptoftherulingbyanyofthepartiestotheexchangetransaction.Thepropertiesandsharesofstockinvolvedinthetransfershouldbeconveyedtothetransferee/sandtransferor/s,respectively,withinthisperiod.
►►►►• PursuanttoRRNo.18-2001andRMONo.32-2001,aphotocopyoftheTransferCertificateofTitle(TCT)/CondominiumCertificateofTitle(CCT)/ShareofStockthatbearstheannotationofsubstitutedbasisoftherealproperty/sharesofstocktransferred/receivedinconnectionwiththetransaction,dulycertifiedbytheRegisterofDeeds/CorporateSecretary,shouldbesubmittedtotheLawDivision,BIR,7/FNationalOfficeBuilding,Diliman,QuezonCity,alsowithinthe90-dayperiodfromdateofreceiptoftherulingorcertificationbyanyofthepartiestotheexchangetransaction;otherwise,therulingshallbevoidandtheChiefoftheLawDivisionshallreferthecasetotheProsecutionDivisionforappropriateaction.
►►►►• AnyviolationofthisCircularbyanyofthepartiestotheexchangetransaction,orbyanypublicofficeroremployee,shallbesubjecttotheappropriatepenaltiesunderSections269and275oftheTaxCode.
►►►►• RevenueDistrictOfficesaredirectednottohonorsuchrulingsbeyond90dayscountedfromthedateofreceiptoftherulingbyanyofthepartiestotheexchangetransaction,unlessanextensionofperiodisgrantedbytheCommissionerinmeritoriouscases.
Revenue Memorandum Circular No. 47-2012 dated August 14, 2012
►►►►• ThedeadlineforfilingapplicationsforVATTCCMonetizationshallbeasfollows:
Type of TCC Filing Period
ForrevalidatedandunexpiredTCCsoriginallyissuedin2002and2003
July17,2012toSeptember1,2012
Forrevalidatedand/orunexpiredTCCsoriginallyissuedin2004untilApril11,2012
July17,2012toOctober17,2012
RMCNo.40-2012prescribesaprescriptiveperiodforrulingsissuedpursuanttoSection40(C)(2)oftheTaxCode.
RMCNo.47-2012prescribestherulesanddeadlinesforthefilingofapplicationsforenrollmentintheVATTCCMonetizationProgram,pursuanttotheDOF,DBMandBIRJointCircularNo.2-2012datedMay31,2012.
16 Tax Bulletin
►►►►• TheapplicationforenrollmentintheVATTCCMonetizationProgramforVATTCCsthatweresolelyissuedbytheBIRshallbefiledwiththeBIRVATTCC-issuingoffice,usingtheapplicationformforenrollmentwhichcanbedownloadedfromtheBIRwebsiteatwww.bir.gov.ph.
►►►►►• ForVATTCCsthatwerejointlyissuedbytheDOFOne-Stop-ShopInter-AgencyTaxCreditandDutyDrawbackCenterandtheBIR,theapplicationforenrollmentinsaidprogramcanbedownloadedfromtheDOFwebsiteathttp://taxcredit.dof.gov.ph.
►►►►• VATTCCholderswithpendingapplicationsforcashconversionofoutstandingVATTCCspursuanttoSection204(C)oftheTaxCodecanstillapplyforenrollmentintheMonetizationProgrambywithdrawingthepreviouslyfiledapplicationforcashconversionandfilinganewapplicationforenrollmentwithsaidprogramwiththeVATTCC-issuingofficesdesignatedastheReceivingOfficesfortheProgram’sApplicationforEnrollment.
[Editor’s Note: RMO 47-2012 was amended by RMO 51-2012 dated August 31, 2012 to extend the deadline for filing applications for monetization for revalidated and unexpired TCCs originally issued in 2002 and 2003, from September 1, 2012 to “September 15, 2012 or the expiration of the TCC, whichever comes first.”]
BOC Issuances
Customs Administrative Order No. 1-2012 dated June 26, 2012
►►►►►• CAONo.1-2012shallinitiallyapplytoexportersinsidetheClarkFreeportZonewithinthejurisdictionofthePortofClark.UponthedirectiveoftheBOCCommissioner,itshallcoverexportersinotherselectedairorseaports.
►►►►►• TheCommissionerofCustomsshallconstituteacommitteeheadedbyaDeputyCommissionerinchargeofaccreditationofAEOs.ThecommitteeshallperformotherfunctionsasmaybedeterminedbytheCommissioner.
►►►►►• RequirementsundertheAEOProgram:
1. Dulyfilled-upApplicationForm
2. Disclosureofthefollowinginformation:
a. Organizationalcharacteristics;b. Compliancerecord;c. Volumeofbusiness;d. Goods;e. Internalproceduresrelatedtodeclaration.
3. Companysecurityprofileincluding:
a. Asummaryofthecompany’ssecuritymanagementsystem;b. Asummaryofthecompany’sriskassessmentprocess;c. Measurestoenhancethesecurityofthecompany’ssupplychain.
4. Supportingdocumentsincluding:
a. Processmapthatillustratestheflowofgoodsandinformationthroughthecompany’ssupplychain;
b. Siteplanthatshowsthelayoutofthecompany’spremisesandclearlyidentifiesallperimeters,accessareas,buildings,structures,securityandaccesscontrols.
CAONo.1-2012establishestheAuthorizedEconomicOperator(AEO)Programforexporters.
