The Bureau of Internal Revenue (BIR) has issued a circular clarifying
the requirements on the withdrawal of bank deposits of a deceased
without the need of a clearance or the electronic certificate
authorizing registration (eCAR).
Previously, the BIR did not allow such withdrawal without eCAR, regardless of the amount involved.
The Tax Reform for Acceleration and Inclusion (TRAIN) Law, however, waived such requirement on certain conditions.
In signing Revenue Memorandum Order 62-2018, BIR Commissioner Caesar
R. Dulay stated that the legal heir or administrator of the decedent
maybe allowed to withdraw the decedent’s bank deposits within one year
from death provided the bank subject to six percent final withholding
tax the amount withdrawn.
For joint account, the final withholding tax shall be based on the share of the decedent in the joint bank deposit.
Prior to withdrawal, the bank shall require the administrator or any
of the legal heir to present the Tax Identification Number (TIN) of the
estate of the deceased together with the BIR Form 1904 of the estate
duly stamped by the concerned revenue district office (RDO).
The bank shall issue the corresponding BIR Form 2306 certifying the withholding of six percent final tax.
The BIR chief said all withdrawal slips shall include a sworn
statement by the joint depositor that he is still living at the time of
withdrawal.
Deposits already declared for estate tax purposes are no longer subject to the six percent final withholding tax.
source: Manila Bulletin by Jun Ramirez
Tuesday, July 17, 2018
Sunday, July 15, 2018
DoF lines up more tax reforms
THE DEPARTMENT of Finance (DoF) plans to submit to Congress this
month the tax reform packages on property valuation and passive income.
“By the end of the month, we will submit package three and four sabay (simultaneously),” Finance Secretary Carlos G. Dominguez III told reporters late Thursday.
Mr. Dominguez said that the two reform packages are “mostly revenue neutral.”
The third package seeks to provide a harmonized valuation scheme for national and local taxes.
“For the real estate — hindi naman samin mapupunta yung pera (collections will not go to the national government) — we just want to make sure that the appraisal is done in an internationally accepted way and is done regularly,” Mr. Dominguez.
“Now the local government, they will have the right to tax to set the rate. We just want the valuation [standardized] because the valuation now is really crazy.”
Currently, the government has two valuation schemes for real property: zonal values prepared by the Bureau of Internal Revenue to serve as basis for estate and capital gains taxes and fair market values used by local governments to compute annual real property taxes.
The DoF’s Bureau of Local Government Finance has said that the proposed reform should ease pressure on local officials — who are elected every three years — from their constituents to keep real property assessments low, resulting in delayed review of property values despite the requirement to do so every three years.
DoF said that the reform will also supplement the unitary six percent estate and donors tax provided by the Tax Reform for Acceleration and Inclusion law.
“And then the other thing also is the higher tax on real estate, you will remove the speculative aspect of it. Because you know, it’s going to cost you too much to hold undeveloped idle real estate. So you want to force them to develop it,” Mr. Dominguez explained.
The fourth package, meanwhile, seeks to streamline taxes on financial investments.
“In the financial taxes, the goal is to simplify it. We have 80 different types of tax in financial products and instruments. We’re working very hard we were able to reduce it to about 42. Ang dami palang batas diyan,” said Mr. Dominguez.
The DoF earlier said that the package includes reduction of interest income tax earned from peso-denominated deposits to 12% from 20% and at the same time increase capital income tax rate for dollar deposits, investments, dividends, equity and fixed income, among others, to the same rate. This move would take out the arbitrage among financial products.
The DoF has also said that it would make them more inclusive by taking out the interest income tax for deposits with a minimum deposit period of five years.
The department targets Congress to approve all packages this year, including the Package 1B on general and estate tax amnesty; the second package on corporate income tax and fiscal incentives; and the Package 2+ on further hikes in tobacco and alcohol taxes, as well giving the government a bigger share of mining revenues. Packages 1B and 2, and the tobacco part of Package 2+ are now in Congress.
source: Businessworld
“By the end of the month, we will submit package three and four sabay (simultaneously),” Finance Secretary Carlos G. Dominguez III told reporters late Thursday.
Mr. Dominguez said that the two reform packages are “mostly revenue neutral.”
The third package seeks to provide a harmonized valuation scheme for national and local taxes.
“For the real estate — hindi naman samin mapupunta yung pera (collections will not go to the national government) — we just want to make sure that the appraisal is done in an internationally accepted way and is done regularly,” Mr. Dominguez.
