Schools have nothing to fear – Kim Henares

MANILA, Philippines—Schools have “nothing to fear” from the taxman as long they comply with the rules.

Bureau of Internal Revenue (BIR) Commissioner Kim Henares gave this assurance after a militant lawmaker slammed as “unconstitutional” her July 22 directive requiring nonstock and nonprofit organizations, including schools, to obtain tax exempt certifications or risk losing their mandatory tax perks.

“[Revenue Memorandum Order 20-2013] does not impose a tax on them (schools). It recognize[s] their exemption provided they are in compliance and meet the requirement to be entitled to it,” Henares said in a text message to the Inquirer.

“If the schools are in compliance and they are entitled to the benefit, what is there to fear? They should be the first ones to understand that rules are put in place to make sure there is order. They practice the same philosophy in running their schools,” Henares said, noting that schools had always been required to get certifications to be able to enjoy tax exemption.

But Kabataan party-list Rep. Terry Ridon said the BIR order was unconstitutional because it threatened to remove the tax-exempt status of schools if they failed to secure a certification from the BIR.

“Clearly, a mere memorandum cannot remove the status of exemption granted under the Constitution. Thus, the memorandum not only threatens students with higher tuition and school fees in the coming years but the actual closure of their schools,” Ridon said.

Under the Constitution, all income and assets used by schools directly and exclusively for educational purposes are tax-exempt.

The Tax Code has a similar provision for nonprofit groups.

Henares, however, was firm about throwing the book at erring schools.

She said that while tuition and laboratory fees would still be exempt, “not a single centavo should be paid to its trustees” or other expenses not related to education.

“The exemptions granted under the Tax Code are not blanket exemptions but are subject to certain conditions, and compliance [with those] conditions is required in order for them to enjoy [tax] exemptions,” Henares said.

“When we come up with a regulation, there is no imputation that the sector [is cheating]. It is a matter of putting in order and discipline,” she said.

But Ridon insisted that the order against schools was the BIR’s latest act of throwing its weight around, and targeting institutions and individuals that it believed it could push around.

Acting the bully

“The BIR should stop acting like the country’s national bully and focus instead on its massive collection shortfall in the billions of pesos,” Ridon said, referring to the BIR’s delinquent accounts that tripled to P300 billion in 2012 according to the Commission on Audit (COA).

“We most certainly hope that this is not another high-profile shame campaign of the BIR to blunt its institutional failure to meet its collection target. No less than the COA made this report despite the shaming of celebrities like Rep. Manny Pacquiao,” Ridon said.

Decision on St. Luke’s

Henares said the order merely implemented the decision of the Supreme Court in October last year ordering St. Luke’s Medical Center Inc., a nonstock, nonprofit organization, to pay the BIR P63.9 million in back taxes.

Tax experts from Punongbayan and Araullo noted that nonstock, nonprofit organizations are rewarded with tax-exempt status (as a reward for undertaking activities that should have been the primary responsibility of the state), but this is not absolute because “income from properties and activities conducted for profit by nonstock, nonprofit corporations is subject to incom e tax.”

The BIR c an also revoke the exemption if the corporation or organization fails to revalidate or renew its tax-exempt status or fails to file a tax report.

“Initial feedback among the organizations is that compliance with this requirement may be difficult, particularly with information pertaining to future income and activities, which may or may not push through depending on the circumstances,” Punongbayan and Araullo said.

Schools that obtained tax-exempt certificates issued before June 30, 2012 (certificates issued after this date are valid for three years), should file for a certification beginning Jan. 1.

Last Friday, however, the Makati Regional Trial Court issued a temporary restraining order barring the BIR from implementing the order.

source:  Punongbayan and Araullo
(As published in the Philippine Daily Inquirer, 31 December 2013.)

BIR 2012: The year in review

The year in review by: Charity P. Mandap

As we look back at the significant events of the past year—natural calamities, economic challenges, political conflicts, controversies in the lives of prominent people and the deaths of celebrities and leaders—we should be aware of the events that would have considerable impact this year.  This is true in the matter of tax rules and regulations.
If we review the past year, what would appear on the list of major Bureau of Internal Revenue (BIR) issuances?

The amendment on the rule on de minimis benefits is one such issuance.   Revenue Regulations No. (RR) 5-2011 limited the scope of non-taxable de minimis benefits by excluding benefits that were not mentioned in the regulation.  Hence, other benefits that were not specifically enumerated shall be subject to income tax as well as withholding tax on compensation.  The BIR further clarified in Revenue Memorandum Circular No. (RMC) 20-2011 that the term “income tax and withholding tax on compensation income” in that paragraph refers to the fringe benefits tax (FBT) for managerial and supervisory employees and should be included in BIR Form 1603 (Quarterly Remittance Return of Final Income Taxes Withheld on Fringe Benefits Paid), instead of BIR Form 1601-C.

On July 7, 2011, the BIR issued RR 10-2011 which amended the consolidated Value-Added Tax (VAT) regulations of 2005.   This regulation removed the exemption given to transfers of property between real estate dealers for stock which results in corporate control and subjected to VAT all exchanges of goods or properties for shares of stocks, regardless of the nature of the business of transferee or transferor, and regardless of whether the transfer will result in corporate control or not.  This revoked previous rulings issued by the BIR exempting real estate dealer to dealer transfer from VAT.

Another amendment to the consolidated VAT Regulations of 2005 is RR 16-2011 issued on October 27, 2011.  The regulation increased the threshold amounts on VAT-exempt transactions for sale of residential lot, sale of house and lot, lease of residential unit and sale or lease of goods or properties or performance of services covered by Section 109 (P), (Q) and (V) of the Tax Code of 1997.

The adjusted threshold amounts are as follows:

 Section     Amount in Pesos (2005)     Adjusted threshold amounts

Section 109 (P)     1,500,000     1,919,500.00
Section 109 (P)     2,500,000     3,199,200.00
Section 109 (Q)     10,000                12,800.00
Section 109 (V)     1,500,000     1,919,500.00

Similarly in 2011, the BIR issued the implementing rules and regulations of the Real Estate Investment Trust (REIT) Law (Republic Act No. 9856) embodied under Revenue Regulation No. 13-2011 issued on July 25, 2011.  Under the law, a REIT is subject to 30 percent income tax and 12 percent VAT. On the other hand, a REIT can enjoy certain tax privileges— the 50 percent reduction in applicable documentary stamp taxes on the sale or transfer of real property to REITs; a lower creditable withholding tax of 1 percent; exemption from the minimum corporate income tax; and additional deduction from gross income equivalent to the dividends distributed by a REIT for purposes of computing the 30 percent corporate income tax.  Note however, that there are several conditions to be able to avail of the tax privileges, such as maintaining the status as public company and the escrow deposits requirements. The BIR likewise placed emphasis on the imposition of VAT on initial transfer of assets to REIT.

