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February 2014 Issue
TMAP MONITOR TMAP Files Position Papers on RR 1-2014 and RR 2-2014 RR 1-2014
RR 2-2014
The Tax Management Association of the Philippines (TMAP) filed with the Bureau of Internal Revenue (BIR) on February 21, 2014 its position paper to appeal the new alphalist requirements under BIR Revenue Regulations (RR) No. 1-2014, which mandates the electronic submission and the use of a prescribed format for alphalists attached as an integral part of the Annual Information Returns. Under said BIR regulations, noncompliance with these mandatory reportorial requirements will be considered by the BIR as nonsubmission and will not qualify as a deductible expense for income tax purposes.
The Tax Management Association of the Philippines (TMAP) submitted to the Ways and Means Committee of the House of Representatives on February 25, 2014 its position paper on BIR Revenue Regulations (RR) No. 22014, which prescribes the new ITR forms to be used for calendar year 2013 and to be filed this April 15, 2014. The position paper was in response to the public hearing called by the Committee last February 17, 2013 questioning said regulation.
While TMAP recognizes the BIR’s thrust to computerize its database for the more effective and efficient matching of taxes withheld by withholding tax agents versus the taxes declared by income recipients, TMAP raised the following issues, which involve taxpayer rights, in general: (Continued on page 3)
RR 2-2014 introduced new income tax forms per class of taxpayer with barcodes and information requirements that are designed for ease of scanning and retrieval of information by the BIR. However, this same regulation also imposed additional restriction on deductions and prescribed supplementary information requirements for which TMAP raised the following points in its position paper: (Continued on page 3)
Chot Reyes at TMAP GMM It is not so often that TMAP is graced by a sports celebrity. Hence, it was no surprise that all eyes and ears were focused on Coach Chot Reyes when he delivered the key note speech during the February 26 General Membership Meeting. Coach Reyes shared with TMAP members the game plan he used as coach for the Gilas Pilipinas Team. Dissecting the last two minutes of the semi-finals games against South Korea, Coach Reyes pointed out the four pillars of the Gilas Pilipinas Team Model: trust, execution, accountability and motivation. (Continued on page 4)
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Kapihan session on RMC 8-2014, RMO 2014 and the Deutsche Bank case
The Second TMAP Kapihan Session held on February 19, 2014 focused on Revenue Memorandum Circular (RMC) 8-2014, Revenue Memorandum Order (RMO) 2014 and the Supreme Court Resolution on the tax treaty relief application filing. Presided by President Rina Manuel & VP for Internals Atty. Randy Bello, the Kapihan session was attended by 31 participants from various corporate members and was hosted by Castillo Laman Tan Law offices. Members first tackled RMC 8-2014 which requires concerned withholding agents to oblige all individuals and entities claiming exemption from withholding taxes to provide a copy of a valid, current and subsisting tax exemption certificate or ruling.
February 2014 Issue
TMAP Holds Seminar on New ITR forms and Other Updates TMAP conducted its first tax seminar for 2014 on February 26, which covered topics such as year-end tax filing reminders, introduction to new income tax forms, Revenue Regulation (RR) 18-2013, RR 1-2014 and other tax updates. Ms. Sally Bocobo-Marinduque, BIR Division ChiefLarge Taxpayers Assistance Division, reminded the members of the various annual reporting requirements due within the first quarter of 2014 and introduced the new income tax return forms prescribed by RR 2-2014. Separate tax returns are now required to be filed by corporations depending on whether they are subject to regular income tax rate, exempt with no other taxable income, or subject to multiple income tax rates. Members were apprised of the salient features of the new ITR which include new formatting changes for optical character recognition, mandatory itemized deductions for corporate and individual taxpayers which are exempt, or with income subject to preferential tax rates, or with mixed income, and additional information/disclosure requirements. The BIR further clarified that the supplemental information for individual taxpayers on the disclosure of gross income/receipts subjected to final tax, sale/exchange of real property, sale/exchange of shares of stock, and other income subjected to final tax is optional for the year 2013 but mandatory starting 2014. Atty. Terence Bello (TMAP Internal VP) presented TMAP’s position on RR 18-2013, with emphasis on the due process requirement in assessments. RR 18-2013 modified the procedures in the issuance of assessments, modes of services and the calculation of interest on assessments. (Continued on page 5)
During the session, the members resolved to draft a position paper requesting for a clarification on the scope of the RMC particularly on whether it applies only to Section 30 exempt taxpayers. The discussions also highlighted that the requirement is contrary to Revenue Bulletin No. 1-2003 which states that “… the ruling function need not be exercised where the law, rule or regulation is clear, thereby dispensing with the need for the interpretation thereof.” Finally, requiring all incomepayees to secure a tax exemption certificate or ruling would just add to the heavy workload of the BIR further delaying the issuance of rulings. (Continued on page 4)
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TMAP Files Position Papers on RR 12014 and RR 2-2014
February 2014 Issue •
The BIR re-introduced the Supplemental Information Requirement disclosure on gross income/receipts subjected to final tax, sale/exchange of real property, sale/exchange of shares of stock, and other income subjected to final tax. TMAP, together with other professional and business organizations, previously filed a position paper to ask for the withdrawal of Revenue Memorandum Circular (RMC) 40-2011, which originally required the supplemental information, due to lack of legal basis, privacy concerns, the Bank Secrecy Law and administrative difficulties. TMAP reiterates its position for RR 22014.
