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Tax Digest
REVENUE REGULATIONS
Requirements for Income Tax
Deductibility of Expenses
Revenue Regulations No. 12-2013 issued on July 12, 2013
amends Section 2.58.5 of Revenue Regulations (RR) No.
2-98.
The old rule during tax assessment is to allow
deduction of expense for income tax purposes upon
payment of alleged deficiency withholding tax
based on failure to withhold resulting to
cancellation of income tax assessment arising from
disallowance of expense for non-withholding.
Under RR 12-2013, even if payment of alleged
withholding tax is made during tax assessment, the
income tax assessment from disallowance of
expense for failure to withhold will still remain.
Section 2.58.5 of Revenue Regulations (RR) No. 2-98, as
amended, to read as follows :
“ Section 2.58.5 Requirements of Deductibility Any income payment which is deductible under the
Code shall be allowed as a deduction from the payor’s
gross income only if it shown that the income tax
required to be withheld has been paid to the Bureau in
accordance with Secs. 57 and 58 of the Code.
No deduction will also be allowed notwithstanding
payments of withholding tax at the time of the audit
investigation or reinvestigation/reconsideration in
cases where no withstanding of tax was made in
accordance with Secs. 57 and 58 of the Code.”
The provisions of these Regulations shall take effect after
fifteen (15) days following publication in any newspaper or
general circulation.
Revenue Regulations No. 12-2013
Volume 6, Series 37
including the Project Management and Implementation
Service in its coverage for the placement of personnel
pursuant to the approved Notice of Organizations, Staffing
and Compensation Action (NOSCA) relative to the BIR
Rationalization Plan under Executive Order No. 366.
Revenue Memorandum Order No. 22-2013
Guidelines and Procedures for the
Implementation of the Electronic Official
Register Book System
Revenue Memorandum Order No. 23-2013 issued on August
8, 2013 prescribes the guidelines and procedures for the
implementation of Electronic Official Register Book (eORB)
System, which shall be initially implemented in the major
tobacco companies identified by the BIR. Notice of eORB
Implementation shall be issued to other tobacco
companies. Taxpayers informed to use the eORB system
shall no longer submit the hard copy(ies) of eORB Form.
The process owner of the eORB system shall be the Large
Taxpayers Service (LTS) with the Chief of Excise LT Field
Operations Division (ELTFOD) as the designated authorized
approving officer. The authority of the Chief, ELTFOD shall
include the approval of the enrolment form as well as the
approval of any amendment to the submitted eORB forms
and Excise Tax deposits.
The Excise LT Regulatory Division (ELTD) shall encode into
eORB System all the pertinent information contained in
the approved Permit to Operate and registration permits
for brand of tobacco products within 24 hours immediately
upon approval of the application.
The LT Performance Monitoring and Programs Division
(LTPMPD) shall generate and print removal and collection
reports generated by the eORB System, for the purposes of
preparing Excise Tax collections for submission to top
management.
Project Management and Implementation
Service
The operations and user’s manual containing all the
procedural requirements for the use of the eORB System
may be downloaded thru eORB icon from the BIR website
(www.bir.gov.ph). With respect to the other requirements
that are incidental in the usage of the eORB System, the
procedures specified in Order shall be observed.
Revenue Memorandum Order No. 22-2013 issued on July 31,
2013 amends Revenue Memorandum Order No. 9-2012 by
Any violation of the provisions in the Order shall be
subject to administrative disciplinary action and shall be
REVENUE MEMORANDUM
ORDER
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Tax Digest
dealt with accordingly. In cases where the taxpayer failed
to maintain the eORB System as well as submit the eORB
Form to the BIR through the facility of said System, the
same constitutes a violation of Section 153 of the National
Internal Revenue Code, as amended, upon which the
penalty of P1,000.00 for each failure shall be imposed;
provided that the aggregate amount to be imposed for
such failures during calendar year shall not exceed
P25,000.00 pursuant to the provisions of Section 250 of
the same Code.
Volume 6, Series 37
d.
e.
Revenue Memorandum Order No. 23-2013
Policies And Guidelines in the Issuance of
Tax Exemption Rulings to Qualified
Non-Stock, Non-Profit Corporations and
Associations Under Section 30 of the
National Internal Revenue Code of 1997
Revenue Memorandum Order No. 20-2013 issued on July
22, 2013 prescribes the policies and guidelines in the
issuance of Tax Exemption Rulings to qualified non-stock,
non-profit corporations and associations under Section
30 of the National Internal Revenue Code (NIRC) of 1997, as
amended.
Corporations and associations enumerated under Section
30 of the NIRC, as amended, including those which have
been issued tax exemption rulings/certificates prior to
June 30, 2012, shall file their respective Applications for
Tax Exemption/Revalidation with the Revenue District
Office (RDO) where they are registered. Only corporations
or associations that are duly qualified under Section 30 of
the NIRC, as amended, shall be issued Tax Exemption
Rulings.