In the same year, the P22.per day Cost of Living Allowance (COLA) given to all private sector minimum wage eagers (MWEs) in the National Capital Region was granted exemptio n from income tax.  

Another recent issuance is RR 17-2011 issued on October 27, 2011, implementing the tax provisions of Republic Act No. (RA) 9505, otherwise known as the “Personal Equity and Retirement Account (PERA) Act of 2008,”  which sets the framework for the establishment of personal accounts to save funds for retirement, death, sickness or disability while providing various tax incentives.  Under the regulation, a qualified contributor shall be entitled to a tax credit equivalent to 5 percent of the aggregate qualified PERA contribution during the calendar year.   This may be credited against the contributor’s income tax liability.  A qualified employer is allowed to contribute to its employees’ PERA, which they may claim as deduction from gross income.

Equally important is RR 14-2011 issued on July 29, 2011, which prohibits the transfer or assignment of Tax Credit Certificates (TCCs) to any person.  Holders of TCCs can only use the TCCs to pay for their direct internal revenue tax liabilities (e.g. income tax, VAT, DST, percentage taxes).  TCCs cannot be applied for the following:  payment of withholding taxes; tax amnesties; deposits on withdrawal of exciseable articles; taxes not administered or collected by the BIR; compromise penalties.

Another significant BIR regulation is that which now require lessors to monitor and report to the BIR the registration profile of their lessees to ensure that owners or sub-lessors of commercial buildings or spaces deal only with BIR-registered taxpayers.  Lessors who fail to submit the reportorial requirements, or who willfully provide false information or knowingly transact with taxpayers who are not registered with the BIR shall be subject to penalties.
Also in 2011, the BIR issued BIR Ruling No. 199-2011 dated July 29, 2011, which subjected to income tax the commutation and payment of all monetized unused sick leave credits and vacation leave credits in excess of 10 days, as a result of involuntary separation of employees from the service. This revoked previous rulings that terminal pay, which is part of the tax-exempt separation pay, is not subject to income tax, regardless of the number of monetized sick and vacation leaves [BIR Ruling No. SB-(004) 024-09].

In the same year, the BIR likewise revoked BIR Ruling Nos. 002-99, DA-184-04 and DA-569-04 which exclude from gross income and hence, exempt from tax, contributions to Pag-Ibig 2, GSIS, SSS, in excess of the mandatory monthly contribution. The BIR explained that the exclusion referred to under Section 32(B)(7)(f) of the Tax Code only applied to mandatory/compulsory contributions.  Voluntary contributions in excess of what the law allowed are not excludible from gross income of taxpayers, and hence subject to income tax.

To cap the year, the BIR issued RMC 40-2011 which sets forth the release of the June 2011 versions of the annual income tax returns for individuals, corporations and partnerships.

The enhanced BIR Forms for individuals incorporate a new Part IV, requiring disclosure of details on income subjected to final tax and income exempt from income tax.    Note, however, that the disclosure of other income is optional in 2011 but shall be mandatory for the year 2012. The new returns shall be used for the annual income tax filing covering calendar year 2011, which is due on or before April 15, 2012. The new versions shall also be required for juridical entities following fiscal year of reporting starting with fiscal year ending January 31, 2012.

These are only some of the numerous BIR rules and regulations issued in the past year.   Taxpayers are advised to take note of the specific issuances that may be applicable to their circumstances to be able to comply with the new requirements and to avoid the corresponding penalties.  Awareness of the new rules may also prove to be valuable in tax planning for the com ing 2012.

source:  Punongbayan and Araullo

Tax bureau details reform initiatives

THE BUREAU of Internal Revenue (BIR) has identified initiatives to be included in a 2013-2016 reform plan aimed at improving the government’s tax administration system.

Revenue Memorandum Order (RMO) 29-2013, dated Oct. 25 but made public only last week, states that “a List of Reform Projects to be included in the Reform Master Plan was approved by the Reform Steering Committee on Sept. 26, 2013, after consultation and validation from concerned Deputy Commissioners and Assistant Commissioners.”

“The Reform Projects were derived from the BIR Strategic Plan for ... 2011-2016, Priority Projects for ... 2013 and proposed for 2014, BIR Framework for Information Systems and other recent emerging priorities...,” it adds.

Forty-four ongoing and proposed initiatives were identified.

For taxpayer services, among the ongoing projects are the establishment of eLounges in each revenue district office, a public awareness campaign, expansion of International Organization of Standardization (ISO) certification to other revenue districts and the redesign of some of the bureau’s forms.

Another proposed project is an online accreditation system for importers and brokers.

For registration, the BIR is working on the taxpayer information update program. It is likewise proposing a sales data controller system, which will be piloted in gas stations.

Ongoing projects concerning filing and payment include the centralization of document processing to regional offices, implementation of a security tax stamp system for cigarettes and an online system for transfer tax transactions.

Targeted for rollout is a system for the automated computation of the internal revenue allotment of local government units as well as tax payments via credit cards.

The bureau also wants to expand the ongoing computerization of its value-added tax and comprehensive audit programs.

For collection enforcement, among the proposed projects are the development of systems for the management of forfeited assets and the online submission and processing of tax clearances for bidding purposes.

The bureau is likewise expanding its own internal support programs to make processes more efficient via the development of a workflow management system and an ongoing overhaul of its electronic tax information system.

The BIR, the government’s main revenue agency, took in P1.12 trillion as of November, up 15.54% from the same period last year and surpassing the full 2012 total of P1.058 trillion. The amount, however, was short of the 11-month goal of P1.16 trillion.