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The Additional Information Requirement on external auditor/accredited tax agent, revenues, cost of sales and other taxable income, balance sheet accounts, and top 20 stockholders, partners or members are redundant as these information are already disclosed in the audited financial statement and notes, which are required to be attached to the ITR and submitted to the BIR. The additional disclosures impose unnecessary burden to taxpayers, which will not necessarily result to additional tax collections for the BIR.
RR 1-2014 (continued) •
The disallowance of deductions from gross income of withholding agents for non-compliance with the prescribed alphalist format is not a valid exercise of the BIR’s quasi-legislative powers because it expanded the deductibility requirements under the Tax Code. Also, the The Tax Code only provides for administrative penalties in case of non-compliance with reportorial requirements, such as the alphalist. By imposing the penalty of disallowance of deductions, the measure becomes oppressive and confiscatory, and violates the due process principle.
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The penalty of non-deductibility of expense for simple failure to comply with the prescribed reportorial format is an undue additional burden on the part of withholding tax agents, who merely act as agents of the tax authority in the advance collection of taxes.
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The requirement for mandatory electronic submission (either through the eFPS, the electronic submission via BIR website, or the electronic mail) of the alphalist reports, even for business establishments with less than ten (10) employees and other small and micro business operators, is discriminatory given the state of internet accessibility in the country.
With these issues in mind, TMAP recommended the following measures to the BIR: 1. Withdraw the provision imposing the penalty of disallowance of expense deduction on withholding tax agents; and 2. Continue to allow manual submission for small and micro business enterprises, including those with less than 10 employees. Mandatory electronic submission should be made only for those under the EFPS.
In view of all these issues, TMAP proposed the following measures to Congress: • • • •
Withdrawal of Section 5 of RR -2014 which imposes the mandatory itemized deduction Exclusion of supplemental information requirement from the ITR forms Deferment of the use of the new ITR forms to give sufficient time to educate the taxpayers Simplification of the new ITR forms, especially for self-employed individual taxpayers
RR 2-2014 (continued) •
The Mandatory Itemized Deduction for corporate and individual taxpayers which are exempt, or with income subject to preferential tax rates, or with mixed income (exempt and subject to preferential rates) has no legal basis as Section 34(L) of the Tax Code explicitly allows optional standard deduction (OSD) as a deduction for those subject to regular income tax under the Tax Code.
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Chot Reyes at TMAP GMM (continued)
February 2014 Issue It is important that every player knows his job. The coach shared with the group that each player in Gilas Pilipinas took a particular role and responsibility as a team member. Stressing the importance of motivation, Coach Reyes closed with his parting line to an engrossed TMAP audience, “Be self-motivated yourself, first.”
Kapihan session on RMC 8-2014, RMO 2014 and the Deutsche Bank case (continued)
Reyes coached the first Philippine team to reach basketball world championship in 40 years. He shared that TMAP is just like a basketball team. “We build teams to get things done, to be able to deliver, perform and execute,” he enthused. “Trust is the foundation of teamwork,” he emphasized. For most teams, it does not matter how individually skilled the members are. For the objective to be achieved, teamwork is the one that matters.
On the other hand, RMO 9-2014 prescribes the guidelines in the processing of requests for rulings with the Law and Legislative Division. Members raised the following points for the position paper (a) non-use of precedent, (b) due process violation caused by lack of communication, (c) due process violation owing to automatic denial of a request for ruling and (d) lack of an established timeline for the issuance of the ruling requested.
Reyes highlighted that for the semifinals game with South Korea he gave a clear game plan to the players and trusted them to execute the game plan. “You have to train your people to read the situation. Execution is not about instructions,” he explained.
Finally, the members discussed the Supreme Court decision on the Deutsche Bank case particularly on the TTRA. Members noted that it is still best practice to file the TTRA. The good news, however, is that the Supreme Court decision is a good defense in case of an assessment by the BIR.
