Tax Digest
Tax
Digest
A Regular Publication of Alba Romeo & Co.
A Regular Publication of Alba Romeo & Co
Vol. XI No. 12
Makati City, Philippines
Aug-Oct 2007
HIGHLIGHTS
Bureau of Internal Revenue ..................................................................................................................... 1-11
REVENUE REGULATIONS NO. 7-2007
Amends certain provisions of Revenue Regulations (RR) No. 21-2002, implementing Section 6(H) of the Tax Code of 1997,
as amended, authorizing the Commissioner of Internal Revenue (CIR) to prescribe additional procedural and/or documentary
requirements in connection with the preparation and submission of financial statements accompanying the tax returns.
REVENUE REGULATIONS 8-2007
Prescribes the additional compliance requirements from taxpayers mandated to adopt the Philippine Financial Reporting
Standards (PFRS) in recording business transactions and preparing financial statements.
REVENUE REGULATIONS NO. 10-2007
Amends further Section 3 of Revenue Regulations (RR) No. 9-2001, as last amended by RR No.5-2004, by expanding the
coverage of taxpayers required to file returns and pay taxes through the Electronic Filing and Payment System (EFPS).
REVENUE MEMORANDUM CIRCULAR NO. 39-2007
Clarifies the Income Tax and Value-Added Tax (VAT) treatment of agency fees/gross receipts of security agencies including
the withholding of taxes due thereon.
REVENUE MEMORANDUM CIRCULAR NO. 53-2007
Reiterates the amendment made by Republic Act (RA) No. 9337 imposing Value -Added Tax (VAT) on the sale of non-food
agricultural products, marine and forest products and on the sale of cotton and cotton seeds in their original state.
REVENUE MEMORANDUM CIRCULAR NO. 55-2007
An Act Enhanching Revenue Administration and Collection By Granting An Amnesty On all Unpaid Internal Revenue Taxes
Imposed by the National Government For Taxable year 2005 and Prior Years.
REVENUE MEMORANDUM ORDER NO. 19-2007
Prescribes the Consolidated Revised Schedule of Compromise Penalties for violations of the National Internal Revenue
Code (NIRC).
REVENUE MEMORANDUM ORDER NO. 28-2007
Prescribes the guidelines and procedures in the transmittal and processing of the Annual Information Return on Income Taxes Withheld
on Compensation and Final Withholding Taxes , Annual Information Return of Creditable Taxes Withheld - Expanded/Income Payments
Exempt from Withholding Tax and monthly/quarterly/ transactional remittance returns, 1601F, 1600,1602, 1603, 1606) with the
Monthly Alphalist of Payees (MAP) and returns required to have Summary Alphalist of Withholding Agents of Income Payments
subjected to Tax Withheld at Source (SAWT) under Revenue Regulations (RR) No. 2-2006 and procedures in the extraction, matching,
analysis, dissemination, utilization of payor/payees data including monitoring the extent of compliance of withholding agents and
income recipients subject to Withholding Tax through the Tax Reconciliation System (TRS).
REVENUE REGULATIONS NO. 12 - 2007
Amending certain provisions of Revenue Regulations No. 9-98 relative to the due date within which to pay Minimum Corporate Income
Tax (MCIT) imposed on domestic corporations and resident foreign corporations pursuant to section 27(E) and section 28(A)(2) of the
1997 National Internal Revenue Code, as Amended.
BDO Alba Romeo & Co.
Certified Public Accountants
www.bdoalbaromeo.com
Tax Digest
BUREAU OF INTERNAL
REVENUE
REVENUE REGULATIONS
NO. 7-2007
Amends certain provisions of Revenue Regulations
(RR) No. 21-2002, implementing Section 6(H) of
the Tax Code of 1997, as amended, authorizing the
Commissioner of Internal Revenue (CIR) to
prescribe additional procedural and/or documentary
requirements in connection with the preparation and
submission of financial statements accompanying the
tax returns.
The said provisions are amended to read as follows:
SECTION 1. CONTENTS AND FORMAT OF
FINANCIAL STATEMENTS TO BE ATTACHED
TO THE ANNUAL INCOME TAX RETURN OR
INFORMATION RETURN. - The Financial Statements with accompanying Auditor’s Certificate
attached to the Annual Income Tax Return (ITR),
or Annual Information Return for tax exempt persons, as the case may be, to be filed with the
Bureau of Internal Revenue, thru its collection agents
including Accredited Agent Banks , shall present/
state the accounts therein in a very descriptive fashion
such that the nature of the specific transactions
entered in the accounts are known to the reader.