It must now collect P133 billion in December to meet its full-year target of P1.253 trillion. -- Bettina Faye V. Roc

source:  Businessworld

A snapshot of refund claims

A snapshot of refund claims

TAXPAYERS should not sleep on their right to reclaim from the government what is legally due them. The Tax Code expressly grants taxpayers the right to recover taxes which have been erroneously or illegally collected. However, such right must be exercised within the confines of the law (i.e. both substantive and procedural requirements must be satisfied).

It is crucial that the claim for refund be filed within the two- year period from the date of payment of the tax as prescribed under Section 229 of the Tax Code; otherwise, the taxpayer will be barred from exercising his rights.

Under the same Tax Code provision, a taxpayer should initially file the claim for refund before the Bureau of Internal Revenue (BIR). Thus, failure to seek relief initially at the administrative level would result in dismissal of the judicial claim for refund once it is elevated to the Court of Tax Appeals (CTA). This is also in line with the doctrine of non-exhaustion of administrative remedies, which means that recourse through court action cannot prosper until after all administrative remedies have first been exhausted.

There have been instances, however, when the taxpayer would elevate the claim for refund to the CTA, although no decision had yet been rendered at the administrative level, since the two-year prescriptive period was about to lapse. There are CTA cases allowing the simultaneous filing of both judicial and administrative claims for refund on the same day (Asianbank Corp. v. Commissioner of Internal Revenue, CA-G.R. SP No. 69129, Dec. 6, 2010), or the filing of the judicial claim just two days after the filing of the administrative claim (Unilever Philippines, Inc. v. Commissioner of Internal Revenue, CTA Case No. 6517, July 26, 2006), for as long as the CTA filing was made within the two-year prescriptive period as provided under the Tax Code.

Please note, however, that this simultaneous filing of the administrative and judicial refund claims may not apply to refunds of excess unutilized input value-added tax (VAT) credits, which is governed by its own distinct rules.

Another essential requirement is proof that the taxpayer is entitled to claim a refund. At the administrative level, the BIR would require submission of documentary evidence to support the taxpayer’s claim. For example, in case of refund of creditable withholding taxes, the taxpayer’s return must show that the income received was declared as part of the gross income; and the withholding of tax must be established by a copy of the relevant certificates of creditable tax withheld (BIR Form 2307) issued by the taxpayer’s customers, showing the amount paid and the amount of tax withheld. In addition to the factual basis, the legal basis should also be laid down.

Failure to submit documentary evidence at the administrative level is not, however, a fatal procedural defect that would be a ground for dismissal of a judicial claim. The principle finds affirmation in the recent CTA decision of CIR vs. Philippine Bank of Communications (CTA EB No. 933, Oct. 7, 2013). Here, the taxpayer filed with the BIR a request for issuance of a tax credit certificate (TCC) for excess creditable tax withheld. Its intention to apply for a TCC was previously indicated in its Annual Income Tax Return. For failure of the BIR to act on its claim, the taxpayer elevated the case to the CTA.

In its argument, the BIR specifically stated that the taxpayer’s judicial claim for refund is procedurally defective since the taxpayer failed to submit the required documents to support its administrative claim.

On this issue, the CTA disagreed with the BIR. It reaffirmed its position that "(n)on-submission of supporting documents in the administrative level is not fatal to a claim for refund. Judicial claims are litigated de novo (which means litigants should prove every aspect of their cases) and decided based on what has been presented and formally offered by the parties during the trial." In support of its decision, the CTA also cited a 2005 Supreme Court decision which emphasized that it is the evidence presented before the CTA which is vital in proving a taxpayer’s judicial claim.

Thus, a taxpayer claiming for refund before the CTA must prove before the said court that it is entitled to such refund by providing documents to support its claim. The CTA will then decide the case based on the evidence presented by the petitioner-taxpayer. Well-settled is the rule that the burden of proof lies upon the claimant to prove the factual basis of its claim. This is because tax refunds are construed strictly against the taxpayer and liberally in favor of the government as they are in the nature of tax exemptions.

Further, the taxpayer should be aware that a claim for refund will automatically trigger a tax audit. Technically, the tax audit should be limited to those taxes covered by the claim for refund.

With a snapshot of the procedural and substantive aspects of the right to claim for refund, one may say that the exercise of this right is not an easy route to take, but a challenge to be won by a determined taxpayer.

The author is a director at the tax services Department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers global network. Readers may send feedback to sylvia.r.salvador@ph.pwc.com.

Views or opinions presented in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from such article.

Top recruiters not top taxpayers

RECRUITMENT agencies were the latest target of the Finance department’s campaign against tax evasion, with popular placement firms said to have not placed among the industry’s top taxpayers last year.

The biggest agency in terms of job listings, in particular, was said to have paid no income taxes.

In a Tax Watch advertisement, the department compared the top taxpayers based on Bureau of Internal Revenue (BIR) data with a top 20 ranking based on the number of job listings on the WorkAbroad.ph web site.

"WorkAbroad.ph has listed down the top 20 recruitment agencies that require no placement fees based on these agencies’ job postings," the department said.

"The BIR [meanwhile] has compiled a preliminary report on Tax Compliance of Recruitment Agencies," it added.

"Are the agencies on WorkAbroad’s list also top taxpayers for 2012?"

It noted that out of the top 20 agencies according to job postings, none were in the BIR’s top 20 taxpayers list and vice versa.

"The #1 agency ... had P0.00 2012 income tax due," it also pointed out.

The ad declared that JCJ Management Services and International Promotion, the top firm in WorkAbroad’s list with 531 job postings, did not pay any income tax last year.

Universal Staffing Services, Inc., second with 482 jobs, paid P109,343 in taxes, while Land Base Human Resources Co., third with 366 postings, paid P41,093.82.

Rounding out the top five recruitment agencies were Industrial Personnel and Management Services, with 312 jobs and P529,161.19 in income taxes paid; and Staffhouse International Resources, with 261 postings and P586,647 in taxes.

The biggest taxpayer among those in the WorkAbroad list was EDI Staffbuilders International, Inc. with P3.25 million. It placed seventh in terms of job postings. The next biggest taxpayer, with P635,665 in payments, was East West Placement Center, Inc., which had the sixth highest number of listings.

The top 20 taxpayers in the industry, meanwhile, paid substantially higher.

The biggest was Topserve Manpower Solutions, Inc., which paid P15.36 million in income taxes in 2012.