“Now the local government, they will have the right to tax to set the rate. We just want the valuation [standardized] because the valuation now is really crazy.”
Currently, the government has two valuation schemes for real property: zonal values prepared by the Bureau of Internal Revenue to serve as basis for estate and capital gains taxes and fair market values used by local governments to compute annual real property taxes.
The DoF’s Bureau of Local Government Finance has said that the proposed reform should ease pressure on local officials — who are elected every three years — from their constituents to keep real property assessments low, resulting in delayed review of property values despite the requirement to do so every three years.
DoF said that the reform will also supplement the unitary six percent estate and donors tax provided by the Tax Reform for Acceleration and Inclusion law.
“And then the other thing also is the higher tax on real estate, you will remove the speculative aspect of it. Because you know, it’s going to cost you too much to hold undeveloped idle real estate. So you want to force them to develop it,” Mr. Dominguez explained.
The fourth package, meanwhile, seeks to streamline taxes on financial investments.
“In the financial taxes, the goal is to simplify it. We have 80 different types of tax in financial products and instruments. We’re working very hard we were able to reduce it to about 42. Ang dami palang batas diyan,” said Mr. Dominguez.
The DoF earlier said that the package includes reduction of interest income tax earned from peso-denominated deposits to 12% from 20% and at the same time increase capital income tax rate for dollar deposits, investments, dividends, equity and fixed income, among others, to the same rate. This move would take out the arbitrage among financial products.
The DoF has also said that it would make them more inclusive by taking out the interest income tax for deposits with a minimum deposit period of five years.
The department targets Congress to approve all packages this year, including the Package 1B on general and estate tax amnesty; the second package on corporate income tax and fiscal incentives; and the Package 2+ on further hikes in tobacco and alcohol taxes, as well giving the government a bigger share of mining revenues. Packages 1B and 2, and the tobacco part of Package 2+ are now in Congress.
source: Businessworld
Tuesday, July 10, 2018
PEZA banking on LGU support for exemptions from TRAIN 2
THE Philippine Economic Zone Authority (PEZA) said it hopes to
attract more new investment this year, citing support from local
government units (LGUs) to exempt the investment-promotion agency from
the effects of the second round of tax reform.
“I am still very optimistic,” PEZA Director-General Charito B. Plaza told reporters on Friday when asked on her outlook for investment this year.
Investment pledges received by PEZA stood at P30.72 billion in the six months to June, down 40.2% year-on-year.
“I am happy that the local authorities, the Union of Local Authorities of the Philippines (ULAP)… passed a resolution, a strongly worded resolution which says they are appealing to the president and congress to exempt PEZA from the TRAIN 2,” Ms. Plaza added, referring to the second round of tax reform, known by the acronym TRAIN for Tax Reform for Inclusion and Acceleration.
“[T]his is the first time that the LGUs have learned about the program of PEZA. That we are giving incentives. They want to have a share of this spreading of jobs so they can also be ready to be federal states,” she added.
TRAIN, which took effect this year, reduced income taxes but imposed new excise taxes on diesel, liquefied petroleum gas, kerosene and bunker fuel for electricity generation.
TRAIN 2 seeks to reduce corporate income tax rate, while rationalizing the fiscal incentives system, creating uncertainty over the status of privileges enjoyed by economic zone locators.
The measure will cut the preferential corporate income tax rate to 15% from 30% but will replace the 5% perpetual gross income earned tax enjoyed by enterprises inside the PEZA ecozones.
Ms. Plaza, however, noted that locators have not shut down due to these uncertainties and have been taking a wait-and-see approach.
source: Businessworld
“I am still very optimistic,” PEZA Director-General Charito B. Plaza told reporters on Friday when asked on her outlook for investment this year.
Investment pledges received by PEZA stood at P30.72 billion in the six months to June, down 40.2% year-on-year.
“I am happy that the local authorities, the Union of Local Authorities of the Philippines (ULAP)… passed a resolution, a strongly worded resolution which says they are appealing to the president and congress to exempt PEZA from the TRAIN 2,” Ms. Plaza added, referring to the second round of tax reform, known by the acronym TRAIN for Tax Reform for Inclusion and Acceleration.
“[T]his is the first time that the LGUs have learned about the program of PEZA. That we are giving incentives. They want to have a share of this spreading of jobs so they can also be ready to be federal states,” she added.