17
5. Copyofthecompany’srelevantsecurityaccreditations.
6. Otherrelevantsupportingdocuments.
►►►►►• Thesummaryofthesecuritymanagementsystemshallcontainthefollowing:
1. Company’ssecuritypolicy,securityobjectivesandcommitmenttosecurity;2. Proceduresforensuringthatpertinentsecuritymanagementinformationis
communicatedtoandfromrelevantemployeesandotherstakeholders;3. Proceduresforthereviewofthecompany’ssecurityprofileatplanned
intervals,toensureitscontinuingsustainability,adequacyandeffectiveness;4. Otherrelevantinformation.
►►►►►• Thesummaryofriskassessmentshallcontainthefollowing:
1. Flowcharttoillustratethecompany’sriskassessmentprocess;2. Risksandvulnerabilitiesidentified;3. Countermeasuresputinplacetoreducetheidentifiedrisksand
vulnerabilities;4. Whentheriskassessmentwasconducted;5. Whoconductedtheriskassessment;6. Otherrelevantinformation.
►►►►►• Elementsofthesecuritymeasuresthatneedtobeaddressed:
1. Premisessecurityandaccesscontrols;2. Personnelsecurity;3. Businesspartnersecurity;4. Cargosecurity;5. Conveyancesecurity;6. InformationandInformationTechnology(IT)security;7. Incidentmanagementandinvestigations;8. Crisismanagementandincidentrecovery.
►►►►►• Asidefromincreasedvisibilityofgoodsinthesupplychain,reductioninpilferages,andgreaterefficiencyinsupplychainmanagement,accreditedcompaniesshallbeentitledtothefollowingbenefits:
1. Dedicatedprocessinglanesresultinginreducedprocessingperiod;2. Renewalofexporteraccreditationonalongtermbasis;3. Lastpriorityinpost-entryaudit;4. Recognitionasalowriskcompany;5. ReducedinspectionorexpeditedclearancebyotherCustomsauthorities
shouldcertifiedstatusbealsorecognizedbyothercountriesunderamutualrecognitionprogramestablishedunderabilateralormultilateralarrangement;
6. OthertradefacilitationbenefitsthatmaybeaffordedbytheBOCunderexistinglawsandregulations.
►►►►►• AtrustedpartnerundertheAEOProgramshallhavethefollowingresponsibilities:
1. UpdatetheBOCasandwhentherearesignificantchangestothecompany’ssecurityprofileandotherinformationrequiredtobedisclosed;
2. Submitanannualstatementofcommitment;3. InformtheBOCofanynon-conformitiesbythecompanywithAEO-
PhilippinesGuidelines;4. Renewitsaccreditationasatrustedpartnereverytwo(2)years.
18 Tax Bulletin
►►►►►• TheaccreditationundertheAEOProgrammayberevokedforthefollowinggrounds:
1. ViolationofthetermsandconditionsoftheAEOcertification;2. Non-compliancebythecompanywithPhilippinecustomslawsand
regulationsorotherlawsandregulations;3. Supplychainsecurityweaknessesornon-conformitywithCAONo.
1-2012anditsimplementingrulesandregulations;4. CompanyoptstowithdrawfromtheProgram.
►►►►• AcompanymayappealtheBOCdecisiondenyingitsapplicationundertheAEOProgramwiththeCommissionerofCustomswithin15calendardaysfromreceiptofthedecision.
►►►►►• Alldocumentsorinformationprovidedbycompaniesshallremainconfidential,andshallnotbedisclosedtoathirdpartywithoutthecompanies’priorwrittenconsent.
►►►►►• TheCommissionerofCustoms,uponconsultationwithstakeholders,shallissuetherulesandregulationsfortheeffectiveimplementationofCAONo.1-2012.
►►►►►• Allorders,memoranda,circularsorpartsthereofwhichareinconsistentwithCAONo.1-2012aredeemedrevoked,amended,ormodifiedaccordingly.
►►►►►• CAONo.1-2012shalltakeeffectfifteen(15)daysafterpublicationinanewspaperofgeneralcirculation.
[Editor’s Note: CAO No. 1-2012 was published in the ManilaBulletin and the PhilippineStar on August 15, 2012.]
Customs Memorandum Order No. 9-2012 dated July 26, 2012
►►►►►• ExistingBOCrulesandregulationsallowforthemanualprocessingofimportentriesinthefollowingcases:
1. Computersystemsbreakdown;2. Powerfailurewhichrendersthecomputersystemnon-operational;3. Theauthorizedagentbankisoffline;4. UponauthorizationbytheBOCDeputyCommissionerforMISTG.
►►►►►►• Formanualprocessingofimportentries,priorauthorizationfromtheCommissionerofCustomsorinhisabsence,theDeputyCommissionerforMISTG,shallbeobtained.
►►►►►►• TheDistrictorPortCollectorshallbeheldaccountableforimportentriesprocessedmanuallywithoutpriorapprovaloftheCommissionerofCustomsortheDeputyCommissionerforMISTG.ErringBOCofficialsandemployeesshallbeimposedappropriateadministrative,civil,and/orcriminalsanctions,subjecttoexistinglawsandCivilServicerulesandregulations.
CMONo.9-2012requirespriorapprovalfromtheCommissionerofCustomsortheDeputyCommissionerfortheMISTGforthemanualprocessingofimportentriesinordertoeffecttheclearanceandreleaseofimportedgoods.
►
19
PSE Issuance
PSE Memorandum CN No. 2012-0046 dated August 22, 2012
►• UndertheAmendedRuleonminimumpublicownership(MPO),listedcompaniesthatarenotcompliantwiththeMPOrequirementaregivenagraceperiodofuptoDecember31,2012withinwhichtocomplywiththeMPO.