Supply Oilfield and Marine Personnel Services, Inc. placed second with P10.31 million in taxes, while Magsaysay MOL Marine, Inc. was third with P9.83 million.

Tax Watch is an ongoing campaign by the Finance department and the BIR where weekly ads containing tax collection statistics are released, with the goal of encouraging compliance. -- Bettina Faye V. Roc
 
source:  Businessworld

Tax agreement with Italy amended

THE PHILIPPINES yesterday approved the amendments to its double taxation agreement with Italy as the government seeks to be removed from the latter country’s blacklist of tax havens.

"The Philippines, through the Department of Finance and the Bureau of Internal Revenue, negotiated and concluded ... the protocol amending the convention between the Philippines and the Italian Republic for the avoidance of double taxation with respect to taxes in income and prevention of fiscal evasion," the DoF said in a statement yesterday.

DoF Secretary Cesar V. Purisima -- who led the signing with Italian Ambassador to the Philippines Massimo Roscigno -- welcomed the signing "as a positive step towards competitiveness and fairness in taxation between our countries."

"We hope that with this move, the Italian authorities would remove the Philippines from its blacklist of tax havens, for the benefit of Italians residing in the Philippines and the Filipinos in Italy who comprise the fourth largest immigrant nationality," Mr. Purisima said in the statement.

Double taxation treaties seek to harmonize tax requirements between two countries to avoid the double payment of taxes to host countries and countries of origin.

The protocol signed yesterday amended Article 25 of the Philippines-Italy 1980 double taxation agreement on the exchange of information, "in accordance with the current tax treaty model of the Organization for Economic Cooperation and Development (OECD) and the United Nations," the DoF said.

Following the amendments, which will need to be ratified by both governments, Italy and the Philippines may now exchange tax information to prevent international tax evasion. -- D.J.B. Evite

source:  Businessworld

New developments show Pacquiao tax case could drag on

THE Bureau of Internal Revenue (BIR) may be open to a settlement on the tax deficiencies of boxing icon Manny Pacquiao, but it appears that Pacquiao’s corner is more bent on working to lift the warrant of distraint issued against his bank accounts and slug it out in the Court of Tax Appeals (CTA) on whether the tax agency is correct in assessing a P2.2-billion tax deficiency.

Internal Revenue Commissioner Kim Jacinto-Henares said on Monday the BIR has not received any indication from the lawyers of Pacquiao that the boxing icon is willing to compromise on the P2.2-billion tax deficiency that was assessed against him for 2008 and 2009.

“Before the hearing last week, his lawyer came to us asking for the lifting of the warrant of distraint,” Henares told the BusinessMirror. “But there’s no proposal from them yet [regarding a settlement].”

For now Pacquiao appears to be more focused on the lifting of the warrants against his bank accounts, and has sought another forum for this issue.

He has filed an urgent motion to lift the warrants before the CTA, which heard the case last week but reset the hearing to January 16 without acting on the motion.

Pacquiao’s camp has reported that he could no longer withdraw from the bank accounts which were subject to the warrant of distraint and levy issued by the tax agency.

Henares said even if Pacquiao would ask for a compromise settlement on his tax deficiencies, it would still be up to the evaluation board, which she leads, whether his offer would be good enough for the BIR to accept.

Henares explained that for Pacquiao to be able to ask for a compromise settlement on his tax deficiencies, he would have to prove that his case falls under the circumstances wherein the commissioner of internal revenue is allowed to compromise a tax deficiency assessment.

Under Section 204 of the National Internal Revenue Code, the commissioner may compromise a tax deficiency assessment only when “a reasonable doubt as to the validity of the claim against the taxpayer exists,” or “when the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.” The amount of the compromise settlement must also not go below 40 percent of the tax deficiency assessed.

The commissioner may also cancel a tax liability altogether, “when the tax or any portion thereof appears to be unjustly or excessively assessed.”

source:  Businessmirror

Tax relief for casualty losses

IN LAST week’s article, we talked about the taxability of donations given the recent outpouring of compassionate aid for the victims of Typhoon Yolanda last month, as well as the victims of the Bohol earthquake in October.

We now look at the other side of the coin. In light of these catastrophes, this is an opportune time to remind affected businesses of the requisites for the deductibility of casualty losses for income tax purposes in time for the year-end closing of the books.

The Tax Code allows the deduction from gross income of casualty losses arising from damage to or loss of property used in business, to the extent that these are not compensated for by insurance or other forms of indemnity, and subject to compliance with certain requirements as outlined in RMO No. 31-09, dated Oct. 16, 2009.

To be deductible, casualty losses must be incurred on properties that are actually used in business. These properties must have been properly reported as part of the taxpayer’s assets in the accounting records and financial statements in the year immediately preceding the occurrence of the loss, with the cost of acquisition clearly established and recorded. The deduction of the losses must be properly recorded in the accounting reports, with the adjustment of the applicable accounts.

Within 45 days from the date of the event causing the loss, a sworn declaration of loss must be filed with the nearest BIR Revenue District Office (RDO) in the BIR-prescribed format, stating the nature of the event that gave rise to the loss and time of its occurrence; description and location of damaged properties; items needed to compute the loss such as the cost or other basis of the properties, any depreciation allowed, value of properties before and after the event, and cost of repair; and the amount of insurance or other compensation received or receivable.

The sworn declaration must be accompanied by the audited financial statements for the preceding year and copies of any insurance policies covering the concerned properties. Failure to submit the sworn declaration within the prescribed 45-day period may result in the disallowance of the loss claimed.

For businesses affected by typhoon Yolanda, the sworn declaration must be filed on or before Dec. 23, 2013.For businesses affected by the earthquake, such sworn declaration should have been filed on or before Nov. 29, 2013.

In addition, proof of the elements of the losses claimed, such as, but not limited to, photographs of the properties before and after the event, documentary evidence of the cost of the properties, police reports in case of robbery or theft during the calamity and/or as a consequence of looting, etc. may be required to substantiate the loss. Taxpayers who have lost their books of accounts and accounting records must also report this to the BIR.