The account titles to be used must be specific and
not control accounts which must be completely enumerated in the financial statements and these
accounts must conform to the basic framework of
the financial reporting standards promulgated by the
Financial Reporting Standards Council (FRSC) of
the Philippines which are the Generally Accepted
Accounting Principles in the Philippines which include Philippine Accounting Standards (PAS) and
Philippine Financial Reporting Standards (PFRS) and
the refinements introduced thereon in respect to
certain types of industries as well as to the rules and
requirements of regulatory agencies that have
supervision over them such as the Securities and
Exchange Commission (SEC), Bangko Sentral ng
Pilipinas (BSP), Insurance Commission (IC), etc.
Alba Romeo & Co.
AUG-OCT 2007
The accounts prescribed in the reports required by
the SEC, BSP, IC and other regulatory bodies shall
likewise be the accounts to be used by individual
taxpayers who are engaged in business or in the
exercise of profession, except for accounts that
are peculiar to corporations and other judicial
persons.
The Profit and Loss Statement/Income Statement
shall show separately by segment (there should be
proper labeling), with breakdown of the specific
accounts, the following:
I. Sales/Revenues;
II. Cost of goods sold (for seller of goods)/Cost
of services (for seller of services);
III. Selling and Administrative Expenses;
IV. Financial Expenses, if any;
V. Other Income; and
VI. Other Expenses
(Note: Items I, IV, V and VI should be fully explained in the Notes to the Financial Statements;
Items II and III should be supported by Schedules.)
SECTION 2. COVERAGE - The Financial Statements shall be composed of the following:
a. Balance Sheet;
b. Income Statement/Profit and Loss Statement;
c. Statement of Changes in Equity, showing
either:
• All changes in equity
• Changes in equity , other than those arising
from transactions with equity holders acting
in their capacity as equity holders;
d. Statement of Cash Flow;
e. Notes, comprising a summary of significant
accounting policies and other explanatory notes;
and
f. Schedules attached to the aforecited statements.
The submission of the abovementioned statements
is mandatory even if there is no income, retained
earnings, etc.
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Tax Digest
REVENUE REGULATIONS 8-2007
Prescribes the additional compliance requirements
from taxpayers mandated to adopt the Philippine
Financial Reporting Standards (PFRS) in recording business transactions and preparing financial
statements.
AUG-OCT 2007
December 31, 2007 and all fiscal years ending
not later than June 30, 2008.
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REVENUE REGULATIONS
NO. 10-2007
The Philippines has adopted the International
Financial Reporting Standards (IFRS) as the PFRS
that should be observed by big corporate taxpayers in the recording of their business transactions
and preparation of Financial Statements starting
year 2005. Under the PFRS, the recording and
the recognition of business transactions for financial accounting purposes, in a majority of situations, differ from the application of tax rules on
the same transactions resulting to disparity of
reports for financial accounting vis-a-vis tax
accounting.
Amends further Section 3 of Revenue Regulations
(RR) No. 9-2001, as last amended by RR No.
5-2004, by expanding the coverage of taxpayers
required to file returns and pay taxes through the
Electronic Filing and Payment System (EFPS).
Hence, there is a need to reconcile the disparity in
a systematic and clear manner to avoid irritants
between the taxpayers and the tax enforcer.
These Regulations shall take effect on all returns
to be filed in October, 2007 or after 15 days following publication in a newspaper of general circulation, whichever comes later.
Accordingly, concerned taxpayers are mandated
to maintain books and records that would reflect
the reconciling items between Financial Statements
figures and/or data with those reflected/presented
in the filed Income Tax Return (ITR). The recording and presentation of the reconciling items in
such books and records shall be done in such a
manner that would facilitate the understanding by
the examiners/auditors of the Bureau of Internal
Revenue tasked to undertake audit/ investigation
functions, providing in sufficient detail the computation of the differences and the reasons therefore
aimed at bringing into agreement the PFRS and
ITR figures.
The keeping of books and records for the reconciling items referred to in the Regulations shall start
for taxable year 2007. For this purpose ‘taxable
year 2007’ shall mean calendar year ending
Alba Romeo & Co.
The coverage now includes corporations with paidup capital stock of P 10,000,000 and above; corporations with complete computerized system; and all
government bidders pursuant to Executive Order
(EO) No. 398, as implemented by RR 3-2005.