• Immediatelyafterthegraceperiod,thePSEwillimposeatradingsuspensiononsaidsharesforaperiodofnotmorethan6months.
►• Consequently,thesaleofsaidsharesduringthesuspensionperiodmayonlybeeffectedoutsidethePSE’stradingsystem,andshallbesubjecttothefollowingtaxes:
Applicable Tax Tax Rate and Base
CapitalGainsTax OnnetcapitalgainsamountingtonotoverP100,000.00–5%
OnanyamountinexcessofP100,000.00–10%
DocumentaryStampTax P0.75oneachP200.00oftheparvalueofthestock
►• Furthermore,ifthefairmarketvalue(FMV)ofthesharesofstocksoldisgreaterthantheconsiderationorthesellingprice,theamountbywhichtheFMVofthesharesexceedsthesellingpriceshallbedeemedagiftsubjecttodonor’staxunderSection100oftheTaxCode.IntheabsenceofanyissuancebytheBIRtothecontrary,therulesprescribedinRRNo.06-08fordeterminingthevalueoflistedsharesofstockwhichweresold,transferredorexchangedoutsideofthetradingsystemand/orfacilitiesofthePSEshallapply.
►• TheforegoingarebasedonthePSE’sunderstandingoftheexistingprovisionsoftheTaxCodeandrelevantBIRissuances.Incaseofconflictorambiguity,theBIR’sinterpretationshallprevail.
SEC Issuances
SEC Memorandum Circular No. 6 dated August 15, 2012
►►• ConsistentwiththeobjectivesoftheAntiRedTapeActof2007(RANo.9485),theSECresolvedtodispensewiththefollowingrequirementsintheregistrationactivitiesbelow:
1. BankCertificateofDeposit–fortheregistrationoftheArticlesofIncorporationofnewcorporationswherethesubscriptiontotheauthorizedcapitalstockispaidincash;ifaportionofthesubscriptionisotherthancash,thenon-cashsubscriptionshallbeprovenbytheappropriatesupportingdocuments;
PSEMemorandumCNNo.2012-0046remindstheinvestingpublicoftheeffectsofthefailureoflistedcompaniestocomplywiththeMPOrequirementbyDecember31,2012.
SECMCNo.6dispenseswithsomerequirementsinsomeregistrationactivities.
20 Tax Bulletin
2. SpecialAuditReport–forapplicationsforincreaseintheauthorizedcapitalstockofcorporationswherethesubscriptiontotheincreaseispaidincashexcept(a)listedcompanies,(b)publiccompaniesasdefinedintheSecuritiesRegulationCode,(c)companiesthatofferorsellsecuritiestothepublic,and(d)wherethepaymentforthesubscriptiontotheincreaseismorethanP10million;
Inlieuofsuchreport,anotarizedSubscriptionContractbetweenthestockholder/sandtreasurerstatingthenumberofadditionalsharessubscribedtoandpaidforshallbesubmittedbythecorporation.
3. PrimaryEntry–forDeedofAssignmentintheregistrationofnewcorporationsorincreaseintheauthorizedcapitalstockwherelandorrealestatepropertyisofferedasconsiderationforsubscriptiontosharesofstock.
►►• SECMCNo.6shalltakeeffectimmediately.
(Editor’s Note: SEC MC No. 6 was published in the ManilaTimes on August 23, 2012.)
SEC-OGC Opinion No. 12-11 dated August 8, 2012
Facts:ACo.isprivatecorporationwhichis99.995%ownedbyforeignindividuals.Issue:
CanACo.acquirerealpropertyinthePhilippines?
Ruling:
No.ACo.cannotownlandinthePhilippines.Foracorporationtopurchase,acquireorownlandinthePhilippines,atleast60%ofthetotalcapitalstockofthecorporationmustbewholly-ownedbyFilipinocitizens.
Astoownershipofrealpropertyotherthanland,foreignerscangenerallypurchasehousesorbuildingsunlessspecificallyprohibitedbylaw.Oneexampleofaprohibitiononownershipofinterestinabuildingisinthecaseofacondominiumproject.Interestinacondominiummaybeintheformofownership,leaseoranyrealrights.Ifthecondominiumprojectissetuponleasedland,thecorrespondingcondominiumcorporationmaybeestablishedbyacorporation100%foreign-owned.Ifthecondominiumprojectissituatedonalandownedbythecondominiumcorporation,whichisaFilipinocorporation,anyinterestinthecondominiumcannotbetransferredtoaliensorforeigncorporationswhosecapitalstockismorethan40%ownedbyaliens.Ifthecommonareasareheldbyacondominiumcorporation,thetransfertoaliensofunitsinaprojectmaybemadeonlyuptothepointwheretheconcomitanttransferofstockholdingsinthecondominiumcorporationwouldnotcausethealieninterestinsuchcorporationtoexceed40%ofitsentirestock.
Foracorporationtopurchase,acquireorownlandinthePhilippines,atleast60%ofthetotalcapitalstockofthecorporationmustbewholly-ownedbyFilipinocitizens.
21
SEC-OGC Opinion No. 12-12 dated August 9, 2012
Facts:CCo.isaholdingcompany.Ittransferreditsprincipalofficetoanewaddresssituatedinthesamecitywhereitspreviousofficewaslocated.IthasapendingapplicationforanamendmentofitsArticlesofIncorporation(AOI).Issue:
DoesCCo.needtoamenditsAOItoreflectthechangeinitsofficeaddress?