Looking at the above requirements, securing the proper substantiation would seem to be a tedious task, particularly photographs of the properties before the event. Considering this requirement, it may be prudent for business owners to now consider taking pictures of business properties as part of their year-end activities, similar to inventory-taking. Tedious though it may be, businessmen are reminded that when a company claims casualty losses as a tax deduction in its income tax return, the BIR will certainly look for the proper documentation to substantiate and justify the deduction. The rule always is that tax deductions are in the nature of tax exemptions, which are always construed in favor of the government and against the taxpayer. The burden of proof that one is entitled to a tax deduction therefore lies with the taxpayer.

Please note also that the RMO explicitly states that the amount of loss that is compensated for by insurance should not be claimed as a deductible loss. If the insurance proceeds exceed the net book value of the damaged or lost assets, they shall be subject to regular income tax, but not VAT, since the indemnification is not an actual sale of goods by the insured company to the insurance company.

In this connection, the proper timing to deduct casualty losses pending finality of the amount of insurance claims is also a potential issue. The reality is that insurance companies take time to respond to claims filed considering the volume of claims received following a calamity and the need to verify the losses incurred by the insured. For instance, if a taxpayer incurs a casualty loss in 2013, but the final amount of indemnity from the insurance company is known only in 2014 (after the filing of the 2013 ITR), can the taxpayer deduct the entire amount of loss in 2013 and declare the entire insurance proceeds as income in 2014? Again, this would largely depend on the factual circumstances and documentation available.

Notwithstanding the tax relief granted for casualty losses for purposes of the regular 30% corporate income tax (or the 5% -- 32% personal income tax rates, in the case of single proprietorships), the law requires certain formalities to be complied with so as to safeguard against possible abuses. Affected businesses should avoid a situation where anticipated tax deductions are lost due to mere failure to comply with substantiation requirements. Worse, the taxpayer may end up needing to pay deficiency taxes plus penalties, which would compound the casualty loss.

Cheryl Edeline C. Ong is a tax senior director of SGV & Co.

(In last week’s article, it was noted that should donations given to the government not qualify in the foregoing criteria, or are not made to accredited NGOs, the donations shall only be deductible to the extent of 10% of the donation, in case of individuals or 5%, for corporations. It should read “10% of the taxable income of corporations and 5% for individuals”.)

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

source:  Businessworld

VAT consequences of modern reading

"Many persons read and like fiction. It does not tax the intelligence and the intelligence of most of us can so ill afford taxation that we rightly welcome any reading matter which avoids this."

- Rose Macaulay

As the world advances into the electronic age, creating a paperless society, the demand for a more efficient and less costly medium of communication is considerably heightened. This is made evident by the insatiable craving that people have for new electronic gadgets such as tablets, smartphones, video game consoles, portable music players, GPS devices, and touchscreen computers that provide access to global connections at the convenience of one’s fingertips. More so, with the aid of the internet, communication traffic has crossed borders to revolutionize the social and commercial landscape. Increasing amounts of data are now transmitted and stored at higher speeds and bigger capacities.

Despite this reality, the Bureau of Internal Revenue (BIR) has consistently ruled that the sale and publication of electronically printed materials, such as electronic books (e-books), is subject to 12% value-added tax (VAT).

Under Sections 109(1)(R) and 116 of the Tax Code, the sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements are exempt from VAT and the 3% percentage tax. While the Tax Code is silent on digitally published books, the BIR, through its administrative rulings, has interpreted the law to exclude electronic versions. Thus, the VAT exemption will not apply to digital or online publications.

Under previously issued BIR rulings issued as early as 1997, the term "book" for purposes of VAT exemption has been held to pertain only to printed or published materials in hard copy and does not apply to an electronic copy of any book or publication.

The BIR’s position is based on the principle that tax exemptions must be strictly construed against the taxpayer and liberally in favor of the taxing authority. Thus, for exemptions to apply, they must be clear and unequivocal. Any doubt as to whether an exemption applies must be resolved against the taxpayer.

In order to further disseminate its position on the matter, the BIR also issued Revenue Memorandum Circular No. 75-2012 which explicitly limited the terms "books" or similar publications (i.e., newspapers, magazines, reviews and bulletins) to printed materials in hard copies. It categorically excluded from the exemption all digital, electronic or online versions such as e-books, e-journals, electronic copies, online library sources, CDs and software.

Interestingly, in another circular (RMC No. 55-2013) this year, the BIR issued a reminder that persons who conduct business through online transactions are subject to the same registration, invoicing, tax filing and record retention requirements as traditional brick-and-mortar businesses. In other words, online business transactions would have the same tax treatment as the typical non-virtual transaction. The medium is disregarded.

Considering the bigger picture, the BIR has likewise embraced the advantages of the digital world in its operations. It has been recognized as one of the government agencies that transitioned vigorously to electronic transactions including electronic filing of documents and payments through its eFPS. Through its website, the BIR has allowed taxpayers convenient access to various online registrations, expanding the platform for public service. It continues to enhance its online systems moving towards comprehensive automation of tax administration. In fact, the BIR’s Reform Master Plan covering the period from 2013 to 2016 under Revenue Memorandum Order No. 29-2013 includes ongoing and proposed reform projects in support of its Framework for Information System among other emerging priorities. Soon, the BIR may have to contend with text materials which form part of its electronic systems and information libraries -- written resources that may pass as e-books or electronic copies of publications as well.

Tax exemptions must not be doled out indiscriminately. Nonetheless, with the fast-paced development of technology which has changed the way people communicate and the BIR being cognizant of this, one hopes that the bureau would reconsider its position on the tax treatment of digital books by taking a more comprehensive, or, dare I say, evolved perspective of the term "book", rather than its current limited definition.

Mr. Rabaja is a senior manager at the tax Services department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers global network. Readers may send feedback via e-mail to revelino.r.rabaja@ph.pwc.com.

The views or opinions presented in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from such article.




source: Businessworld

DONATION: Tax breaks for the compassionate

SUPER typhoon Yolanda (Haiyan) wrought unimaginable devastation in the Visayas and sparked a massive international relief operation to bring aid to victims. People and organizations from across the country and from around the world provided assistance. Aid came in the form of cash and goods.

This generous outpouring of support has, however, triggered the question on whether such donations are subject to donor’s tax. Not a few raised the sentiment that it may not seem right to tax the donors, who, in the first place, have extended a helping hand to those who are in dire need.

What does the Tax Code really say about taxation of donations?