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February 2014 Issue
TMAP Holds Seminar on New ITR Forms and Other Updates (Continued) The implications of RR 1-2014 were then discussed by Atty. Marivic Sarmiento (TMAP Director), who elaborated on the changes in the requirements for the submission of the annual alpha-lists, the supporting arguments for/against its validity, and the penalty for non-compliance: disallowance of expenses. Lastly, Atty. Lea Roque (TMAP Director) updated the members of the recently released BIR regulations, circulars and orders, which included new requirements for processing of request for rulings, presentation of tax exemption certificate by exempt individuals and entities, requirements for accreditation of importers and customs brokers by the BIR, and submission of Form 2316.
New Corporate Member Profile TMAP now includes Philex Mining Corporation in its corporate membership roster, as represented by Atty. Jeffrey Balmores.
TMAP Welcomes New Members TMAP inducted new members during the February 2014 GMM, as follows:
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Atty. Jeffrey R. Balmores (CPA-Lawyer) - Head of Tax and Corporate Governance of Philex Mining Corporation. Formerly with Jollibee Foods Corporation as Corporate Tax Director. Joel Baptista (CPA) - Tax Manager of Sun Life of Canada. Formerly a Revenue Officer of BIR for 15 years
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Atty. Amabelle Grace G. Mascardo-Macias (Lawyer) - Partner of Gerodias Suchianco Estrella Law Firm
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Ma. Victoria C. Espano (CPA) – Chief Executive Officer of Punongbayan & Araullo
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Atty. Michael Dana N. Montero (Lawyer) - VicePresident for Legal and Tax Affairs and a member of Board of Directors of Stream International Global Services Philippines, Inc. (formerly eTelecare Global Solutions, Inc.)
Philex Mining Corporation (PMC) is the Philippines’ largest publicly listed mining company and one of the oldest mining companies in the country having been incorporated in 1955 and subsequently listed on the Philippine Stock Exchange on November 23, 1956. PMC and its subsidiaries are organized into two main business groupings: the metals business under PMC, and the energy and hydrocarbon business under Philex Petroleum Corporation. PMC envisions becoming a highly-respected, worldclass natural resource company committed to deliver excellent value to its investors, employees, and other stakeholders through responsible mining – discovering and processing minerals and energy resources for the use of society. PMC is committed to the continuous improvement of its operations by minimizing its adverse impact on the community and its surrounding areas, complying with all applicable rules and legislations, and promoting environmental awareness and social commitment across the entire organization.
Welcome to TMAP!
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February 2014 Issue
Updates From The Board TMAP paid a courtesy call to Ateneo Law School Dean Sedfrey Candelaria in February 2014. TMAP will continue to work with Ateneo Law in pursuing enhancements in tax education, promoting the field of tax practice for law students and tax research.
Happy birthday to the following TMAP members who are celebrating their respective birthdays in February and March!
FEBRUARY 1 ABENIR, Anthony Brett 1 PATRICIO, Cecilia R. 3 DEL ROSARIO, Jean P. 5 PUNONGBAYAN, Ester R. 6 SISON, Benedicto
*** On February 17, 2014, TMAP was invited by the House of Representatives Committee on Ways and Means as one of the resource persons in its public hearing on RR 22014 (new ITR forms). In said hearing, TMAP reiterated its position against the supplemental information requirement on passive income and raised the issue on mandatory itemized deduction under Section 5 of the RR. TMAP also attended the public hearing conducted by the Senate Ways and Means Committee in March 2014 to express its support for a Senate bill to adjust income tax brackets and reduce the tax rates.
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MARCH 2 3 4 4 5 9 11 16 20 21 25 26 26 30 30 31
TERRADO, Julie Ann S. BANAAG, Anacleto ARANAS, Jesus Clint O. TOLENTINO, Imelda Maxima R. CARDIÑO, Antonio L. VALDEZ, Enrico G. TUGONON, Benedict R. DUMLAO, Edgar D. ACYATAN-GUERRERO, Arminda MAMURIC, Jose Roberto L. ALAS, Danilo T. GATUZ, Trinity DE LEON, Edward M. DUGAN, Belinda E.
CONSTANTINO, Ferdinand A. GO-BROZO, Maria Socorro JURADO-BENEDICTO, Rosario DEL ROSARIO, Ana Maria S. NAVARRO-CRUZ, Hannah BUÑAG, Jose Mario LIM, Maria Lourdes P. HERNANDO, Ma. Josefina S. MEDALLA, Rolando Jr. V. ABELA, Walter Jr. L. Zialcita-Villapando, Madeline L. SY, Shennan A. MONSOD-TORMON, Menchie CRUZ, Mary Evangeline A. BANTA, Jeri Alanz A. SEBASTIAN, Guillermo V.
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