InTAX July (Issue 7 Vol. 3)

8/9/2019 InTAX July (Issue 7 Vol. 3)

1/3

InTAX July Issue

Issue 7 Vol. 3

Department of Finance

The Department of Finance (DOF) issued the following:

Department Order (DO) No. 044-2014, 17 June 2014, to provideguidelines and procedures in the performance by the DOF-FIU(Fiscal Intelligence Unit) of post-entry audit on import transactions.

(RGM&Co.s Note: The procedure to be followed in the post-entryaudit waspreviously covered under our Special In-TAX Issuancefor June 2014).

DO No. 045-2014, 26 June 2014, to clarify that the operating hoursof the Bureau of Customs (BOC) offices handling PEZA shipmentsshall be from 7:00am to 7:00pm, seven (7) days a week. Theextension of office hours applies to the following ports: NinoyAquino International Airport, Manila International Container Port,

and Port of Manila, and sub-ports in Economic Zones in Cavite,Laguna, Batangas, Rizal and Quezon (CALABARZON). Theextended operating hours shall be immediately implemented incustoms offices in the CALABARZON area; while for other offices,the extended operating hours shall begin on the date identified bythe Commissioner of Customs.

The BOC shall also coordinate with the Land Bank of thePhilippines and other relevant banks to ensure that banks serviceswould be available during the times and days mentioned.

DO No. 046-2014, 26 June 2014, to further extend the period tocomply with the accreditation requirements for importers andbrokers to 31 July 2014.

(RGM&Co.s Note: This waspreviously covered under our SpecialIn-TAX Issuance for July 2014).

Department Order (DO) No.044-2014, 17 June 2014

DO No. 045-2014, 26 June2014

DO No. 046-2014, 26 June2014

Bureau of LocalGovernment Finance

(BLGF) Opinion dated 18June 2014

Metro Pacific Corporation(now Neo Oracle Holdings,Inc.) vs. Commissioner ofInternal Revenue (CTACase No. 8318, 11 June2014)

Officemetro Philippines,Inc. (formerly RegusCentres, Inc.) vs.Commissioner of InternalRevenue (CTA Case No.8382, 03 June 2014)

_______________

InTAX is an officialpublication of the

Tax Group ofR.G. Manabat & Co.

The Philippine Tax Grouphas been named as a Tier 1

Tax Practice in thePhilippines by the

International Tax Review

Editorial Board

Emmanuel P. BonoanEditor-in-Chief

Herminigildo G. MurakamiMaria Georgina J. Soberano

Assistant Editors

Roberto L. TanMaria Carmela M. Peralta

Maria Myla S. MaralitManuel P. Salvador III

Contributors

MarketsMariel D. JavierMarketing RiskManagement

Jestoni I. PanilagLayout, Design & Circulation

The materials contained in

InTAX were compiled by

R.G. Manabat & Co. from

various sources. The

subjects are discussed in

brief/general terms and are

intended to provide an

overview of the recent and


2/3

Bureau of Local Government Finance

The Bureau of Local Government Finance (BLGF) Opinion dated18 June 2014 is an endorsement to the Municipal Treasurer ofBamban, Tarlac for appropriate action stating that classifyingpoultry and livestock products as non-essential commodities in theRevised Municipal Revenue Code of Bamban 2004 runs counter tothe provisions of the 1991 Local Government Code (LGC). It isclear from Section Nos. 131(a) and 143(c)(2) of the LGC thatpoultry and livestock products as contemplated in the definition ofthe term agricultural products should be classified as essentialcommodities and therefore subject to local business tax (LBT) atthe rate of of the rates in Section No. 143(a)(b)&(d) of the LGC.

Since the Municipal Treasurer of Bamban, Tarlac has beencollecting LBT on poultry and livestock products as non-essentialcommodities since 2004, the right to a tax refund/credit on some ofthe LBT payments may have already expired. Section 196 of theLGC provides that the claim must be made within 2 years reckonedfrom the date of the payment of such tax. However, the BLGFbelieves that when the tax claimed to be refunded is illegally orerroneously collected, the principle of solutio indebitishall governwhich has a prescriptive period of 6 years under Article 2154 of theCivil Code and not the 2-year prescriptive period. (Victoria Milling

Co., Inc. vs. Central Bank of the Philippines; Ramie Textiles vs.Hon. Ismael Mathay Sr.)

(RGM&Co.s Note: We believe the 2-year period under Section 196of the LGC should prevail over Article 2154 of the Civil Code of thePhilippines since the former is a special law while the latter is ageneral law.)

As to the use by the Municipal Treasurer of Bamban, Tarlac of thePresumptive Income Level Assessment Approach (PILAA) incomputing LBT, the BLGF, citing First Planters Pawnshop, Inc. vs.City Treasurer of Pasay City [CTA (EB) No. 501, 10 December2010], provides that the PILAA may be used to compute LBT only ifthe taxpayer is unable to provide proof of its income. The PILAA is

a tax collection tool which enables the local government units to seta certain income level standard for various business entities basedon industry factors.

With the submission of the taxpayers financial records, theMunicipal Treasurer can sufficiently compute the LBT due withoutresort to the PILAA. If the Municipal Treasurer believes that thetaxpayer under-declared its gross income, the remedy is tocompute the LBT based on the declared income and thensubsequently, issue a Letter of Authority for the examination andaudit of the taxpayers books of accounts and other records. If thetaxpayer has no such records to validate the declared income, thenthe Municipal Treasurer may use the presumptive income level for

the assessment of deficiency taxes.