As a general rule, the transfer of property through gift by any person, resident or not, is taxed at varying rates. In general, the donor’s tax for each calendar year is computed on the basis of net gifts following a table of graduated rates from 2% to 15%, depending on the amount of the donation. However, if the donee is a stranger, the tax rate that applies is 30%. For this purpose, a "stranger" is a person who is not a brother, sister (by whole or half blood), a spouse, ancestor, or lineal descendant, or a relative by consanguinity within the fourth degree in the collateral line. However, donations not exceeding P100,000 are exempt.

The Tax Code does provide for gifts or donations by residents and non-residents that are exempt from donor’s tax. These are: (a) gifts made to or for the use of the national government or any entity created by any of its agencies not conducted for profit, or to any of its political subdivisions; and (b) gifts in favor of educational and/or charitable, religious, cultural, or social welfare corporation, institution, accredited non-government organization, trust or philanthropic organization or research institution or organization, subject to the requirement that not more than 30% of the said gifts shall be used by the donee for administration purposes.

Thus, donations made to national government agencies such as the National Disaster Risk Reduction and Management Council (NDRRMC) and the Department of Social Welfare and Development (DSWD) are exempt from donor’s tax. In addition, the importation and donation of food, clothing, medicine, and equipment for relief and recovery shall be considered as that of the NDRRMC where the value-added tax (VAT) due on said importation shall be shouldered by the government.

For donations made to the Philippine Red Cross, the Philippine Red Cross Act of 2009 (Republic Act No. 10072) expressly exempts such donations from donor’s tax, and they are deductible from the donors’ gross income for income tax purposes.

With respect to donations made to non-government organizations (NGOs), the Tax Code requires that these must be accredited with the Philippine Council for NGO Certification (PCNC), so that donations to them may be exempted from the donor’s tax. The rules also require, among others, that not more than 30% of proceeds shall be used by the NGO for administration purposes.

Aside from the donor’s tax issue, the other to consider with regards to gifts or donations is whether the same is deductible for purposes of computing the donor’s net taxable income. Under Section 34(H)(2) of the Tax Code, donations are deductible in full for as long as these are made to the government to be used exclusively in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture and in economic development, according to a National Priority Plan determined by the National Economic Development Authority (NEDA). Also, donations made to accredited NGOs are deductible in full. Should donations given to the government not qualify under the foregoing criteria, or are not made to accredited NGOs, the donations shall only be deductible to the extent of 10% of the donation, in case of individuals or 5%, for corporations.

However, for donations made in kind, especially made by entities engaged in the manufacture and sale of goods, these may be subject to 12% VAT, as they may be considered "transactions deemed" sale, where the goods originally intended for sale are deemed transferred, used, or consumed, even if not in the course of business.

The Tax Code and other related laws seem to provide a clear picture on the taxation of donations. In light of the current relief efforts for those in despair, the information provided can help us be both responsible and compassionate donors at this trying moment.

Betheena C. Dizon is a tax associate Director of SGV & Co.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

source:  Businessworld

Tax implications of donations

The human tragedy brought about by Super Typhoon Yolanda has resulted in an outpouring of sympathy from companies and individuals who have been donating to various humanitarian and government agencies. The Bureau of Internal Revenue (BIR) has commented on the taxes due on donations.  To be sure, many companies are aware of the implications of donor’s tax, the value-added tax (VAT), and the deductibility of donations. But lest the BIR be “misunderstood” for enforcing the law, some details should be provided on these laws, rules and regulations which govern donor’s tax, and other tax implications of donations. Moving from there, maybe some of these rules can be reconsidered in the light of the current state of national calamity.

The general law is that a donor’s tax of 30 percent of the net gift is imposed on donations made to a stranger.  A stranger is anyone who IS NOT a brother, sister (whether by whole or half-blood), spouse, ancestor and lineal descendant, or relative by consanguinity in the collateral line within the fourth degree of relationship). On the other hand, any donation above P100,000 made to a “non-stranger” is subject to a donor’s tax at rates provided in the Tax Code.

Now that we have cleared that hurdle, the following donations made by either residents, or non-residents who are not citizens of the Philippines, are exempt from donor’s tax:

1. Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government, including government owned and/or controlled corporations.  Examples of said entities are the National Disaster Risk Reduction and Management Council under Republic Act (RA) No. 10121, and Department of Social Welfare and Development.  NOTE, however, that the BIR requires that a BIR Ruling should be issued on a per transaction and case to case basis (BIR Ruling No. 165-12, 09 March 2012).

2. Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization, collectively referred to as NGOs, provided that these are qualified donee institutions (i.e., they have a BIR Certificate of Registration/Ruling confirming their tax exempt status, and acknowledging their accreditation with the Philippine Council for NGO Certification, Inc.).  NOTE that the donations have to be used specifically for one or more of the purposes for which the donee entity was created or organized.  In the context of aid to victims of the super typhoon, these purposes would probably be “charitable activities” and “social welfare purposes”.  NOTE FURTHER that under Revenue Memorandum Order No. 20-2013, existing certificates of registration/rulings issued by the BIR prior to 30 June 2012 have to be “revalidated” before 31 December 2013.

Gifts to other entities when there exists a special law exempting the entity from donor’s tax.  An example would be the Philippine National Red Cross (PNRC), under RA No. 10072.

The next question would be whether the donations are deductible from the gross income of the donors.  Deductions are only allowed in full if the donations were made to the following entities:

Government of the Philippines or to any of its agencies or political subdivisions, including fully-owned government corporations, exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture, and in economic development according to a National Priority Plan determined by the National Economic and Development Authority (NEDA).

Foreign institutions or international organizations which are fully deductible in pursuance of or in compliance with agreements, treaties, or commitments entered by the Government of the Philippines and the foreign institutions or international organizations or in pursuance of special laws.

The NGOs mentioned above.

Otherwise, donations to the government for activities not covered by a National Priority Plan, or to “non-qualified” NGOs would be deductible only to the extent of 10% in the case of individuals, and 5% in the case of corporations, of the donor’s taxable income derived from trade, business or profession as computed without the benefit of the deduction stated in Section 34(H)(1) and (2) of the Tax Code.  Note that Section 5(c) of RA No. 10072 provides that donations to the PNRC to support its purposes shall be deductible from the gross income of the donor.

Note that deeds of donation are generally subject to the documentary stamp tax (DST) at the rate of PhP15.00 per deed.