TRAIN, which took effect this year, reduced income taxes but imposed new excise taxes on diesel, liquefied petroleum gas, kerosene and bunker fuel for electricity generation.
TRAIN 2 seeks to reduce corporate income tax rate, while rationalizing the fiscal incentives system, creating uncertainty over the status of privileges enjoyed by economic zone locators.
The measure will cut the preferential corporate income tax rate to 15% from 30% but will replace the 5% perpetual gross income earned tax enjoyed by enterprises inside the PEZA ecozones.
Ms. Plaza, however, noted that locators have not shut down due to these uncertainties and have been taking a wait-and-see approach.
source: Businessworld
Thursday, July 5, 2018
Dominguez unveils details of proposed tax amnesty program
Finance Secretary Carlos G. Dominguez III on Thursday unveiled
details of the planned and much-awaited tax amnesty program aimed at
shoring up revenues to fund the massive infrastructure projects to be
rolled out by the Duterte administration.
“This year, we hope to improve further our revenue collections with a proposed tax amnesty program. The program will help clear the dockets as well as enable the transfer of stranded real properties so that they can be made economically useful,” Dominguez said in a speech before the Rotary Club of Manila.
“In particular, we propose an estate tax amnesty where the government collects only 6 percent of the net undeclared estate tax for those who died prior to January 1, 2018,” Dominguez said.
He noted that estate tax used to be a higher 20 percent.
Also, the Department of Finance was “proposing a general tax amnesty on all unpaid internal revenue taxes excluding internal revenue taxes arising from importation and customs duties,” Dominguez added.
The Finance chief said that they also wanted to offer amnesty on tax delinquencies, at a rate of 50 percent on the basic tax, excluding interest charges and surcharges.
“For those already facing criminal cases in court, we are proposing a rate of 80 percent of the basic tax only,” he added.
Dominguez earlier said that the government was eyeing to implement the much-awaited tax amnesty by April next year to coincide with the deadline of filing income tax returns.
Tax amnesty forms part of tax reform package “1B,” an off-shoot of the Tax Reform for Acceleration and Inclusion (TRAIN) Act signed by President Duterte last December.
Besides general tax amnesty, package 1B also includes estate tax amnesty, higher motor vehicle user’s charge, bank secrecy relaxation and automatic exchange of information.
Tax package 1B was a result of the Senate’s removal of the tax administration measures from the original first tax reform package passed by the Lower House last year under House Bill No. 5636.
Once package 1B is passed, it will add about P40 billion in revenues.
The DOF was optimistic that the tax reform package 1B will be passed by Congress in the third quarter.
Dominguez said that another reform that the DOF proposes was to treat value-added tax (VAT) as “purely a consumption tax.”
“As such, it will be collected at the point of consumption or sale, and it will be refunded when the consumption is done outside the Philippines. VAT exemptions should not be granted as investments incentives,” he said.
In general, “the tax reform program will assure us of sufficient revenues to fund the infrastructure modernization and expand social services,” Dominguez said.
“Thirty percent of incremental revenues generated from the tax reform law will go to pay for social services. There will be larger allotments for improving public health, upgrading our educational system and providing conditional cash assistance for the poorest of the poor. This, after all, is what modern governments are about: looking after the welfare of its people and providing them effective protection. Meanwhile, about 70 percent of the revenues raised from the new law will be directed to infrastructure modernization,” the Finance chief said.
Besides the TRAIN Law, up to five more tax packages, including pending legislation on corporate income taxation reform coupled with the rationalization of fiscal incentives, will be pursued by the Duterte administration.
source: Philippine Daily Inquirer
“This year, we hope to improve further our revenue collections with a proposed tax amnesty program. The program will help clear the dockets as well as enable the transfer of stranded real properties so that they can be made economically useful,” Dominguez said in a speech before the Rotary Club of Manila.
“In particular, we propose an estate tax amnesty where the government collects only 6 percent of the net undeclared estate tax for those who died prior to January 1, 2018,” Dominguez said.
He noted that estate tax used to be a higher 20 percent.
Also, the Department of Finance was “proposing a general tax amnesty on all unpaid internal revenue taxes excluding internal revenue taxes arising from importation and customs duties,” Dominguez added.
The Finance chief said that they also wanted to offer amnesty on tax delinquencies, at a rate of 50 percent on the basic tax, excluding interest charges and surcharges.