However, non-stock non-profit corporations are
excluded from the coverage of this Regulations.
xxx
REVENUE MEMORANDUM
CIRCULAR NO. 39-2007
Clarifies the Income Tax and Value-Added Tax
(VAT) treatment of agency fees/gross receipts of
security agencies including the withholding of taxes
due thereon. The issue that comes into fore is
whether or not the security guard’s salaries, which
form part of the Contract Price of the security
services rendered by the Security Agency, can be
treated as gross income of the Security Agency,
which will constitute as part of the taxable gross
receipts subject to VAT, whether actually or
constructively received.
In view of the clear language of the law and its
implementing regulations placing the primary
obligation on the Client to pay the salaries of the
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Tax Digest
security guards coupled with the requirement that
the monies received by the Security Agency representing salaries shall be earmarked and segregated
for the said guards, the amount paid by the Client
representing the salaries of the security guards will
not form part of the Security Agency’s gross income,
and neither will it form part of its taxable gross
receipts when actually or constructively received.
The Security Agency must record as part of its gross
income the Agency Fee portion of the payment, net
of the VAT thereon. Since the security guards’
salaries are tacked in as part of the service fees, the
security agency must always recognize that portion
of the fees as a LIABILITY. For this purpose, the
Contract for Security Services entered into by and
between the security agency and its Client must
provide for a breakdown of the amount of security
services into two components: (1) the Agency Fee,
and (2) the Security Guards’ Salaries. If the
Contract does not provide for a breakdown of the
amount payable to the security agency, the entire
amount representing the Contract Price will be taxed
as income to the Agency, which must form part of
its gross receipts, whether actually or constructively
received.
The Client who is engaged in business can claim as
a deduction from gross income the total amount paid
to the Security Agency, net of the VAT on the Agency
Fee. It is allowed to recognize an input tax based
on the Agency Fee if the transaction is covered by a
VAT Official Receipt issued by the Security Agency.
It is also required to withhold and remit the
Expanded Withholding Tax (EWT) on the Agency
Fee. The portion of the expense pertaining to the
security guards salaries will be covered by a
Non-VAT Acknowledgment Receipt issued by the
Security Agency.
For VAT purposes, the taxable gross receipts of
the Security Agency pertains to the amount actually
or constructively received by it constituting its gross
income. Since only the amount covering the Agency
Fee represents its gross income, then that portion
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AUG-OCT 2007
alone of the Contract Price, when actually or
constructively received, will constitute the Security Agency’s taxable gross receipts. This means
that the amount received by the Security Agency,
which is segregated, earmarked or set aside for
the salaries of the security guards, will not form
part of its gross receipts but should be
recognized as a LIABILITY. Accordingly, the
12% output tax will only be computed on the.
Agency Fee which shall in turn be the input tax of
its Client.
Only the portion of the payment representing the
Agency Fee, if covered by a VAT Official
Receipt, will entitle the VAT-registered Client to
a claim of input tax credit. This means that the
amount of output tax paid by the Security Agency
is the amount of input tax available to the Client.
The Client cannot claim an input tax on the salary
portion of the expense (Security Services)
because it pertains to services exempt from VAT.
Section 109(I) of the National Internal Revenue
Code (NIRC), as amended, specifically exempts
from VAT services rendered by individuals pursuant to an employer-employee relationship. The
services of the security guards squarely fall
under this category of exempt transaction. This
is because, in substance, the Client has the
principal obligation to bear the prescribed wage
rates for the security guards as mentioned, and
the Security Agency will be jointly and severally
liable therefore only in the event of the Client’s
failure to pay.
Consonant with the provisions of Section 113 of
the NIRC, as amended, and as implemented by
Section 4.113-1 of Revenue Regulations (RR)
No. 16-2005, the Security Agency shall issue a
VAT Official Receipt for every sale, barter or
exchange of services. The VAT Official Receipt
shall cover the entire amount which the Client
pays to the Security Agency representing the
compens ation of its services (Agency Fee) with
the indication that such amount received includes
the VAT. The VAT on the Agency Fee must
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Tax Digest
always be shown as a separate item in the VAT
Official Receipt. The VAT shown on the VAT
Official Receipt will constitute the output tax of
the Security Agency and in turn, the input tax of
its Client.
With respect to the security guards’ salaries, which
are mandated by law to be paid by the Client
through the Security Agency, the amount so paid
representing salaries must be covered by a
Non-VAT Acknowledgement Receipt.
This document, coupled with the notarized
certification of the EWT shall be a sufficient
substantiation for the expense that will be claimed
as a deduction from gross income by the Client.
As a general rule, “all income payments which
are required to be subjected to withholding of
income tax shall be subject to the corresponding
withholding tax rate to be withheld by the person
having control over the payment and who, at the
same time, claims the expenses.”
Insofar as the Agency Fee is concerned, the
Client is constituted as the withholding agent of
the EWT following the rule abovementioned.