A corporation or association shall submit the following
documents:
a. Original copy of application letter for issuance of Tax
Exemption Ruling. The letter shall cite the particular
paragraph of Section 30 of the NIRC, as amended,
under
which
the
application
for
exemption/revalidation is being based;
b. Certified true copy of the latest Articles of
Incorporation and By-Laws issued by the Securities
and Exchange Commission;
c. Original copy of Certification under Oath by an
executive officer of the corporation or association as
f.
g.
h.
to: (i) all previous amendments/changes in the
Articles of Incorporation and By-Laws, (ii) manner of
activities, and (iii) the sources and disposition of
income, if any, of the subject corporation or
association. If there are no amendments/changes,
the Certification shall state this fact;
Certified true copy of the Certificate of Registration
with the BIR;
Original copy of the Certification under Oath by the
Treasurer of the corporation or association as to the
amount of income, compensation, salaries or any
emoluments paid by the corporation or association
to its trustees, officers and other executive officers.
Provided, that, a corporation sole, which, by its
nature, does not have trustees, orporate officers or
executive officers need not submit the certification
required under this subparagraph.
Original copy of the Certification issued by the RDO
where the corporation or association is registered
that the corporation or association is not the subject
of any pending investigation, on-going audit, pending
tax assessment, administrative protest, claim for
refund or issuance of tax credit certificate, collection
proceedings, or a judicial appeal; or if there be any,
the original copy of the Certification issued by the
RDO on the status thereof;
Certified true copies of the Income Tax Returns or
Annual Information Returns and Financial
Statements of the corporation or association for the
last three (3) years; and
Original copy of a statement under Oath by an
executive officer of the corporation or association as
to its modus operandi which shall include:
i. A full description of the past, present and
proposed activities of the corporation or
association;
ii. A narrative description of anticipated receipts
and contemplated expenditures; and
iii. A detailed description of all revenues which it
seeks to be exempted from Income Tax. All other
revenues which are not included in the
statement/application shall be subject to Income
Tax.
In addition to the said requirements, a non-stock and
non-profit educational institution under Section 30(H) of
the NIRC, as amended, shall submit the following
documents:
a. Certified true copy of government recognition/
permit/accreditation to operate as an educational
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Tax Digest
institution issued by the Commission on Higher
Education (CHED), Department of Education (DepEd),
or Technical Education and Skills Development
Authority (TESDA);
b. If the government recognition/permit/accreditation to
operate as an education institution was issued more
than five (5) years prior to the application for tax
exemption/revalidation, an original copy of a current
Certificate of Operation/Good Standing, or other
equivalent document, issued by the appropriate
government agency (i.e., CHED, DepEd, or TESDA) shall
be submitted as proof that the non-stock and
non-profit educational institution is currently
operating as such; and
c. Original copy of Certificate of utilization of annual
revenues and assets by the Treasurer or his
equivalent of the non-stock and non-profit
educational institution. In accordance with the
guidelines set forth in Section 1.3 of Department of
Finance (DOF) Order No. 137-87, the Certificate shall
provide a breakdown of the following:
i. Any amount in cash or in kind (including
administrative expenses) paid or utilized to
accomplish one or more purposes for which the
educational institution was created or organized,
including grant of scholarship to deserving
students and professorial chairs for the
enhancement of professional course.
ii. Any amount paid to acquire an asset used (or held
for use) directly in carrying out one or more
purposes for which it was created or organized,
including the upgrading of existing facilities to
support the conduct of the above activities.
iii. Any amount in cash or in kind invested in an activity
related to the educational purposes for which it
was created or organized.
iv. Any amount set aside for a specific project, which
must be supported by a Board Resolution issued by
the school administration on proposed projects
(i.e., construction and/or improvement of school
buildings and facilities, acquisition of equipment,
books and the like) to be funded out of the money
deposited in banks or placed in money markets, on
or before the 15th day of the fourth month following
the end of its taxable year.
The general guidelines in the evaluation of the
applications for tax exemptions/revalidation as well as the
specific guidelines in the evaluation of the application of
corporations or associations under Section 30(E) of the
NIRC, as amended, are specified in the Order.
Volume 6, Series 37
A Tax Exemption Ruling issued under this Order shall be
valid for a period of three (3) years from the date of
effectivity specified in the Ruling, unless sooner revoked
or cancelled. The Tax Exemption Ruling shall be deemed
revoked if there are material changes in the character,
purpose, or method of operation of the corporation or
association which are inconsistent with the basis for its
Income Tax exemption. The revocation takes effect as of
the date of the material change.