“For those already facing criminal cases in court, we are proposing a rate of 80 percent of the basic tax only,” he added.
Dominguez earlier said that the government was eyeing to implement the much-awaited tax amnesty by April next year to coincide with the deadline of filing income tax returns.
Tax amnesty forms part of tax reform package “1B,” an off-shoot of the Tax Reform for Acceleration and Inclusion (TRAIN) Act signed by President Duterte last December.
Besides general tax amnesty, package 1B also includes estate tax amnesty, higher motor vehicle user’s charge, bank secrecy relaxation and automatic exchange of information.
Tax package 1B was a result of the Senate’s removal of the tax administration measures from the original first tax reform package passed by the Lower House last year under House Bill No. 5636.
Once package 1B is passed, it will add about P40 billion in revenues.
The DOF was optimistic that the tax reform package 1B will be passed by Congress in the third quarter.
Dominguez said that another reform that the DOF proposes was to treat value-added tax (VAT) as “purely a consumption tax.”
“As such, it will be collected at the point of consumption or sale, and it will be refunded when the consumption is done outside the Philippines. VAT exemptions should not be granted as investments incentives,” he said.
In general, “the tax reform program will assure us of sufficient revenues to fund the infrastructure modernization and expand social services,” Dominguez said.
“Thirty percent of incremental revenues generated from the tax reform law will go to pay for social services. There will be larger allotments for improving public health, upgrading our educational system and providing conditional cash assistance for the poorest of the poor. This, after all, is what modern governments are about: looking after the welfare of its people and providing them effective protection. Meanwhile, about 70 percent of the revenues raised from the new law will be directed to infrastructure modernization,” the Finance chief said.
Besides the TRAIN Law, up to five more tax packages, including pending legislation on corporate income taxation reform coupled with the rationalization of fiscal incentives, will be pursued by the Duterte administration.
source: Philippine Daily Inquirer
Tuesday, July 3, 2018
Tax amnesty: A losing proposition?
There’s no point having high tax rates when enforcement is the real
problem. That’s why the comprehensive tax reform program of the Duterte
administration is a necessary evil to make our tax system simpler,
fairer and more efficient.
There’s no reform without pain. We cannot change without having to sacrifice our old ways and maybe even our personal budget.
TRAIN package 1 has taught us that.
Based on the 2016 Annual Report of the Bureau of Internal Revenue (BIR), most of the country’s income tax collections from individuals are shouldered by employees whose income taxes are withheld at source. Their contribution amounts to more than P280 billion of the P340 billion in tax revenues from this sector
On the other hand, the collection from self-employed and professionals (SEPs), despite the increase in taxpayer base by 12.31 percent and 6.86 percent, respectively, decreased by 1.18 percent from P16.012 million in 2015 to P15.82 million in 2016.
Policy reforms must be supported by administrative reforms, and the taxpaying public must be properly informed, guided and assisted to encourage voluntary compliance. Tax rates can easily be increased or decreased through legislation, same as adding new taxes. However, broadening the taxpayer base and increasing voluntary compliance require strategy, budget and collaboration. These are critical to making our tax system efficient.
If the BIR were to improve its enforcement, then it needs an increased budget to hire more technocrats and legal experts, and to invest in technology to catch up with e-commerce and prosecute big- time tax evaders.
As much as we need to intensify the audit of taxpayers, we also need to investigate and remove corrupt BIR examiners who continue to leverage on the ignorance of taxpayers and inefficiency of our tax system. How come the same companies are still being audited for three or more consecutive years despite their improving tax compliance? What’s the real reason and why burden the few taxpayers (being audited) with the increasing collection goal of the BIR?
BIR audit imposes 25 percent surcharge, interest and compromise penalty on top of the basic tax due. Businesses end up having to pay more than if they had simply complied. So, does the BIR audit improve compliance of taxpayers being audited?
Not all those who have to pay these fines and penalties for noncompliance did so intentionally.
Business owners don’t need to have malicious intent to forget filing a return, miss a deadline, or report an incorrect taxable income. They might have just thought they had paid the right dues.
With all the provisions, revenue regulations, memorandum circulars, and other legislation, it is often difficult to keep track of which taxes to pay, how to pay them, and when to pay them.
If you have an educational background dealing with taxes, good for you. Otherwise, you’d have to either start learning, or pay others to understand the laws for you.