However, with respect to the portion of the
Contract Price representing the amount segregated
and earmarked as salaries of the security guards,
the Security Agency shall be the one responsible
for the withholding of the tax on compensation
income. This is so because while it is the Client
who claims the payment as an expense, it is the
Security Agency that physically controls the
payment to the salaries of the Security guards.
However, in order to comply with the requirement for deductibility under Section 34(K), in
relation to Sections 58 and 81, all of the NIRC,
as amended, the Security Agency must furnish its
Client, on or before January 31 of the year
following the year of withholding, a Notarized
Certification indicating the names of the guards
employed by the Client, their respective
Taxpayer’s Identification Numbers (TINs), the
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AUG-OCT 2007
amount of their salaries and the amount of tax
withheld from each. This certification together with
the covering Non-VAT Acknowledgment Receipt
must be kept on file by the Client as substantiation for the claim of the expense.
xxx
REVENUE MEMORANDUM
CIRCULAR NO. 53-2007
Reiterates the amendment made by Republic Act
(RA) No. 9337 imposing Value -Added Tax (VAT)
on the sale of non-food agricultural products, marine and forest products and on the sale of cotton
and cotton seeds in their original state.
Prior to the enactment of RA No. 9337, which
amended certain provisions of the National Internal Revenue Code (NIRC) of 1997, as amended,
Section 109 has included the “sale of non-food
agricultural products; marine and forest
products in their original state by the primary
producer or the owner of the land where the
same are produced” as well as the “sale of
cotton and cotton seeds in their original state;
and copra” as among the transactions exempt
from the imposition of VAT.
However, with the promulgation of RA No. 9337,
the abovementioned exempt transactions were
repealed by Section 7 of such Act when it amended
Section 109 by excluding from the enumeration of
VAT-exempt transactions the said aforementioned
provisions.Revenue Regulations (RR) No. 16-2005
implementing the provisions of RA No. 9337 became effective beginning November 1, 2005. Thus,
beginning such date, primary producers of non-food
agricultural products; marine and forest products,
including owners of the land where the same are
produced, as well as sellers of cotton and cotton
seeds in their original state are already subject to
VAT at the rate of 10% from November 2005 to
January 2006 and to the rate of 12% beginning
February 2006 onwards.
As such, these taxpayers are expected to have
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Tax Digest
AUG-OCT 2007
already filed their respective VAT declarations and
paid the VAT due on these newly-covered VAT
transactions beginning said period. In case they have
inadvertently failed to file the VAT returns required
or have wrongly continued to declare these transactions as VAT-exempt in their respective VAT returns
filed beginning November 2005, they are encouraged
to make the necessary corrections and self assessments in order that these transactions may properly
be reflected in their rightful category as transactions
subject to VAT with the corresponding payment of
the deficiency VAT due.
For this purpose, all district offices are likewise
directed to review the VAT returns filed by these
taxpayers beginning on the month of November 2005
and onwards, check whether these previously
exempt transactions have been declared for VAT
purposes and issue deficiency assessments , if found
to be otherwise.
· those with pending cases involving unexplained or unlawfully acquired wealth,
revenue or income under the Anti-Graft and
Corrupt Practices Act;
· those with pending cases filed in court
involving violation of the Anti-Money Laundering Law:
· those with pending criminal cases filed in court
or in the DOJ for tax evasion and other
criminal offenses under Chapter II of Title X
of the National Internal Revenue Code of
1997, as amended.
· those with pending criminal cases filed in
court for felonies of frauds, illegal exaction
and transactions, and malversation of public funds and property under Chapter III and
IV of Title VII of the Revised Penal Code;
and
· tax cases subject of final and executory
judgment by the Courts.
xxx
REVENUE MEMORANDUM
CIRCULAR NO. 55-2007
“An Act Enhanching Revenue Administration and
Collection By Granting An Amnesty On all
Unpaid Internal Revenue Taxes Imposed by the
National Government For Taxable year 2005 and
Prior Years,” the following rules and regulations are
hereby promulgated to implement the provisions of
the said Act.
Availment. Taxpayers availing of the tax amnesty
shall file a tax amnesty return accompanied by
Notice of Availment and Statement of Assets,
Liabilities and Networth (SALN) as of December 31, 2005.
Coverage. All national internal revenue taxes
imposed by the National Government for the
taxable year 2005 and prior years, with or without
assessment duly issued therefore, that have remained
unpaid as of December 31, 2005.