Ruling:
Yes.CCo.needstoamenditsAOItoreflectthechangeofaddressfromonebuildingtoanotherevenifthesecondbuildingiswithinthesamecityormunicipality.ItisnotenoughtoreflectthechangeintheGeneralInformationSheet(GIS).However,ifthetransferismerelytoanotherfloorofthesamebuilding,thereisnoneedtoamendtheAOI.
Asforanypenaltytobeimposed,sincethereisapendingapplicationforamendmentofAOI,nopenaltywillbeimposediftheboardresolutioneffectingthechangeinaddresshasthesameorearlierdatethantheGIS.However,iftheGISisdatedearlierthantheboardresolution,afineofP5,000.00willbeimposedonastockcorporation.
SEC-OGC Opinion No. 12-13 dated August 9, 2012
Facts:XCo.isaholdingcompanythatowns11%shareholdingsinYCo.,anairlinecompanywhichis40%foreign-owned.
Atpresent,XCo.is100%Filipino-owned.However,itwishestorestructureitsshareholdingsbyallowing51%ofitssharestobesubscribedbyAtty.Z,aFilipinocitizen.Atty.ZholdsthesharesintrustforMs.A,a14-year-oldbeneficiarywhowasbornoutoflawfulwedlockbetweenMr.G,aGermannational,andhisFilipinawife;hence,Ms.AislikewiseaFilipinocitizen.
Mr.Gholds30%outofthe40%foreignownershipinYCo.Mr.G,Ms.A’sfatherandlegalguardian,executedadeedoftrustinfavorofAtty.ZtoconcludetheshareholdingsofMs.AinXCo.Issues:
1. IsthetrustagreementbetweenMr.GandAtty.Zvalid?2. IftheproposedrestructuringisadoptedbyXCo.,isXCo.stillconsidered
100%Filipino-owned?3. IftheproposedrestructuringisadoptedbyXCo.,willYCo.beinexcessof
the40%foreignownershiplimitation?
AcorporationneedstoamenditsAOItoreflectthechangeofaddressfromonebuildingtoanother,evenifthesecondbuildingiswithinthesamecityormunicipality.
Indeterminingthecitizenshipofsharesbeingheldintrust,thenationalityofboththetrusteeandthebeneficiaryshouldbeconsidered.
22 Tax Bulletin
Ruling:
1. TheSECcannotrenderanopiniononthevalidityofcontracts,suchasatrustagreement.
2. Yes.XCo.willstillbeconsidered100%Filipino-ownediftheproposedstructuringisadopted.Forpublicutilitycompaniessuchasanairlinecompany,atleast60%ofitscapitalmustbeownedbyFilipinocitizens.Indeterminingthecitizenshipofsharesbeingheldintrust,thenationalityofboththetrusteeandthebeneficiaryshouldbeconsidered.
Intheproposedrestructure,51%ofthesharesinXCo.willbesubscribedbyAtty.Z,whoisaFilipinotrustee,intrustforMs.A,whoisaFilipinobeneficiary.Thus,XCo.willstillbe100%Filipino-owned.
3. No.YCo.willnotbeinexcessofthe40%foreignownershiplimitationiftheproposedstructuringisadopted.
Atpresent,40%ofYCo.isforeign-owned.Iftherestructuringisadopted,11%,whichisownedbyXCo.willstillbeconsideredFilipino-owned.Astotheremaining49%,weassumethatthisisownedbyFilipinos.Thus,YCo.satisfiesthe60%Filipinoownershiprequirement.
BSP Issuance
BSP Circular No. 762 dated July 25, 2012
►►►• SectionX128/4137QandrelatedsubsectionsoftheManualofRegulationsforBanks(MORB)/ManualofRegulationsforNon-BankFinancialInstitutions(MORNBFI)shallbeaddedtoread,asfollows:
“SectionX128/4137Q–Deposits for stock subscription.Depositsforstocksubscriptionrefertopaymentsmadebyexistingstockholdersornewsubscribersofthebank/quasi-bank(QB)onsubscriptiontotheincreaseintheauthorizedcapital,whichmayberecognizedeitherasaliabilityorequity.
Depositsforstocksubscriptionshallberecognizedaspartoftheequityforprudentialreportingpurposeswhenallofthefollowingconditionsaremet:
1. ThedepositforstocksubscriptionmeetsthedefinitionofanequityinstrumentunderPhilippineAccountingStandards(PAS)32Financial Instruments: Presentationsuchthatthedepositforstocksubscriptionshallnotbeinterest-bearingnorwithdrawablebythesubscriber.
2. Thebank/QB’sexistingauthorizedcapitalisalreadyfullysubscribed;
3. Thebank/QB’sstockholdersandboardofdirectorshaveapprovedtheproposedincreaseinauthorizedcapital;
CircularNo.762amendstheregulationsonDepositsforStockSubscriptionsofbanks/quasi-banks.
23
4. Thebank/QBhasfiledanapplicationfortheamendmentofitsArticlesofIncorporationfortheincreaseinauthorizedcapitalwiththeappropriatedepartmentoftheSES,BSP,dulysupportedbycompletedocumentsaslistedinCircularLetterNo.2009-042datedMay14,2009;
ApplicationsfortheamendmentofArticlesofIncorporationfortheincreaseinauthorizedcapital,whichhavebeenreturnedduetoinsufficiencyofsupportingdocuments,shallnotqualifyforrecognitionasanequityinstrument;and
5. ThebankmusthaveobtainedapprovaloftheMonetaryBoardontransactionsinvolvingsignificantownershipofvotingsharesofstockbyanyperson,naturalorjuridical,orbyonegroupofpersons,asprovidedinSubsec.X126.2.b,ifapplicable.