Tax Exemption Rulings may be renewed upon filing of a
subseguent Application for Tax Exemption/Revalidation,
under same requirements and procedures provided
herein. The exemption shall be deemed revoked upon the
expiration of the Tax Exemption Ruling. The new Tax
Exemption Ruling shall be valid for another period of
three (3) years, unless sooner revoked or cancelled.
If a corporation or association, which has been issued a
Tax Exemption Ruling, fails to file its annual information
return, it shall automatically lose its income tax-exempt
status beginning the taxable year for which it failed to file
an annual information return, in addition to the sanctions
imposed under Section 250 of the NIRC, as amended.
Tax exemption rulings or certificates issued to
corporations or associations listed under Section 30 of
the NIRC, as amended, prior to June 30, 2012 shall be valid
until December 31, 2013. Tax exemption rulings or
certificates issued after June 30, 2012 shall continue to be
valid for a period of three (3) years from date of issuance,
unless sooner revoked or cancelled.
Revenue Memorandum Order No. 20-2013
REVENUE MEMORANDUM
CIRCULAR
Validity Of The Unused/Unissued Principal
And Supplementary Receipts/Invoices
Revenue Memorandum Circular No. 52-2013 issued on
August 12, 2013 clarifies the validity of unused/unissued
principal and supplementary receipts/invoices printed
prior to January 18, 2013.
All principal and supplementary receipts/invoices with
Authority to Print (ATP) dated prior to January 1, 2011 shall
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Tax Digest
no longer be valid as of August 31, 2013 pursuant to
Revenue Regulations No. 18-2012 and Revenue
Memorandum Circular No. 44-2013.
Issuance of said receipts/invoices starting August 31, 2013
constitutes a violation of Section 264 of the Tax Code of
1997, as amended, and is considered as if no receipt
/invoice was issued. No deduction from gross income shall
be allowed using these receipts/invoices as these are not
valid proof of substantiation. In case of VAT-registered
persons, no input tax may be claimed using these
receipts/invoices.
All principal and supplementary receipts/invoices with
ATP dated January 1, 2011 to January 17, 2013 may be used
until October 31, 2013 provided that new ATP was issued on
or before August 30, 2013. Application for new ATP filed
after April 30, 2013 is deemed to have been filed out of
time and subject to a penalty of P1,000.00 pursuant to
Section 264 of the Tax Code, as amended.
In all principal and supplementary receipts/invoices which
can still be used until October 31, 2013, the words “valid
until October 31, 2013 only” shall be stamped
prominently on the face of the receipts or invoices
(original and duplicate copies). No deduction and input tax
may be claimed using these receipts/invoices.
Volume 6, Series 37
The Recovery of Unutilized Creditable
Input Taxes Attribute to Value Added Tax
Revenue Memorandum Circular No. 57-2013 issued on
August 29, 2013 circularizes BIR Ruling No. 123-2013 dated
March 25, 2013 concerning the recovery of unutilized
creditable input taxes attributable to Value Added Tax
(VAT) zero-rated sales.
Based on Sections 110(B) and 112(A) of the 1997 Tax Code, as
amended, the unutilized creditable input taxes
attributable to zero-rated sales can only be recovered
through the application for refund or tax credit. The
proposition that accumulated and unapplied input VAT
arising from Cekas’ purchase of goods and services after
expiration of the 2 year prescriptive period may be
expensed outright is denied for lack of legal basis.
All employees engaged in the audit and review of audit
cases are enjoined to disallow unutilized creditable input
taxes attribute to VAT zero-rated sales that are claimed as
deductions for Income Tax purposes.
Revenue Memorandum Circular No. 57-2013
***
A certified true copy of the ATP shall be included as
attachment in any application for tax clearance.
Non-submission of ATP shall be ground for non-issuance
of tax clearance for whatever purposes.
Revenue Memorandum Circular No. 52-2013
Extending the Validity of Provisional
Accreditation Granted to Printers of
Principal and Supplementary Receipts
/Invoices
Revenue Memorandum Circular No. 54-2013 issued on
August 15, 2013 extends until December 31, 2013 the validity
of provisional accreditation granted to deemed accredited
printers of principal and supplementary receipts/invoices
posted in the BIR website from February 14, 2013 to June
30, 2013.
Philippines Economy Is Rising On The First
Half Of 2013
The GOVERNMENT’S revenue and tax efforts improved in
the first half on the back of better collections, putting it on
track toward meeting its goals for the year.
Data from the Finance department showed that the
government’s revenue effort – which reflects its gross
domestic product (GDP) - - stood at 17.9% in the first
semester, better than the 15.5% notched in the same
period last year.
All internal revenue officers and employees are hereby
enjoined to give this Revenue Memorandum Circular wide
a publicity as possible.
Tax effort - - or the government’s total tax collections as a
percentage of the economy - - came in at 13.6% in the first
six months, higher than the 13.3% recorded in the first
semester of 2012.