These businesses, once found noncompliant, are subjected to heavy fines, penalties, and compromises. Their lack of intent does not excuse them, of course. After all, ignorance of the law excuses no one. Even so, something needs to be done to address this issue.
The general tax amnesty currently being reviewed in Congress can help with that problem.
TRAIN’s package 1B will provide not only businesses, but every taxpayer, a fresh start.
It is expected to generate about P40 billion for the government for the year, which only goes to show the expansiveness of the reform.
However, that again poses the problem that the corrupt taxpayers can just start over with their misdeeds.
So, is the tax amnesty a losing proposition? It does not have to be. That’s why requisite to an effective amnesty program is the lifting of the Bank Secrecy Law to force erring taxpayers or violators to do self-assessment and tax planning before filing for tax amnesty.
The amnesty addresses an end result, not a root cause.
Of course, that is not to say it is not a good solution—because it is—just that it should not be seen as the answer to the country’s tax woes.
What the country needs is a system that encourages honesty and integrity for both taxpayers and tax collectors.
With coming tax reforms intended to lower taxes, the government exhibits its trust in the Filipino people. In turn, as citizens, we need to do our part.
Voluntary compliance will be the key to a better system.
At the Asian Consulting Group (ACG), we are committed to helping taxpayers pay the right taxes.
But paying the right taxes does not have to mean paying more taxes.
Unnecessary penalties, interest and compromises are the main cause of a taxpayer’s headache, and if taxpayers choose to be more compliant (and honest), then they can get rid of all these problems.
This is where knowledge and professional help can play a significant part.
Just because a taxpayer wishes to comply with taxes voluntarily does not mean they would be free from the burdens of taxes immediately.
With the right assistance, taxpayers can save millions of pesos while helping the government collect the right taxes without unnecessary penalties and compromises.
Taxpayers who are frequently audited will now have options, either they wait and prepare for the implementation of general tax amnesty or apply their companies to the Seal of Honesty (SOH) Certification Program.
Visit www.sealofhonesty.ph for more information.
If you’re interested, you may want to know about Citizen Tax Planning (CTP) to stop a BIR audit.
CTP is a game-changing strategy to help taxpayers pay the right taxes without the unnecessary penalties and compromises.
E-mail us at consult@acg.ph, for more details. You may also visit www.acg.ph.
source: Inquirer
As we always say, if we want a better Philippines, we need to be good citizens and better taxpayers.
There’s no reform without pain. We cannot change without having to sacrifice our old ways and maybe even our personal budget.
TRAIN package 1 has taught us that.
Based on the 2016 Annual Report of the Bureau of Internal Revenue (BIR), most of the country’s income tax collections from individuals are shouldered by employees whose income taxes are withheld at source. Their contribution amounts to more than P280 billion of the P340 billion in tax revenues from this sector
On the other hand, the collection from self-employed and professionals (SEPs), despite the increase in taxpayer base by 12.31 percent and 6.86 percent, respectively, decreased by 1.18 percent from P16.012 million in 2015 to P15.82 million in 2016.
Policy reforms must be supported by administrative reforms, and the taxpaying public must be properly informed, guided and assisted to encourage voluntary compliance. Tax rates can easily be increased or decreased through legislation, same as adding new taxes. However, broadening the taxpayer base and increasing voluntary compliance require strategy, budget and collaboration. These are critical to making our tax system efficient.
If the BIR were to improve its enforcement, then it needs an increased budget to hire more technocrats and legal experts, and to invest in technology to catch up with e-commerce and prosecute big- time tax evaders.
As much as we need to intensify the audit of taxpayers, we also need to investigate and remove corrupt BIR examiners who continue to leverage on the ignorance of taxpayers and inefficiency of our tax system. How come the same companies are still being audited for three or more consecutive years despite their improving tax compliance? What’s the real reason and why burden the few taxpayers (being audited) with the increasing collection goal of the BIR?
BIR audit imposes 25 percent surcharge, interest and compromise penalty on top of the basic tax due. Businesses end up having to pay more than if they had simply complied. So, does the BIR audit improve compliance of taxpayers being audited?
Not all those who have to pay these fines and penalties for noncompliance did so intentionally.
Business owners don’t need to have malicious intent to forget filing a return, miss a deadline, or report an incorrect taxable income. They might have just thought they had paid the right dues.
With all the provisions, revenue regulations, memorandum circulars, and other legislation, it is often difficult to keep track of which taxes to pay, how to pay them, and when to pay them.