Finally, donations subject to the VAT in two cases:

When the donation in kind is imported into the Philippines, and When the (local) donation consists of goods or properties originally intended for sale or for use in the course of business.

All that having been said, maybe the following rules should be reconsidered:

The need to get a BIR Ruling confirming that the donation to the government entity is exempt from donor’s tax.  This requires the submission of documents substantiating the donation to the government.  While the BIR appears to be doing its best to release rulings, the magnitude of donations currently being done will create an even larger workload for the concerned BIR divisions tasked to draft these rulings.  Can’t substantiation be done instead when, and if ever the donor is subject to an audit investigation?  Can the BIR consider drafting an issuance which would state which specific documents would be needed to substantiate the donation, for exemption from donor’s tax and for deductibility of the donation, without the need for a BIR Ruling?

All existing certificates of registration/rulings issued to accredited or qualified NGOs dated prior to 30 June 2012 will expire on 31 December 2013.  Does this mean that the allowances for deduction and exemption from donor’s tax on donations to these NGOs will no longer be allowed?  While some of us may understand the need to re-certify NGOs (based on the current political situation), can’t this deadline be extended?  There are NGOs that are in the proverbial thick of the distributing relief goods and services, and the need for their continued aid isn’t expected to lessen by the end of the year.  Will an extension of the deadline have that bad an effect on the BIR’s verification and collection efforts?

 RA No. 10121 basically provides that the VAT on importations of donations consigned to the NDRRMC shall be addressed by the prevailing General Appropriations Act.  In other words, the VAT on importations will be shouldered by the National Government.  Shouldn’t the VAT on local donations also be covered under this rule?

To be fair to the BIR, I am sure that these questions are at the top of the BIR leadership’s minds.  While some entities may be ready to shoulder all taxes in the spirit of unconditionally providing humanitarian aid, wouldn’t reconsideration of the above rules be fair to the donors and their beneficiaries?

Andrew James Gerard D. Ruiz is a Senior Manager from the Tax Group of Manabat Sanagustin & Co. (MS&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The view and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or MS&Co. For comments or inquiries, please emailmanila@kpmg.com or rgmanabat@kpmg.com.

For more information on KPMG in the Philippines, you may visit www.kpmg.com.ph.

source:  Philippine Star

Let’s COMPly... Withholding Tax on Compensation

IN ANCIENT Rome, soldiers received salarium, known as salary in our time, as a form of compensation for work rendered. It is believed that salarium originated from the term for "salt", sal, because the wages were either used to purchase salt or were salt itself. Hence, this gave rise to the common expression "being worth one’s own salt".

To maximize tax savings, employees and employers alike must take stock of requirements covering compensation tax.

Here are a few reminders for employees receiving purely compensation income and for employers in relation to withholding tax on compensation.

FOR EMPLOYEES
Update your tax exemption status. Employees should keep their tax exemption status updated by filing BIR Form 2305 (Certificate of Update of Exemption and of Employer’s and Employee’s Information) with the BIR within 10 days after a change in status or event (e.g., marriage, childbirth, previous qualified dependent children reaching 21 years of age), and thereafter furnishing their employers with a copy of the duly filed form.

Failure to update one’s tax exemption status could cause an employee to lose tax benefits. For instance, failing to claim an additional qualified dependent child, would mean foregone savings of P8,000 (P25,000 x 32%).

Any increase in tax exemption may be claimed in the same taxable year, while a decrease (e.g., death of a dependent) will only take effect in the next taxable year.

Submit BIR Form 2316 from previous employers. Those with previous employers during the year should submit the withholding tax certificates (BIR Form 2316) issued by their previous employers to their new employer for proper calculation of their annual taxes. This helps avoid underwithholding of tax by the current employer and the need for the employee to recalculate his income tax due when he files his annual income tax return on or before April 15 of the following year.

Note that employees with multiple employers during the year are not qualified for substituted filing and are required to file BIR Form 1700 (Annual Income Tax Return for Individuals Earning Purely Compensation). Under the substituted filing concept, an individual taxpayer is not required to file an income tax return since the employer’s annual information return and the duplicate copy of the employee’s BIR Form 2316 filed with the BIR serve as the "substitute" income tax return.

FOR EMPLOYERS
Calculate employee’s withholding taxes accurately. To ensure accurate calculation of compensation tax, a number of factors must be considered, namely:

• Tax exemption status of employees. Tax exemption status should be based on information reflected in BIR Form 1902 (Application for Registration for Individuals Earning Purely Compensation Income) or BIR Form 2305 duly filed with the BIR.

Regardless of marital status, personal tax exemption is pegged at P50,000 with additional tax exemption of P25,000 for every qualified dependent child not to exceed four children.

• Taxable income. Taxable income is equal to gross compensation income less non-taxable earnings (e.g., de minimis benefits and mandatory contributions to SSS, PHIC and HDMF), personal and additional tax exemptions. Sounds easy right? But, have you considered employee benefits not processed through the regular payroll that could be subject to withholding tax on compensation?

Take, for example, health insurance benefits given to dependents of rank-and-file employees. If these are paid for by the employer, the grossed-up monetary value (i.e. withholding tax is shouldered by the employer in the same manner as fringe benefit tax) of medical benefits, less P1,500 representing de minimis benefit, should be treated as compensation subject to withholding tax.

• Tax rates. Withholding taxes every payroll period are calculated based on the revised withholding tax tables that took effect on Jan. 1, 2009.

However, in calculating for the last withholding tax covering the month of December, the tax rates to be used should be the annual graduated tax rates of 5% to 32% while the net taxable income should be based on the annual compensation of the employees.

Determine if employees are qualified as substituted filers. Employers are required to issue BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld for Compensation) for all active employees on or before Jan. 31 of the following year (for resigned employees, when the last wage is paid).

Effective this taxable year 2013, employers are also required to submit to the BIR the duplicate hard copy of the duly accomplished BIR Form 2316 of all employees qualified as substituted filer not later than Feb. 28 of the following year. The duplicate copy must be signed by both the employer and the employee declaring the truthfulness of the information under the penalty of perjury.