The qualified taxpayers are required to pay an
amnesty tax equivalent to five percent (5 %) of
their total declared networth as of Dec. 31, 2005
as declared in the SALN as of the said period,
or resulting increase in networth by amending such
previously filed statements for purposes of this
tax amnesty, thereby including still undeclared
assets and/or liabilities, as the case may be, as of
December 31, 2005, or the absolute minimum
amnesty payment, whichever is higher, in accordance with the following schedule:
Exceptions. The tax amnesty does not extend to
the following persons or cases:
· withholding agents with respect to their withholding tax liabilities;
· those with pending cases falling under the
jurisdiction of the Presidential Commission on
Good Government (PCGG)
Alba Romeo & Co.
a. Corporations based on subscribed capital
Above P50M - 5% or P500,000, whichever
is higher
P20 - P50 M- 5% or P250,000, whichever
is higher
P5 - P20 M-5% or P100,000, whichever
is higher
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Tax Digest
AUG-OCT 2007
Below P5 M- 5% or P 25,000, whichever is
higher
b. Individuals (whether resident or non-resident
citizens, including resident or non-resident
aliens), trusts and estates - 5% or P50,000,
whichever is higher
c. Other juridical entities, including partnerships,
but not limited to cooperatives and foundations, that have become taxable as of
December 31, 2005 – 5% or P50,000,
whichever is higher
Immunities and Privileges.
a. A taxpayer availing of the tax amnesty shall
enjoy immunity from civil, criminal or
admi-nistrative penalties under the NIRC, as
amended, arising from the failure to pay any
and all internal revenue taxes for taxable year
2005 and prior years.
b. The tax amnesty return and SALN shall not
be admissible as evidence in all proceedings
that pertain to taxable year 2005 and prior
years, in so far as such proceedings relate to
internal revenue taxes, except for the
purpose of ascertaining the networth beginning January 1, 2006, the same shall not be
examined, inquired or looked into by any
person or government office, However, the
taxpayer may use this as a defense,
whenever applicable, in cases brought against
him.
c. The books of accounts and other records
for the years covered therein shall not be
examined except in case of application for
refund, credit, exemption or incentive.
All immunities and privileges shall not apply when
there is a failure to file a SALN and Tax amnesty
return or when the amount of networth as of
December 31, 2005 is proven to be understated
to the extent of 30% or more.
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Alba Romeo & Co.
REVENUE MEMORANDUM
ORDER NO. 19-2007
Prescribes the Consolidated Revised Schedule
of Compromise Penalties for violations of the
National Internal Revenue Code (NIRC).
In all cases of criminal violations of the NIRC not
involving the commission of fraudulent act, the
compromise penalties to be imposed shall follow
strictly the amounts in the “Revised Schedule of
Compromise Penalties” (Annex A of the Order).
Certain acts/violations which are commonly
resorted to by taxpayers as means of tax evasion
are deleted from the coverage thereof for having
met the requirements of the definition of fraudulent acts.
In no case shall the compromise penalty differ in
amount from those specified in the aforementioned
Schedule, except when duly approved by the
Commissioner or concerned Deputy Commissioner, or in proper cases, by the Regional Directors. Although all amounts of compromise
penalties incident to violations shall be itemized
in the assessment notice and/or demand letter, the
same should not form part of assessment notice
that reflects deficiency basic tax, surcharge and
interest but should appear in a separate assessment notice/demand letter as the amount suggested
to the taxpayer to pay in lieu of criminal
prosecution. If paid, the compromise penalties
shall be collected and accounted for under the
usual procedures, as internal revenue collection.
Since compromise penalties are only amounts suggested in settlement of criminal liability, and may
not therefore be imposed or exacted on the
taxpayer, the violation shall be referred to the
appropriate office for criminal action in the event
that a taxpayer refuses to pay the suggested
compromise penalty. Cases involving fraud shall
be referred to the concerned Division having
jurisdiction over the case, for the institution of the
corresponding criminal action.
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Tax Digest
AUG-OCT 2007
The prescribed schedule of compromise penalties shall not prevent the Commissioner of
Internal Revenue (CIR) or his duly authorized
representative from accepting a compromise
amount higher than what is provided in the Order.
A compromise offer lower than the prescribed
amount may be accepted after approval by the
CIR or the concerned Deputy Commissioner/
Assistant Commissioner/Regional Director.
xxx
REVENUE MEMORANDUM
ORDER NO. 28-2007
Prescribes the guidelines and procedures in the
transmittal and processing of the Annual Information Return on Income Taxes Withheld on
Compensation and Final Withholding Taxes (BIR
Form No. 1604-CF), Annual Information Return
of Creditable Taxes Withheld - Expanded/Income
Payments Exempt from Withholding Tax (BIR
Form No. 1604-E) and monthly/quarterly/ transactional remittance returns (BIR Form Nos.