Depositsforstocksubscription,whichdonotmeettheabovementionedconditionsshallbeclassifiedasaliability.
Depositsforstocksubscription,whichmeettheconditionstoberecognizedasequity,shallformpartofabank’squalifyingcapitalforpurposesofcomputingtherisk-basedcapitaladequacyratiounderSectionsX115foruniversalandcommercialbanks,aswellastheirsubsidiarybanksandQBs,andX118forstand-alonethriftbanks,ruralbanksandcooperativebanks.”
• PartIIofAppendix63b/AppendixQ-46oftheMORB/MORNBFIonthequalifyingcapitalundertherisk-basedcapitaladequacyframeworkforthePhilippinebankingsystemwereamended,asfollows:
1. “Depositforcommonstocksubscription”and“Depositforperpetualandnon-cumulativepreferredstocksubscription”wereaddedascomponentsofCoreTier1capitalandremovedfromUpperTier2capital;
2. “Depositforperpetualandcumulativepreferredstocksubscription”and“Depositforlimitedliferedeemablepreferredstocksubscriptionwiththereplacementrequirementuponredemption”wereaddedascomponentsofUpperTier2capitalandremovedfromLowerTier2capital;
3. “Depositforlimitedliferedeemablepreferredstocksubscriptionwithoutthereplacementrequirementuponredemption”wasaddedasacomponentofLowerTier2capital;
►• PartIIofAppendix63coftheMORBonqualifyingcapitalundertherisk-basedcapitaladequacyframeworkforstand-alonethriftbanks,ruralbanksandcooperativebankswasamended,asfollows:
1. “Depositforcommonstocksubscription”and“Depositforperpetualandnon-cumulativepreferredstocksubscription”wereaddedascomponentsofCoreTier1capitalandremovedfromUpperTier2capital;
2. “Depositforperpetualandcumulativepreferredstocksubscription”and“Depositforlimitedliferedeemablepreferredstocksubscriptionwiththereplacementrequirementuponredemption”wereaddedascomponentsofUpperTier2capitalandremovedfromLowerTier2capital;
24 Tax Bulletin
3. “Depositforlimitedliferedeemablepreferredstocksubscriptionwithoutthereplacementrequirementuponredemption”wasaddedasacomponentofLowerTier2capital;
►• PartVIofAppendix63coftheMORBondefinitionsundertherisk-basedcapitaladequacyframeworkforstand-alonethriftbanks,ruralbanksandcooperativebankswasamended,asfollows:
“PartVI.Definitions
xxx
8. Depositforstocksubscription–ThisreferstothefundsreceivedasdepositsforstocksubscriptionthatmeettheconditionsforrecognitionasequityprovidedinSec.X128.
xxx”
►• Subsection4116Q.2oftheMORNBFIonqualifyingcapitalwasamendedasfollows:
1. “Depositforcommonstocksubscription”and“Depositforperpetualandnon-cumulativepreferredstocksubscription”wereaddedascomponentsofTier1(core)capitalandremovedfromUpperTier2capital;
2. “Depositforperpetualandcumulativepreferredstocksubscription”wasaddedasacomponentofUpperTier2capitalandremovedfromLowerTier2capital;
3. “Depositforlimitedliferedeemablepreferredstocksubscription”wasaddedasacomponentofLowerTier2capital;
►• TheFinancialReportingPackage(FRP),issuedunderCircularNo.512datedFebruary3,2006,asamended,wasfurtheramendedasfollows:
1. Revisionofthedefinitionof“Depositforstocksubscription”accountunder“OtherLiabilities”oftheManualofAccounts;
2. Creationof“Depositforstocksubscription”accountunder“EquityAccounts”oftheManualofAccounts;and
3. RevisionofthereportingtemplatesoftheBalanceSheetoftheFRP/SimplifiedFRP.
►• TheguidelinegoverningthemodeandsubmissionofthereportorialtemplatesofFRP,SimplifiedFRPandRisk-BasedCapitalAdequacyFrameworksshallbecoveredbyaseparateissuance.
►• ThisCircularshalltakeeffect15daysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 762 was published in the MalayaBusinessInsight on July 30, 2012.]
25
BSP Circular No. 763 dated August 3, 2012
►• SubsectionX302.3isaddedtotheMORB,toreadasfollows:
“SubsectionX302.3.RegulatoryReliefforBanksunderRehabilitationProgramApprovedbytheBSP-
Banksmaybeallowedtochargetheiroutstandingunbookedallowanceforprobablelossesdirectlytoretainedearnings,onaone-timebasis,subjecttothefollowingconditions:
a. ThatthisisinconnectionwithacomprehensiverehabilitationprogramapprovedbytheBSP;and
b. Theeffectthereof,ifthesehadbeenchargedtoprofitandloss,shallbefullydisclosedintheauditedfinancialstatements,annualreportsandpublishedstatementofcondition.”
►• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 763 was published in the ManilaStandardToday on August 11, 2012.]