Revenue Memorandum Circular No. 54-2013
The government this year aims to improve its revenue
4
Tax Digest
effort to 14.7% from the last year’s 14.5% and its tax effort
to 13.5% from 12.9%, in 2012.
Volume 6, Series 37
Philippines Signs Amended Tax Treaty with
Germany
This, as the country’s GDP is expected to grow 6-7% from
the 6.8% expansion notched in 2012.
The economy expanded by 7.6% in the first semester
versus last year’s 6.4%, already surpassing the
government’s full-year target.
In the first half, the government raked in a total P839.464
billion in revenues, 10.3% more than last year’s P760.921
billion.
Of this total, P746.313 billion came from tax revenues.
Contributing to this were the Bureau of Internal Revenue
(BIR), which collected P593.711 billion in taxes in the
semester, up 13.9% annually and bringing the agency’s tax
effort to 10.8%, data from the Finance department further
showed.
In the first semester of 2012, the BIR’s tax effort stood at
10.3%.
Meanwhile, the Bureau of Customs (BoC ) brought in
P145.131 billion in tax revenues in the first half, up just
1.2% from the P143.425 billion it collected in the same
period in 2012 and bringing its tax effort ratio to 2.6%.
The BoC ’s tax effort in the first half was slightly less than
the 2.8% ratio recorded in the first six months of 2012.
The Finance department wants the BIR’s tax effort to
improve to 10.5% this year from last year’s 10%, while the
BoC ’s ratio target is 2.9%, up from last year’s 2.7%.
The government aims to collect P1.746 trillion in revenues
this year, more than last year’s P1.535 trillion.
Majority of this will come from tax revenues, which are
seen to hit P1.608 trillion, more than the P1.361 trillion
collected in 2012.
The bulk of the projected taxes will be collected by the BIR,
which is mandated to collect P1.253 trillion this year. The
BoC , meanwhile, must collect P340 billion in tax revenues,
while other offices will bring in the remaining P14.2 billion.
Faye, Bettina (2013 Sept 8) Tax, revenue efforts
rise in first half – Business World
The Philippines and Germany recently signed a
renegotiated version of the Double Taxation Agreement
(DTA) between the two countries, otherwise known as the
Agreement for the Avoidance of Double Taxation with
respect to Taxes on Income and Capital, in Berlin, Germany
on September 9, 2013.
The Philippines was represented by Secretary of Finance
Cesar Purisima while Germany was represented by
Ambassador Martin Ney, the Legal Adviser to the German
Foreign Ministry.
Purisima hailed the signing of the renegotiated
agreement as a fruitful development in the Philippines’
efforts to seek international cooperation in tax
administration.
“We are honored and pleased to sign this latest set of
amendments to our Double Taxation agreement with
Germany. By signing this, we also renewed the
commitment between both of our countries to promote
tax transparency as an international priority, and to help
each other fight tax evasion in our respective
jurisdictions,” Purisima said.
Double Taxation agreements are meant to promote
international trade and investment by ensuring that
entities are not subject to double application of certain
types of tax between two contracting states, as this would
be detrimental to foreign business activity. The sharing of
tax information afforded by a Double Taxation agreement
enhances the ability of tax administrators to monitor
fiscal performance and revenue collections.
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Tax Digest
Volume 6, Series 37
Among the amendments to the Philippines-Germany DTA
are the lowering of certain preferential rates, as
summarized below:
Dividends, lowered preferential tax rate on dividends to
5% if beneficial owner is a company which owns at least
70 percent of stockholdings of paying company, from
previous 10% under the old DTA.
Interest, lowered tax on interest to rate of 10% unless
otherwise exempt instead of 15% rate in all other cases
under the old DTA and interest in connection with sale on
credit of a commercial/scientific equipment and of an
enterprise to enterprise sale on credit, if the recipient is
also the beneficial owner thereof, is now taxable only in
the residence State, and not anymore taxed in the source
state at 10%.
Royalties, lowered tax rate to 10% regardless of the type
of royalty.
Source:
http://www.gov.ph/2013/09/12/philippines-signs-amende
d-tax-treaty-with-germany/
September 12, 2013 | From the Department of Finance
Tax Digest by:
Client Continuity & Communication Team
Tax Compliance Services
For clarification, tax queries or if you need
our assistance in securing BIR ruling, you
may call us at telephone number (632)
759-5090 or email us at
aocheadoffice@alasoplascpas.com or visit
us at our website www.alasoplascpas.com
This publication should not be used or
treated as professional advice. The
information in this publication should not
be relied to replace professional advice
on specific matters and its contents must
not be used as basis for formulating
decisions under any circumstances.
Readers for this material are advised to
seek professional advise before making
any business decision or you may call and
ask for the full text.
6