1601C, 1601E, 1601F, 1600,1602, 1603, 1606)
with the Monthly Alphalist of Payees (MAP) and
returns required to have Summary Alphalist of
Withholding Agents of Income Payments
subjected to Tax Withheld at Source (SAWT)
(1701, 1702, 2550Q, 2551M, 2551Q, etc.)
under Revenue Regulations (RR) No. 2-2006 and
procedures in the extraction, matching, analysis,
dissemination, utilization of payor/payees data
including monitoring the extent of compliance of
withholding agents and income recipients subject
to Withholding Tax through the Tax
Reconciliation System (TRS).
The Order shall cover all annual information
returns filed in soft copy and/or hard copy which
are encoded/uploaded for calendar year 2005 and
subsequent years. It likewise covers all
withholding tax returns including those with
attached MAP and tax returns of income recipient with attached electronic or hard copy of
Alba Romeo & Co.
SAWT beginning January 2006. The returns filed
by large taxpayers shall be processed by the Large
Taxpayers Service (LTS) and all other returns filed
by non- large taxpayers shall be processed by
the Withholding Tax Division (WTD), during the
pilot stage and until system is fully operational,
and thereafter, shall be handled by the concerned
Revenue District Offices (RDOs). The sales/
revenue/income figure of a taxpayer arrived at
under the TRS matching system or procedure shall
be compared with the sales/revenue/income
arrived at under the RELIEF System and the
resulting higher figure between the two figures
generated separately under the two different
matching systems shall bethe presumed correct
sales/revenue/income of the payee/income
recipient. All computerized RDOs in Metro
Manila shall no longer transmit the original hard
copy of the 2006 and subsequent years BIR Form
No. 1604-CF, BIR Form No. 1604-E and
Monthly Withholding of VAT and Percentage
Taxes (BIR Form No. 1600) to the WTD as
prescribed under RMO 80-98. They shall
process/encode/upload withholding tax returns
and its attachments following existing procedures
under Revenue Memorandum Order No. 5-2001
and RR 2-2006.
All non-computerized RDOs shall process/
encode/upload withholding tax returns into the ITS
following existing procedures. RDOs should
encourage their taxpayers to submit withholding
tax returns and annual information returns thru the
e-submission facility that allows electronic submission of BIR Form Nos. 1600, 1601-C, 1601E, 1601-F, 1602, 1603, 1604-CF,1604-E,
1606 and the attached alphalists of employees/
payees where data/files generated passes the
validation procedures of the Bureau.
All RDOs are required to encode/upload returns
including attached alphalist into the ITS within 30
days for monthly/ quarterly/transactional tax
returns and 60 days for annual returns from date
of receipt of returns. Returns required with
SAWT/MAP shall likewise be uploaded.
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Tax Digest
Pre-audit of electronically available returns shall
be done thru TRS. For withholding tax agents
under the jurisdiction of the LTS, the procedures
in the resolution of withholding tax discrepancies
covered by the TRS-LN shall be undertaken by
the Large Taxpayers Service (LTS)-Large Taxpayers Audit and Investigation Division (LTAID)I/
LTAIDII/LTDO. For withholding tax agents
under the jurisdiction of the Regional Offices, the
resolution of the withholding tax discrepancies
covered by the TRS-LN shall be undertaken by
the WTD during the pilot stage. The Preliminary
Assessment Notice/Final Assessment Notice shall
be signed by the Deputy Commissioner of Internal Revenue-Operations Group, after evaluation
and review by the Assistant Commissioner of Internal Revenue-Collection Service. After the pilot stage, processing and resolution of the TRSLN will eventually be done in the RDO level
following the existing procedures in the processing of TRS-LN.
TRS data consist of information submitted by the
taxpayer thru the following returns:
• BIR Form No. 1604-CF
• BIR Form No. 1604-E
• Withholding Tax Remittance Returns
• Returns with MAP
• Returns with SAWT
The concerned offices under the Information Systems Group shall be responsible for developing
the TRS infrastructure and establishing a
centralized TRS database that serves as a comprehensive integrated resource network that will
allow the automatic matching of processed TRS
data.
The LTS for large taxpayers and during the pilot
stage, the WTD, under the Collection Service,
for all other taxpayers, in coordination with the
concerned offices of ISG, shall be responsible for
evaluating, processing, and monitoring the TRSLN together with the Details of Withholding
Agents/Payors and Payees/Income Recipient
Report (DWAPR) and shall recommend other
Alba Romeo & Co.