BSP Circular No. 764 dated August 3, 2012
►• ThefollowingsectionsoftheMORNBFIareamendedtoprovidethattherulesonoutsourcingofbankingfunctionsasshowninAppendixQ-37shallbeadopted:
1. Section4162Q(2008–4190Q),insofarastheyareapplicabletoquasi-banks(QB);
2. Subsection4406Q.9,insofarastheyareapplicabletotrustdepartmentsofQBsperformingtrustandotherfiduciarybusinessandinvestmentmanagementactivities;
3. Subsection4701Q.13,insofarastheyareapplicabletoQBs’outsourcingofinternetandmobileelectronicservices;
4. Section4190S,insofarastheyareapplicabletonon-stocksavingsandloanassociations;
5. Section4190P,insofarastheyareapplicabletopawnshops;and
6. Section4190N,insofarastheyareapplicabletofinancialinstitutions.
►• Appendix37oftheMORNBFIisamendedandre-titledasRevisedOutsourcingFrameworkforBanks.
CircularNo.763providesforregulatoryrelieftobanksunderrehabilitationprogram.
CircularNo.764prescribestheRevisedOutsourcingFrameworkforNBFIs.
26 Tax Bulletin
►• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 764 was published in the BusinessMirror on August 13, 2012.]
BSP Circular No. 765 dated August 3, 2012
►►• SectionX162oftheMORBisre-titledandamendedtoreflectastatementofprinciplewhichshallreadasfollows:
“Section162Statement of Principle on Outsourcing.Aninstitutionmayoutsourcebankingsupportandmarketingactivitiessubjecttotheprovisionssetforthbelow.Accordingly,aninstitutionisexposedtooperationalrisksasaresultofoutsourcing.Assuch,aninstitutionthatavailsofoutsourcingshouldhaveinplaceappropriatemechanismstoensureeffectivemanagementofattendantrisks.”
►• ThepreviousSectionX162oftheMORBshallberenumberedasSubsectionX162.1,Governance in All Cases of Outsourcing of Banking Functions,andamendedtoprovidetheresponsibilitiesofabankwhenoutsourcingisallowedbylaw.
►►• ThepreviousSubsectionX162.1oftheMORB(2008–X169.1),Prohibition against outsourcing certain banking functions,isrenumberedasSubsectionX162.2andamendedtoprovideinherentbankfunctionsthatnobankshalloutsource.ThepreviousSubsectionX162.2(2008–X169.2)onOutsourcing of Information Technology Systems/ProcessesisamendedandtransferredtotheAppendixofSectionX162oftheMORBinrelevantdocumentations.
►• ThepreviousSubsectionX162.3(2008–X169.3),Outsourcing of Other Banking Functions,isdeleted.ThenewSubsectionX162.3oftheMORBreadsasfollows:
“SubsectionX162.3Definition.Outsourcingshallrefertoanycontractualagreementbetweenabankandaqualifiedserviceproviderforthelattertoperformdesignatedactivitiesonacontinuingbasisonbehalfofthebank.”
►• ThenewSubsectionX162.4,Managing Outsourcing-Related Risks,oftheMORBfocusesontheresponsibilityofthebanktomanagetheoperationalrisksthatarisefromoutsourcing.
►• ThenewSubsectionX162.5readsasfollows:
“SubsectionX162.5Authority to Outsource.OnlythosebankswithaCAMELScompositeratingofatleast“3”andaManagementRatingofnotlowerthan“3”shallbeallowedtooutsourcedesignatedactivitieswithoutpriorBSPapproval.Otherwise,thebankmustsecurepriorapprovalfromtheappropriatesupervisingdepartmentoftheBSPwhoseevaluationwillbebasedonthebank’sabilitytomanagerisksattendanttooutsourcing.”
►• ThenewSubsectionX162.6,Documentation,requiresbankstokeepthenecessarydocumentationtoshowthatoutsourcingarrangementsareproperlyreviewedandtheappropriateduediligencehasbeenundertakenpriortoimplementation.
CircularNo.765prescribestheRevisedOutsourcingFrameworkforBanks.
27
►►• SubsectionsX162.11(2008–X169.11)andX162.12(2008–169.12)oftheMORBareconsolidated,re-titledandrenumberedasSubsectionX162.7,Intra-group Outsourcing,andamendedtoprovidetheconditionsincaseabankisactingasaserviceproviderwithinitsbusinessgroup.
►• ThenewSubsectionX162.8,Offshore Outsourcing,providesfortheconditionsincasesofoutsourcingwheretheserviceproviderislocatedoutsidethecountry.
►►• ThepreviousSubsectionX162.4(2008–X169.4)isrenumberedasthenewSubsectionX162.9andamendedtoreadasfollows:
“SubsectionX162.9Service Providers.Thebankshallcarryoutduediligenceinselectingserviceproviders.Itmustensuretheintegrity,technicalexpertise,operationalcapability,financialcapacityandsuitabilityoftheserviceprovidertoperformtheoutsourcedactivity.Incaseswheretheclientsareprejudicedduetoerrors,omissionsandfraudsbytheserviceprovider,thebankshallbeliableinprovidingtheappropriateremediesasmaybeallowedbylawsorregulations,withoutprejudicetorecoursebythebanktotheserviceprovider.”
►• ThepreviousSubsectionX162.5isrenumberedasSubsectionX162.10,re-titledandamendedtoreadasfollows:
“SubsectionX162.10Transitory Provision.AlloutsourcingagreementsmustbealignedwiththeprovisionsofSectionX162oftheMORB.Existingoutsourcingagreementswhicharenotinaccordancewiththiscircularwillnotbeunwound.However,itmustcomplywiththerequirementsprovidedhereinuponrenewaloftheagreements.”
►►• ThepreviousSubsectionX162.19,Penalties,isre-numberedasSubsectionX162.11.
►►• SubsectionsX406.9,Outsourcing Services in Trust Departments,andX701.13(2008–X621.13),Outsourcing of interment and Mobile Banking Services,oftheMORBaredeleted.