Court of Tax Appeals

The Court of Tax Appeals (CTA) issued the following decisions:

Metro Pacific Corporation (now Neo Oracle Holdings, Inc.) vs.Commissioner of Internal Revenue (CTA Case No. 8318, 11June 2014) looked at Section 100 of the 1997 Tax Code, asamended, which in effect provides that where property (other thanreal property classified as capital assets) is transferred for lessthan an adequate and full consideration, then the amount by whichthe fair market value of the property exceeded the value of

consideration shall be deemed a gift subject to donors tax. TheCTA resolved that a plain reading of Section 100 of the 1997 TaxCode, as amended, shows that no exemption/exception was statedtherein. If the legislature intended an exception/exemption toSection 100 of the 1997 Tax Code, as amended, it could haveclearly stated therein such exception/ exemption.

relevant developments

relating to Philippine tax

laws and various

government regulations.

This information is for

guidance only and should

not be regarded as a

substitute for appropriate

professional advice.

R.G. Manabat & Co.

accepts no liability withregard to the information the

firm has provided or any

action that may be taken by

readers of InTAX. The

information contained herein

is updated until the date of

publication. Although we

endeavor to provide

accurate and timely

information, there can be no

guarantee that such

information is accurate as of

the date it is received or that

it will continue to be

accurate in the future. Noone should act on such

information without

appropriate professional

advice after a thorough

examination of the particular

situation

www.kpmg.com.ph

High performing people

cutt ing through

complexi ty

KEY CONTACTS

Emm anuel P. Bonoan

Vice Chairman and

Head of Tax

DL: 885-0602

[email protected]

Herminigi ldo G.

Murakami

Principal, Tax

DL: 885-0117

[email protected]

Maria Georgina J.

Soberano

Principal, Tax

DL: 885-0610

[email protected]

Roberto L. Tan

Principal, Tax

DL: 893-4527

[email protected]

Maria Carmela M. Peralta

Principal, Tax

DL: 844-8597

mpera l [email protected]

Manuel P. Salvador III

Principal, Tax

DL: 621-0824msalvador i i [email protected]

Maria Myla S. Maral i t

Partner, Tax

DL: [email protected]
http://www.kpmg.com.ph/http://www.kpmg.com.ph/mailto:[email protected]:[email protected]:[email protected]:[email protected]://localhost/var/www/apps/conversion/tmp/scratch_4/[email protected]://localhost/var/www/apps/conversion/tmp/scratch_4/[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://localhost/var/www/apps/conversion/tmp/scratch_4/[email protected]:[email protected]:[email protected]://www.kpmg.com.ph/


3/3

The CTA did not agree with the petitioner that the subjecttransaction was an ordinary business transaction negotiated ingood faith by unrelated parties for legitimate purposes whichshould be excluded from the coverage of Section 100 of the 1997Tax Code, as amended, because the transfer is bona fide, at arm'slength and free from any donative intent. Thus, the sale of sharesof stocks (not traded in the stock exchange) sold below the fairmarket value is subject to donors tax pursuant to Section 100 ofthe 1997 Tax Code, as amended.

(RGM&Co.s Note: A Motion for Reconsideration was filed by thePetitioner on 26 June 2014)

Officemetro Philippines, Inc. (formerly Regus Centres, Inc.) vs.Commissioner of Internal Revenue (CTA Case No. 8382, 03June 2014) resolved that condominium dues are not taxableincome of a condominium corporation, hence should not be subjectto expanded withholding tax (EWT). The CTA relied on variousBureau of Internal Revenue (BIR) rulings which held thatassociation/condominium dues, membership fees and otherassessment/charges collected from the members, which aremerely held in trust and which are to be used solely foradministrative expenses in implementing their purpose(s), viz., toprotect and safeguard the welfare of the owners, lessees and

occupants; provide utilities and amenities for their members, andfrom which the condominium corporation could not realize any gainor profit as a result of their receipt thereof, must not be included insaid corporation's gross income. This means that the same are notsubject to income tax and to withholding tax. Thus, amountsrepresenting payments for condominium dues should be excludedfrom the total rental subject to EWT.

(RGM&Co.s Note: The Decision is silent on whether thecondominium dues are subject to VAT or not. Further, this is acase pertaining to taxable year 2005, prior to the issuance ofRevenue Memorandum Circular No. 65-2012. Both parties filedMotion for Reconsideration on 06 June 2014)

Privacy |Legal

R.G. Manabat & Co., The KPMG Center, 6787 Ayala Avenue, Makati City,Philippines 1226

2014 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMGnetwork of independent firms affiliated with KPMG International Cooperative ("KPMGInternational"), a Swiss entity. KPMG International provides no client services. No memberfirm has any authority to obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such authority to obligate or bindany member firm. All rights reserved.
http://www.kpmg.com/onlinedisclaimer.html#Privacyhttp://www.kpmg.com/onlinedisclaimer.html#Legalhttp://www.kpmg.com/onlinedisclaimer.html#Legalhttp://www.kpmg.com/onlinedisclaimer.html#Privacy

Documents

InTAX July (Issue 7 Vol. 3)