AUG-OCT 2007
ADHOC reports, as may be needed by the
management.
The monitoring of TRS-LNs and collection therefrom shall be the responsibility of the ACIR, CS/
ACIR-LTS but the monitoring of the whole
process shall be the responsibility of the Office of
DCIR-OG and Commissioner of Internal Revenue.
In as much as TRS-LNs are considered as Letters of Authority (LA) for purposes of amending
the returns, returns covering the periods and/or
transactions referred to in the TRSLNs can no
longer be amended. The returns referred to herein
shall include all returns and schedules required to
be submitted. Moreover, if there are no returns
initially filed or schedules attached thereto, the
taxpayer may no longer file a return by way of a
“late compliance” considering that the Commissioner has made a computation of the tax base
and tax due in his behalf.
In the pilot phase, taxpayers to whom TRS-LNs
were issued shall, aside from the payment of the
required deficiency Income Taxes, pay the VAT
and Percentage Taxes resulting from the findings
of discrepancy in the TRS-LN.
The settlement and payment of the deficiency taxes
under the TRS-LN or issue-based LA shall not
preclude the Bureau from issuing a LA covering
the comprehensive audit of a taxpayer’s tax
liability, if warranted. However, any payment of
deficiency taxes pursuant to TRS-LN shall be
credited against any assessment that may be made
by the appropriate BIR office pursuant to a
notice of investigation or LA provided the
discrepancies disclosed by said audit are of the
same nature as the discrepancies reflected in the
TRS-LN for the same taxable year.
The audit to be conducted pursuant to an LA
should be an issue-based audit focusing on the
information provided by the payor/payee and the
explanations furnished by the taxpayer.
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Tax Digest
AUG-OCT 2007
In case a TRS-LN is issued to a taxpayer who is
already the subject of an investigation pursuant to
an LA for the period covered by the said TRSLN, the TRS-LN shall not be considered
cancelled but instead, processing should be
consolidated with the investigation being
conducted pursuant to the LA and shall form part
of the audit docket. The TRS discrepancy
reflected in the said TRS-LN should be properly
utilized by including the extent of its utilization in
the report of investigation by the concerned
Revenue Officer.
xxxx
REVENUE REGULATIONS
NO. 12 - 2007
Amending certain provisions of Revenue Regulations No. 9-98 relative to the due date within
which to pay Minimum Corporate Income Tax
(MCIT) imposed on domestic corporations and
resident foreign corporations pursuant to section
27(E) and section 28(A)(2) of the 1997 National
Internal Revenue Code, as Amended.
SCOPE. - Pursuant to the provisions of Sections
244, 27(E), and 28(A)(2) of the 1997 National
Internal Revenue Code (Tax Code), as amended,
in relation to Section 245 thereof which requires
that the rules and regulations of the Bureau of
Internal Revenue shall stipulate the manner in
which internal revenue taxes shall be paid, these
Regulations are hereby promulgated to amend
Revenue Regulations No. 9-98, in order to align
the time of payment of minimum corporate
income tax (MCIT) imposed on domestic
corporations and resident foreign corporations
with the mandatory quarterly filing of normal
corporate income tax returns pursuant to Sec. 75
and Sec. 77 of the same Tax Code.
AMENDATORY PROVISION. – Pertinent
portions of Sec. 2.27(E) of Revenue Regulations
No. 9-98 are hereby amended to read as
follows:
Alba Romeo & Co.
“Sec. 2.27(E) MINIMUM CORPORATE
INCOME TAX (MCIT) ON DOMESTIC
CORPORATIONS –
“(1) Imposition of the Tax. - A minimum
corporate income tax (MCIT) of two percent (2%) of the gross income as of the end
of the taxable year (whether calendar or
fiscal year, depending on the accounting
period employed) is hereby imposed upon
any domestic corporation beginning on the
fourth (4th) taxable year immediately following the taxable year in which such corporation commenced its business operations. The
MCIT shall be imposed whenever such corporation has zero or negative taxable income
or whenever the amount of minimum corporate income tax is greater than the normal
income tax due from such corporation. Notwithstanding the above provision, however,
the computation and the payment of MCIT,
shall likewise apply at the time of filing the
quarterly corporate income tax as prescribed
under Section 75 and Section 77 of the Tax
Code, as amended.