►►• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 765 was published in TheManilaTimes on August 13, 2012.]
BSP Circular No. 766 dated August 17, 2012
►►• SectionX401/4401Q,Statement of Principles,oftheMORB/MORNBFIareamendedtoprovidethatpoliciespredicateduponthecardinalprincipleoffidelityshallbedirectedtowardstheobservanceofprudentadministration,undividedloyaltyandutmostcare,non-delegationofresponsibilities,preservingandprotectingproperty,andkeepingandrenderingaccounts.
►►• SectionsX403/4403Q,Definitions,oftheMORB/MORNBFIareamendedbyre-assigningitems“a”to“u”as“b”to“v”andaddinganewitem“a”asfollows:
CircularNo.766prescribestheGuidelinesinStrengtheningCorporateGovernanceandRiskManagementPracticesonTrust,OtherFiduciaryBusiness,andInvestmentManagementActivities.
28 Tax Bulletin
“A.TrustEntityshallrefertoa(a)bankornon-bankfinancialinstitution,throughitsspecificallydesignatedbusinessunittoperformtrustfunctions,or(b)trustcorporation,authorizedbytheBangkoSentralngPilipinas(BSP)toengageintrustandotherfiduciarybusinessunderSection79ofR.A.No.8791(TheGeneralBankingLawof2000)ortoperforminvestmentmanagementservicesunderSection53ofR.A.No.8791.”
►►• SubsectionsX406.2/4406Q.2,Composition of trust committee,oftheMORB/MORNBFIareamendedtoprovidethattheTrustCommitteeshallhaveatleastfivemembersasfollows:
1. Thepresidentoranyseniorofficerofthebank/non-bankfinancialinstitution(NBFI);
2. Thetrustofficer;
3. Theremainingmembers,includingthechairperson,maybeanyofthefollowing:
i. Non-executivedirectorsorindependentdirectorswhoarebothnotpartoftheauditcommittee;or
ii. Thoseconsideredasqualified“IndependentProfessionals.”
Iftherearemorethan5members,amajorityshallbecomposedofqualifiednon-executivemembers.
►►• SubsectionX406.3/4406Q.3,Qualifications of committee members, officers and staff,oftheMORB/MORNBFIareamendedtoprovidethatdirectors,committeemembersandofficerschargedwiththeadministrationoftrustandotherfiduciaryactivitiesshallhavetheadditionalrequirementofrelevantexperienceinsuchbusiness.
Atrustofficer,inadditiontopossessingatleast3yearsofactualexperienceintrustoperationsoratleast5yearsofactualexperienceasanofficerofabank/NBFI,musthave:
1. Completedatleast90traininghoursintrust,otherfiduciarybusinessorinvestmentmanagementactivitiesacceptabletotheBSP;or
2. Completedarelevantglobalorlocalprofessionalcertificationprogram.
►►• ItemfofSections2404/3404oftheMORBontheauthoritytoengageinlimitedtrustbusinesstothriftbanksandruralbanks,respectively,shallberevisedtoprovidethatatrustofficer,inadditiontopossessingatleast1yearof
29
actualexperienceintrustoperationsoratleast2yearsofactualexperienceasanofficerofabank/NBFI,musthave:
1. Completedatrainingprogramintrust,otherfiduciarybusinessorinvestmentmanagementactivitiesacceptabletotheBSP;or
2. Completedarelevantglobalorlocalprofessionalcertificationprogram.
►►• SubsectionsX406.a/4406Q.4,Responsibilities of Administration,oftheMORB/MORNBFIareamendedtoprovidethespecificresponsibilitiesofthefollowing:
1. TheBoardofDirectors(BOD)inrelationtotrustactivitiesofabank/NBFI;
2. TheTrustCommittee,whichisaspecialcommitteethatreportsdirectlytotheBODandisprimarilyresponsibleforoverseeingthefiduciaryactivitiesofthebank/NBFI;and
3. TheTrustOfficer,whoisvestedwiththemanagementoftheday-to-dayfiduciaryofficer.
►►• SubsectionsX406.10/4406Q.10,Confirmation of the appointment/ designation of trust officer and independent professional,oftheMORB/MORNBFIareamendedtoprovidethatanindependentprofessionalandtrustofficermustbefitandpropertodischargetheirrespectivefunctions.Theirappointment/designationshallbesubjecttoconfirmationbytheMonetaryBoardwhichshallinformtheconcernedbank/NBFIif,afterevaluation,itfindsgroundsforthedisqualificationoftheindependentprofessionalandtrustofficer.
• Trustentitiesofbanks/NFBIsthatdonotmeettherequirementsofthisCircularshallbegiventwelve(12)monthsfromthedateofeffectivitytocomply.
• Non-compliancewiththeprovisionsofthisCircularshallsubjectthebank/NBFIanditsBODtosanctionsprovidedunderSections36and37ofR.A.7653withoutprejudicetotheimpositionofothersanctionsastheMonetaryBoardmayconsiderwarrantedunderthecircumstancesthatmayincludebutnotlimitedtocurtailmentoffiduciaryactivities,and/orintroductionofnewbusiness,andsuchothersanctionsasmaybeprovidedbylaw.
• ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeitherintheOfficialGazetteorinanewspaperofgeneralcirculation.
[Editor’s Note: Circular No. 766 was published in the ManilaBulletin on August 24, 2012.]