If you have an educational background dealing with taxes, good for you. Otherwise, you’d have to either start learning, or pay others to understand the laws for you.
These businesses, once found noncompliant, are subjected to heavy fines, penalties, and compromises. Their lack of intent does not excuse them, of course. After all, ignorance of the law excuses no one. Even so, something needs to be done to address this issue.
The general tax amnesty currently being reviewed in Congress can help with that problem.
TRAIN’s package 1B will provide not only businesses, but every taxpayer, a fresh start.
It is expected to generate about P40 billion for the government for the year, which only goes to show the expansiveness of the reform.
However, that again poses the problem that the corrupt taxpayers can just start over with their misdeeds.
So, is the tax amnesty a losing proposition? It does not have to be. That’s why requisite to an effective amnesty program is the lifting of the Bank Secrecy Law to force erring taxpayers or violators to do self-assessment and tax planning before filing for tax amnesty.
The amnesty addresses an end result, not a root cause.
Of course, that is not to say it is not a good solution—because it is—just that it should not be seen as the answer to the country’s tax woes.
What the country needs is a system that encourages honesty and integrity for both taxpayers and tax collectors.
With coming tax reforms intended to lower taxes, the government exhibits its trust in the Filipino people. In turn, as citizens, we need to do our part.
Voluntary compliance will be the key to a better system.
At the Asian Consulting Group (ACG), we are committed to helping taxpayers pay the right taxes.
But paying the right taxes does not have to mean paying more taxes.
Unnecessary penalties, interest and compromises are the main cause of a taxpayer’s headache, and if taxpayers choose to be more compliant (and honest), then they can get rid of all these problems.
This is where knowledge and professional help can play a significant part.
Just because a taxpayer wishes to comply with taxes voluntarily does not mean they would be free from the burdens of taxes immediately.
With the right assistance, taxpayers can save millions of pesos while helping the government collect the right taxes without unnecessary penalties and compromises.
Taxpayers who are frequently audited will now have options, either they wait and prepare for the implementation of general tax amnesty or apply their companies to the Seal of Honesty (SOH) Certification Program.
Visit www.sealofhonesty.ph for more information.
If you’re interested, you may want to know about Citizen Tax Planning (CTP) to stop a BIR audit.
CTP is a game-changing strategy to help taxpayers pay the right taxes without the unnecessary penalties and compromises.
E-mail us at consult@acg.ph, for more details. You may also visit www.acg.ph.
source: Inquirer
As we always say, if we want a better Philippines, we need to be good citizens and better taxpayers.
Wednesday, June 27, 2018
Unlocking the BIR’s ‘Oplan Kandado’ program
As the main revenue-collecting agency, the Bureau of Internal Revenue
(BIR) is tasked to collect a total of P2.039 trillion in tax revenue
this year to fund the government’s “Build, Build, Build” program. It was
able to surpass its first-quarter collection target by approximately
17%, collecting P422.587 billion above its target of P361.767 billion.
The implementation of the TRAIN Law may have largely contributed to the increased tax collection, but some credit may also go to the BIR’s intensified collection efforts through its stringent tax compliance programs.
One particular program that the Bureau has been aggressively using these past few years (and arguably the most feared by taxpayers) is “Oplan Kandado.” Introduced in 2009 through a Revenue Memorandum Order (RMO), Oplan Kandado aims not only to maximize the degree of voluntary compliance among taxpayers, but also to deter Tax Code violations.
True to the program’s moniker, it imposes heavy administrative sanctions on offenders, such as suspension and temporary closure of the taxpayer’s business. The RMO even provides that the operations be widely publicized in certain instances through press releases or conferences, and if possible, via televised coverage — a total nightmare for any taxpayer. The intention is for the program to create a lasting impact on the public, particularly erring taxpayers.
In February, a transport network vehicle service (TNVS) paid P41 million in taxes by way of reparations under Oplan Kandado. Just recently, more and more establishments, including a popular lechon restaurant in Quezon City, were shut down by the BIR due to alleged nonpayment of value-added tax (VAT). The clampdown may be due to the integration of the program as part of the BIR officials’ key performance indicators in 2017.
Oplan Kandado’s mandate is anchored on Section 115 of the Tax Code which gives the Commissioner of Internal Revenue (CIR) or his authorized representative the power to suspend business operations due to violations of any of the following essential VAT requirements: (1) Failure to register for VAT as required; (2) Failure to issue receipts or invoices; (3) Failure to file a VAT return and pay the tax due; and (4) Understatement of taxable sales or receipts by 30% or more.