It is important for employers to determine employees who are qualified as substituted filers prior to the February deadline. A good way to do this is to send a survey to all employees early on to determine whether they fully satisfy the following conditions and thus qualify as substituted filers:

• Employee should be receiving purely compensation income regardless of amount;

• Employee should be working for only one employer in the Philippines for the calendar year;

• Withholding tax has been withheld correctly by the employer (tax due equals tax withheld);

• The employee’s spouse also complies with all three conditions stated above;

• The employer files the annual information return (BIR Form 1604CF);

• The employer issues BIR Form 2316 to each employee; and

• File compensation tax returns on time.

The monthly remittance returns (BIR Form 1601C) should be filed on or before the 10th day after the end of each month, except for the month of December, which must be filed on or before Jan. 15. For e-filers, the deadline is on the 11th to 15th day after the end of each month depending on the employer’s industry classification.

Failure to file and/or remit the tax due on time will result to imposition of 25% or 50% surcharge, 20% interest per annum and compromise penalty. Further, it can result in disallowance of the related salary expense in the employer’s calculation of corporate income tax liability.

The deadline for filing the annual information return (BIR Form 1604CF), together with the required alphalist, is on or before Jan. 31 for both manual and e-filers.

Failure to file on time will result in maximum penalty of P25,000 for a taxable year.

Just as salary is the bread and butter of every employee, taxes too are the lifeblood of the government. Both are sources of income that ensure sustainable existence. Only in an enabling environment that bears compliance of tax laws and upholds equitable distribution of wages can the government and its citizens reap optimal advantage of its economic fruits.

The author is a senior manager at the tax services department of Isla Lipana & Co., the Philippine member firm of the PricewaterhouseCoopers global network. Readers may send feedback to floredee.t.odulio@ph.pwc.com.

The views or opinions presented in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from such article.

source:  Businessoworld

SC resolves with finality rules for VAT refund claims

IN A Supreme Court (SC) resolution dated Oct. 8, the SC rejected with finality the claim of San Roque Power to recover a P400 million excess input value added tax (VAT) refund from the Bureau of Internal Revenue (BIR). The SC denied the motion for reconsideration filed by San Roque Power in a last ditch effort to save its claim for refund which was earlier denied by the SC.

In the consolidated cases of GR No. 187485, GR No. 196113 and GR No. 197156, the SC laid down the rule that a judicial claim for excess input VAT refund can be made only within 30 days after the lapse of 120 days (known as the 120-30-day rule) from the filing of the claim and complete documents with the BIR. San Roque Power failed to observe this rule.

San Roque Power, in its motion for reconsideration, appealed for a prospective application of this SC decision arguing that the administrative practice in the BIR as well as decisions of both the Court of Tax Appeals (CTA) and Court of Appeals (CA) at the time of filing its refund claim did not require strict observance of the 120-30-day rule. Applying it prospectively will have adverse effects on the national economy.

In turning down this argument, the SC emphasized that the CTA or CA decisions, unlike those of the SC, do not form part of the law of the land and are not binding precedents to persons other than parties to the case. More so, they are not binding on the SC. To hold that CTA or CA decisions, even if reversed by the SC, should still prevail is to turn upside down our legal system and hierarchy of courts with effects far worse than the doomsday scenario predicted by San Roque Power on the national economy.

In the same resolution, the separate motion for reconsideration filed by the BIR questioning the relief granted to refund claims filed from Dec. 10, 2003 to Oct. 6, 2010 has also been rejected by the SC. The BIR argues that the ruling relied upon to grant the relief is void as it was issued only by a Deputy Commissioner and not by the Commissioner himself. In striking out this argument, the SC cited the provision of the Tax Code which states that the Commissioner can validly delegate the issuance of a ruling to his Deputy Commissioner.

In its Resolution, the SC reiterated and confirmed with finality its earlier decision laying down the following rules in a judicial claim for excess input VAT refund:

1. The rule requires strict observance of the "120-30-day rule" in a judicial claim for excess input VAT refund for the court to acquire jurisdiction.

2. An exception to A (the 120-30-day rule) applies on claims for refund that were prematurely filed within the window of relief from Dec. 10, 2003 to Oct. 6, 2010. Thus, even if the taxpayer does not wait for the 120-day period for the Commissioner to decide the administrative claim before elevating it to the courts, the judicial claim is considered filed on time and not premature;

3. Judicial claims filed beyond (not within) the "120-30-day rule" after the filing of the administrative claim for refund with the BIR should be denied on the ground of late filing.

The San Roque Power case clarified the mandatory nature of the 120-30-day rule. For refund claims involving excess Input VAT, it should be filed with the BIR within two years from the end of a taxable quarter the sales were made. If not acted upon by the BIR within 120-days from submission of complete documents, the claimant can file a judicial claim with the CTA within 30 days from the expiration of the 120-day period. The observance of the 120 days is mandatory and jurisdictional, non-compliance of which will not vest the court with jurisdiction.

But other pressing issues haunting the validity of refund claims remain unresolved. Clarification of these issues is necessary, otherwise, claimants may suffer the same fate as San Roque Power. For example, the reckoning point for counting the 120 days is not yet clear. Is it from the filing of the claim? Or from submission of complete documents? What kind of documentation is considered complete? BIR issuances are lacking on this matter. The CTA has, in some cases, given its position on this issue but as ruled by the SC in its resolution, CTA decisions could not be relied upon for guidance as they are not binding precedents. So, where should taxpayers turn to?

Tax refunds are in the nature of exemptions which must be strictly contrued against the taxpayer making the claim. I agree. But on this premise, shouldn’t it also be the prime responsibility of the government -- legislative, executive and judiciary -- to provide clarity and guidance if they are to expect proper compliance?

I tend to agree with the dissenting opinion of Chief Justice Sereno in saying that in the case at hand, there was confusion in the application of the rules and the BIR as well as the Courts participated, allowed and contributed to this confusion. And for this reason alone, shouldn’t the rules, now that they are clarified, be applied prospectively? This is the rule in a game where equity and fair play matters. After all, the highest form of law is one anchored on the universal laws of fairness, equity and justice.

(The author is Chair of the Tax Committee of the Management Association of the Philippines [MAP], Governor and Secretary of MAP for 2014, and the Managing Partner and CEO of Du-Baladad and Associates [BDB Law]. Send feedback to map@globelines.com.ph and dick.du-baladad@bdblaw.com.ph. For previous articles, visit www.map.org.ph.)
 

source:  Businessworld