30 Tax Bulletin
Court Decision
Team Pacific Corporation vs. Josephine Daza, in her capacity as Municipal Treasurer of TaguigSecondDivision,G.R.No.167732,promulgatedJuly11,2012
Facts:
PetitionerTeamPacificCorporation(TPC),adomesticcorporationengagedinthebusinessofassemblingandexportingsemiconductordevices,conductsitsbusinessattheFTIComplexinTaguig.Sincethestartofitsoperations,TPChadbeenpayinglocalbusinesstaxes(LBT)at1/2oftheratesimposedon“exportersandonmanufacturers,millers,producers,wholesalers,distributors,dealersorretailersofessentialcommodities”pursuanttotheTaguigRevenueCode.
WhenTPCreneweditsbusinesslicensein2004,however,RespondentJosephineDaza,thenMunicipalTreasurerofTaguig,assessedLBTatthefullrateonthegroundthatTPCisnotanexporterofessentialcommodities.
TPCpaidtheassessedLBTandfiledawrittenprotestonJanuary19,2004.OnApril15,2004,TPCfiledapetitionforcertiorariunderRule65ofthe1997RulesofCivilProcedurebeforetheRegionalTrialCourt(RTC).TPCallegedthatDazadidnotactonitsprotestwithin60days,asprescribedunderArticle195oftheLocalGovernmentCode(LGC),andthatDazaactedwithgraveabuseofdiscretioninnotapplyingthe1/2rateprovidedundertheTaguigRevenueCode.
DazaarguedthatTPCerredinfilingapetitionforcertiorariandthatTPCshouldhave,instead,filedanappealincourtwithin30daysfromreceiptofthedenial.
TheRTCdismissedthepetition.ItfoundthattherewasnoproofofdenialofTPC’sprotest.Hence,TPChad30daysfromthelapseofthe60daysallowedforthetreasurertomakeitsdecision,withinwhichtoperfectanordinaryappeal.TheRTCruledthatthespecialcivilactionofcertiorariisnottheproperremedyofTPC.
TPCappealedtotheSupremeCourtandarguedthattheremedyofappealisnotspecifiedunderArticle195oftheLGC,andtherefore,aRule65petitionforcertiorariistheproperandlogicalremedy,giventhatDazaactedwithgraveabuseofdiscretioninassessingitsLBTatthefullrate.
Afterreceivinganoticeofassessment,ataxpayermayfilewithin60daysawrittenprotestwiththelocaltreasurer,whichshalldecideonitwithin60days.ThetaxpayercanmakeanappealtotheRegionalTimeCourt(RTC)within30daysfromreceivingthedenialoftheprotest,orfromthelapseofthe60-dayperiodtodecideontheprotest.Thereafter,thetaxpayercanappealthedecisionoftheRTCtotheCourtofTaxAppeals(CTA)within30daysafterreceivingthedecision.
31
Issue:
DidTPCavailofthecorrectremedyagainsttheassessmentwhenitfiledapetitionforcertioraribeforetheRTC?
Ruling:
No.TPCdidnotavailofthecorrectremedy.TPCshouldhavefiledanordinaryappealwiththeRTC.
Within60daysfromreceiptofanoticeofassessment,ataxpayermayfileawrittenprotestwiththelocaltreasurer,whichshalldecidethesamewithin60days.Thetaxpayershallhave30daysfromreceiptofthedenialoftheprotest,orfromthelapseofthe60-dayperiodgiventothelocaltreasurertodecidetheprotest,withinwhichtoappealtotheRTC.
Withoutanyformaldenialoftheprotest,TPC’sfilingofitspetitionbeforetheRTConApril19,2004wasdoneinatimelymanner.ReckonedfromthefilingoftheprotestonJanuary19,2004,Dazahad60daysoruntilMarch19,2004withinwhichtoresolvetheprotest.
Fromthelapseofthis60-dayperiod,TPChad30daysoruntilApril18,2004withinwhichtofileitsappealtotheRTC.SincethelatterdatefellonaSunday,theRTCcorrectlyruledthatTPC’sfilingofitspetitiononApril19,2004wasstillwithintheprescribedperiod.
However,aRule65petitionforcertiorariisnottheappropriateremedyfromDaza’sinactiononTPC’sprotest.Instead,TPCshouldhavefiledanordinaryappealwiththeRTC.Thereafter,anappealfromthejudgment,resolutionororderoftheRTCshallbemadewithin30daysafterreceiptofthedecision,byfilingapetitionforreviewwiththeCTA.
Theperfectionofanappealinthemannerandwithintheperiodfixedbylawisnotonlymandatorybutjurisdictional,andnon-compliancewiththeselegalrequirementsisfataltoaparty’scause.
32 Tax Bulletin
Wewelcomeyourcomments,ideasandquestions.PleasecontactMa.FidesA.Baliliviae-mailatMa.Fides.A.Balili@ph.ey.comorattelephonenumber894-8113andMarkAnthonyP.Tamayoviae-mailatMark.Anthony.P.Tamayo@ph.ey.comorattelephonenumber894-8391.
SyCip Gorres Velayo & Co.6760AyalaAvenue,MakatiCity,PhilippinesTelephone:(632)891-0307Fax:(632)819-0872
©2012SyCipGorresVelayo&Co.AllRightsReserved.FEAno.1000050
SGV&Co.maintainsofficesinMakati,Cebu,Davao,Bacolod,CagayandeOro,Baguio,GeneralSantosandCavite.
ForanelectroniccopyoftheTaxBulletinorforfurtherinformationaboutTaxServices,pleasevisitourwebsitewww.sgv.ph
Expirydate:noexpiry