Oplan Kandado starts with the issuance of a Mission Order from the BIR, authorizing revenue officers to conduct surveillance on a taxpayer’s operations, overtly or covertly, within a period of 10 to 30 days (unless extended in writing). In covert surveillance, the BIR officials may issue an Apprehension Slip on the spot if the taxpayer is caught in the act of not issuing official receipts/invoices, or issuing official receipts/invoices that are not registered with the BIR.
If after the conclusion of the surveillance the BIR finds basis for the closure of the business establishment, the taxpayer is sent a notice giving him the opportunity to explain “under oath” within 48 hours why the business should not be closed. If the taxpayer fails to respond within 48 hours or the BIR deems the explanations insufficient or unjustified, a five-day VAT Compliance Notice (VCN) shall be issued.
The taxpayer is given only two days to respond to the VCN. Upon receipt of the taxpayer’s response, the five-day VCN shall be deemed suspended and shall only resume upon receipt of the BIR’s reply/resolution finding the taxpayer liable.
Should the taxpayer refuse or neglect to submit an explanation within the prescribed two-day period, the BIR shall issue a Closure Order as approved by the CIR. To effect the Closure Order, the BIR will padlock the entrance and place a sign that the establishment is closed due to nonpayment of taxes or for other violations of the VAT rules and regulations. The closure of a business establishment shall be for a period of not less than five days and/or until the violation is rectified. In some cases, immediate or partial compliance may be considered sufficient basis to lift the closure.
The closure of an establishment, even if temporary, can result in significant financial and reputational repercussions, more so if the closure is publicized through mass media. Thus, many taxpayers choose to comply with the tax findings contained in the VCN rather than risk negative publicity that could mar their reputation.
Given the drastic measures employed by the program, how can taxpayers defend themselves when faced with Oplan Kandado findings? Consider the following steps:
Even under ideal conditions, both taxpayers and the BIR undeniably
face difficulties with Oplan Kandado. While there are minor issues that
can easily be resolved to prevent the closure of business
establishments, in some cases, there are also complex issues that may
require more than the allotted two-day period for compliance. For
instance, what if the findings involved alleged nonpayment of VAT, while
the taxpayer argues that it is not liable for VAT in the first place?
Worse is if the taxpayer has already been slapped with a Closure Order
while the issue remains the subject of a legal battle.
For many taxpayers, two days is too short a time to properly address tax findings and collate the supporting documents. Regrettably, some opt to just pay the deficiency tax assessments as an easy way out to avoid setbacks and other detrimental repercussions on their business operations. As a tax practitioner and a Filipino, I am pleased when the government meets (and exceeds) its revenue targets. However, I look forward to the day when such targets are achieved through voluntary payments by compliant taxpayers and through programs that are reasonably implemented to support the growing business community in the Philippines.
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 content is for general information purposes only, and should not be used as a substitute for specific advice.
Kathrine Joy Capales is an Assistant Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
source: Businessworld
The implementation of the TRAIN Law may have largely contributed to the increased tax collection, but some credit may also go to the BIR’s intensified collection efforts through its stringent tax compliance programs.
One particular program that the Bureau has been aggressively using these past few years (and arguably the most feared by taxpayers) is “Oplan Kandado.” Introduced in 2009 through a Revenue Memorandum Order (RMO), Oplan Kandado aims not only to maximize the degree of voluntary compliance among taxpayers, but also to deter Tax Code violations.
True to the program’s moniker, it imposes heavy administrative sanctions on offenders, such as suspension and temporary closure of the taxpayer’s business. The RMO even provides that the operations be widely publicized in certain instances through press releases or conferences, and if possible, via televised coverage — a total nightmare for any taxpayer. The intention is for the program to create a lasting impact on the public, particularly erring taxpayers.
In February, a transport network vehicle service (TNVS) paid P41 million in taxes by way of reparations under Oplan Kandado. Just recently, more and more establishments, including a popular lechon restaurant in Quezon City, were shut down by the BIR due to alleged nonpayment of value-added tax (VAT). The clampdown may be due to the integration of the program as part of the BIR officials’ key performance indicators in 2017.
