2013 february by PIEV

TAX MANAGEMENT ASSOCIATION OF THE PHILIPPINES, INC. __________________________________________________ TAX UPDATES FOR FEBRUARY 2013 (Prepared by Baniqued & Baniqued) BIR Issuances Revenue Regulations No. 2-2013 (January 23, 2013) • The BIR promulgated guidelines on transfer pricing, particularly in applying the arm’s length principle for cross-border and domestic transactions between associated enterprises.

Revenue Memorandum Circular No. 8-2013 (January 25, 2013) • The BIR issued guidelines for claims for refunds of input VAT attributable to zero-rated and effectively zero-rates transactions.

• The RMC covers all such transactions which shall have been filed or lodged after the date of effectivity of Joint Circular No. 6-2012 issued by the Department of Finance, Bureau of Internal Revenue and Department of Budget and Management.

Revenue Memorandum Circular No. 9-2013 (January 30, 2013) • Association dues, membership fees and other assessments/ charges collected by homeowners’ associations (“HA”) from its homeowner-members and other entities are subject to income tax and VAT. • To be exempt, the following requisites must be complied with: 1. the HA must be duly constituted; 2. the LGU certification identifying the basic services being rendered by the HA and the LGU’s lack of resources; and 3. the HA must present proof that the income and dues are being used for the cleanliness, safety, security and other basic services needed by the homeowners.

Revenue Memorandum Circular No. 16-2013 (February 8, 2013) • This RMC provides guidelines in the accounting and recording of deposits/advances for the payment of pertinent expenses received by taxpayers other than general professional partnerships.

Revenue Memorandum Circular No. 15-2013 (February 13, 2013) • This RMC implements pertinent provisions of Resolution No. 9476 with regard to campaign finance and disclosure for the May 2013 elections.

TAX MANAGEMENT ASSOCIATION OF THE PHILIPPINES, INC. __________________________________________________ • Each candidate and/or political party must comply with the following: 1. issue a receipt for every contribution received and obtain and keep a receipt for every expenditure made; 2. keep detailed, full and accurate records; and 3. be responsible for the preservation of records of contributions and expenditures, with all pertinent records, for at least three years afterwards.

Revenue Memorandum Circular No. 17-2013 (February 15, 2013) • The BIR revoked BIR Ruling No. 10-2007 dated May 4, 2007. • The BIR ruled that FTAA contractor’s exemption under BIR Ruling No. 10-2007 from the payment of excise tax from the date of approval of its Mining Project Feasibility Study up to the end of the recovery period pursuant to the FTAA and the Philippine Mining Act of 1995 and its IRR has no basis since the noncollection of the government share during the period of recovery does not amount to an express tax exemption.

Court Decisions CE Casecnan Water and Energy Co., Inc. v. Commissioner of Internal Revenue, CTA EB No. 836 (CTA Case No. 7891) (January 28, 2013) • The Court of Tax Appeals has no jurisdiction when the judicial claim for the refund/credit of input VAT is prematurely filed.

Business Process Outsourcing Int’l, Inc. v. Commissioner of Internal Revenue, CTA EB No. 826 (CTA Case No. 7605) (January 28, 2013) • A taxpayer claiming a tax credit or refund has the burden of proof to establish the factual basis of that claim. Hence, the taxpayer must still present substantial evidence to prove its claim for refund. • The legal requirements for claiming a refund/credit of creditable withholding tax are as follows: 1. the claim must be filed within two years from the date of payment of the tax as mandated by law; 2. the fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld; and 3. it must be shown on the return that the income received was declared as part of the gross income.

Commissioner of Internal Revenue v. Avon Products Mfg., Inc., CTA EB No. 840 (CTA Case No. 7635)(January 29, 2013)

TAX MANAGEMENT ASSOCIATION OF THE PHILIPPINES, INC. __________________________________________________ • BIR rulings are official positions of the BIR to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws. • It is widely accepted that the interpretation placed upon a statute by the executive officers whose duty it is to enforce it, is entitled to great respect by the courts. • The main issue in this case is whether Rev. Regs. No. 8-84, or the Cosmetic Products Regulations, still implements Section 150(b) of the 1997 NIRC, as amended, in relation to the imposition of excise taxes on what qualifies as “toilet waters”. • Scrutiny of the said section reveals that the term is not defined therein. However, BIR Ruling No. 43-2000 dated September 15, 2000 defined “cologne” as a “scented alcohol-based liquid used as perfume, aftershave lotion or deodorant”, and all such colognes shall be classified as toilet waters subject to excise tax. • In view of the inapplicability of the provisions of Rev. Regs. No. 8-84, the interpretation given by the petitioner in the said BIR Ruling deserves great weight and respect especially since it merely interpreted the word in its plain and ordinary meaning.

Negros del Norte Planters Ass’n Multi-Purpose Cooperative v. Commissioner of Internal Revenue and BIR Regional Director, Region 12, Bacolod City, CTA Case No. 8287 (January 30, 2013) • To be exempt from VAT on its sale transaction of processed goods or material, the cooperative must be an agriculture producer. • Based on Republic Act No. 9520, in relation to RA 9337, the sale of sugar in its processed form by a cooperative is exempt from VAT, if the sale is made to members of the cooperative. Whereas, if the sale of sugar in its processed form is made by the cooperative to non-members, said sale is exempt from VAT if the cooperative is an agricultural producer of the sugar cane that has been converted into refined sugar.

Deutsche Knowledge Services Pte. Ltd. v. Commissioner of Internal Revenue, CTA EB No. 834 (CTA Case No. 7808) (February 4, 2013) • When the law provides a period within which to commence an action, such requirement is jurisdictional. • Observance of the periods provided for in Section 112 of the 1997 NIRC is mandatory and noncompliance therewith would result in the denial of the claim. • The right to appeal is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of law. The failure to perfect an appeal as required by the rules has the effect of defeating the right to appeal of a party and precluding the appellate court from acquiring jurisdiction over the case.

Adelardo K. Pagente v. Hon. Esmeralda Tabule, Hon. Nelson Aspe, Hon. Kim JacintoHenares, Bureau of Internal Revenue, CTA Case No. 8280 (February 5, 2013)

TAX MANAGEMENT ASSOCIATION OF THE PHILIPPINES, INC. __________________________________________________ • The Court of Tax Appeals does not have jurisdiction to entertain the appeal and to determine the validity and correctness of an assessment that had already attained finality. • As provided in Section 228 of the 1997 NIRC, as implemented by Section 3.1.5 of Rev. Regs. No. 12-99, the failure of a taxpayer to file a timely protest against the assessment renders the assessment final, executory and demandable. Once the assessment attains finality, the taxpayer is already precluded from disputing the correctness of the assessment.

Commissioner of Internal Revenue v. Fax N Parcel, CTA EB No. 883 (CTA Case No. 7415) (February 14, 2013) • Revenue Memorandum Order no. 04-03 recognized the need to verify the amounts reflected in the Quarterly Report of Summary Lists of Sales and Purchases with other externally sourced data in ascertaining the taxpayer’s under-declaration of revenues or overstatement of costs and expenses, if any. • While it is true that tax assessments have the presumption of correctness and regularity in its favour, it is also equally true that assessments should not be based on mere presumptions, no matter how reasonable or logical the presumption may be.

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