Thus, in the computation of the tax due for
the taxable quarter, if the computed quarterly
MCIT is higher than the quarterly normal
income tax, the tax due to be paid for such
taxable quarter at the time of filing the
quarterly corporate income tax return shall
be the MCIT which is two percent (2%) of
the gross income as of the end of the taxable
quarter. In the payment of said quarterly
MCIT, excess MCIT from the previous
taxable year/s shall not be allowed to be
credited. Expanded withholding tax, quarterly
corporate income tax payments under the
normal income tax, and the MCIT paid in the
previous taxable quarter/s are allowed to be
applied against the quarterly MCIT due.
“For purposes of these Regulations, the term,
“normal income tax” means the income tax rates
prescribed under Sec. 27 (A) and Sec. 28(A)(1)
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Tax Digest
of the Code at 34% on January 1, 1998; 33% effective January 1, 1999; at 32% effective January 1, 2000
and 35% effective November 1, 2005 and thereafter.
Provided, however, that effective January 1, 2009 the
rate of income tax shall be thirty percent (30%), pursuant to RA No. 9337.
“ In the case of a domestic corporation
xxx xxx xxx
“(2) Carry forward of excess minimum corporate
income tax —
xxx xxx xxx
“(3) Relief from the Minimum Corporate Income
Tax under Certain Conditions –
xxx xxx xxx
“ (4) Definition of Terms
“(a) “Gross income” - For purposes of the minimum
corporate income tax prescribed under this. Subsection, the term “gross income” means gross sales
less sales returns, discounts, and allowances and cost
of goods sold, in case of sale of goods, or gross
revenue less sales returns, discounts, allowances and
cost of services/direct cost, in case of sale of
services. This rule, notwithstanding, if apart from
deriving income from these core business activities
there are other items of gross income realized or
earned by the taxpayer during the taxable period
which are subject to the normal corporate income
tax, the same items must be included as part of the
taxpayer’s gross income for computing MCIT. This
means that the term “gross income” will also include
all items of gross income enumerated under Section
32(A) of the Tax Code, as amended, except income exempt from jncome tax and income subject
to final withholding tax described in the succeeding
subparagraph.
“Gross sales” shall include only sales contributory
to income taxable under Sec. 27(A) of the Code.”
“Cost of goods sold” shall include all business
expenses directly incurred to produce the merchandise to bring them to their present location and use.
Gross Revenue shall include income from sale of
services, likewise, taxable under Sec. 27(A). Cost
Alba Romeo & Co.
AUG-OCT 2007
of Services or Direct Cost of Services shall
include business expenses directly incurred
or related to the gross revenue from rendition of services.
“Passive incomes which are subject to final
tax at source shall not form part of gross
income for purposes of minimum corporate
income tax.“
xxx xxx xxx
“(5) Specific Rules for Determining the Period When a Corporation Becomes Subject to the MCIT“ xxx xxx xxx
“(6) Manner of filing and payment — The
minimum corporate income tax (MCIT) shall
be paid in the same manner prescribed for
the payment of the normal corporate income
tax which is on a quarterly and on a yearly
basis. It shall be covered by a tax return
designed for the purpose which will be
submitted together with the corporation’s
annual final adjustment income tax return.
Domestic corporations shall be required to
pay the minimum corporate income tax on a
quarterly basis, pursuant to the provisions
of Sec. 75 and Sec. 77 of the Code in
relation to Section 245 of the same Code,
as amended.
“ xxx xxx xxx”
In the filing of the quarterly income tax return
for the taxable quarter which is due for filing
after the effectivity of these Regulations, the
computation of the MCIT shall be done on
cumulative basis covering not only the current
taxable quarter but also the previous taxable
quarters of the same taxable year. Such
computed MCIT shall be compared with the
cumulative normal income tax, whereupon the
higher amount between the two shall be the
basis of the quarterly income tax payment to
be made for said taxable quarter.
10
Tax Digest
AUG-OCT 2007
Thus, for those using calendar year basis
accounting period, in the filing of the quarterly
income tax return for the third quarter ended
September 2007 which is due for filing on or
before November 29, 2007, the gross income for
the 1st and 2nd quarters shall be added to the gross
income for the quarter ended September 2007,
the total of which shall be the basis of the 2%
MCIT which shall then be compared with the
computed cumulative normal income tax. The
cumulative MCIT for the three (3) said quarters
shall be paid in case the same appears to be higher
than the normal income tax computed for the same
period. Excess normal income tax carried over
from previous taxable year and payments made
for the previous quarters of the same taxable year,
including withholding tax credits claimed for said
previous quarters of same taxable year shall be
credited against the computed tax due in the
cumulative quarterly tax return.
Effectivity: Beginning on the income tax return for
fiscal quarter ending September 2007 which is
due for filing on or before November 29, 2007.
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