Oplan Kandado’s mandate is anchored on Section 115 of the Tax Code which gives the Commissioner of Internal Revenue (CIR) or his authorized representative the power to suspend business operations due to violations of any of the following essential VAT requirements: (1) Failure to register for VAT as required; (2) Failure to issue receipts or invoices; (3) Failure to file a VAT return and pay the tax due; and (4) Understatement of taxable sales or receipts by 30% or more.
Oplan Kandado starts with the issuance of a Mission Order from the BIR, authorizing revenue officers to conduct surveillance on a taxpayer’s operations, overtly or covertly, within a period of 10 to 30 days (unless extended in writing). In covert surveillance, the BIR officials may issue an Apprehension Slip on the spot if the taxpayer is caught in the act of not issuing official receipts/invoices, or issuing official receipts/invoices that are not registered with the BIR.
If after the conclusion of the surveillance the BIR finds basis for the closure of the business establishment, the taxpayer is sent a notice giving him the opportunity to explain “under oath” within 48 hours why the business should not be closed. If the taxpayer fails to respond within 48 hours or the BIR deems the explanations insufficient or unjustified, a five-day VAT Compliance Notice (VCN) shall be issued.
The taxpayer is given only two days to respond to the VCN. Upon receipt of the taxpayer’s response, the five-day VCN shall be deemed suspended and shall only resume upon receipt of the BIR’s reply/resolution finding the taxpayer liable.
Should the taxpayer refuse or neglect to submit an explanation within the prescribed two-day period, the BIR shall issue a Closure Order as approved by the CIR. To effect the Closure Order, the BIR will padlock the entrance and place a sign that the establishment is closed due to nonpayment of taxes or for other violations of the VAT rules and regulations. The closure of a business establishment shall be for a period of not less than five days and/or until the violation is rectified. In some cases, immediate or partial compliance may be considered sufficient basis to lift the closure.
The closure of an establishment, even if temporary, can result in significant financial and reputational repercussions, more so if the closure is publicized through mass media. Thus, many taxpayers choose to comply with the tax findings contained in the VCN rather than risk negative publicity that could mar their reputation.
Given the drastic measures employed by the program, how can taxpayers defend themselves when faced with Oplan Kandado findings? Consider the following steps:
1) Make sure that there is a valid Mission Order authorizing the revenue officers to conduct the surveillance.
2) Once a 48-hour notice is issued,
ensure that the written reply is duly notarized and properly addressed
the findings stated in the notice.
3) If a five-day VCN is issued, check if
it contains the details of the findings of the investigating officer and
if it states the particular provision of the Tax Code that was violated
and for which rectification should be done.
4) Respond to the five-day VCN within two
days from receipt, and/or comply with the terms of the VCN showing
blatant violations (e.g. comply with the registration requirements in
case of failure to register as VAT taxpayer).
For many taxpayers, two days is too short a time to properly address tax findings and collate the supporting documents. Regrettably, some opt to just pay the deficiency tax assessments as an easy way out to avoid setbacks and other detrimental repercussions on their business operations. As a tax practitioner and a Filipino, I am pleased when the government meets (and exceeds) its revenue targets. However, I look forward to the day when such targets are achieved through voluntary payments by compliant taxpayers and through programs that are reasonably implemented to support the growing business community in the Philippines.
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 content is for general information purposes only, and should not be used as a substitute for specific advice.
Kathrine Joy Capales is an Assistant Manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
source: Businessworld
Monday, March 12, 2018
DOF seeks Congress nod for other CTRP packages
The Department of Finance (DOF) is
targeting to secure Congress’s approval for the remaining packages of
its Comprehensive Tax Reform Program (CTRP) by the end of the year.
During the Philippine Economic Briefing forum in Davao City last Friday, DOF Assistant Secretary Ma. Teresa S. Habitan bared that the DOF is eyeing for “Package 2 plus” to be ratified in Congress by December along with Package 3 and Package 4 of the CTRP.
“And we count on your support on the succeeding packages to be heard by Congress this year,” Habitan told businessmen during her presentation at the forum.
Package 2 plus includes measures tackling the increase in excise taxes on sin products, namely, tobacco and alcoholic products, mining, coal and casino operations.
The proposal to increase excise tax rates on sin products like tobacco and alcoholic beverages is being targeted for Congress ratification by June 2018, while the the comprehensive mining tax and that of the removal of the value-added tax for coal and casino operations is being eyed for December.
Package 2 of the CTRP, which aims to lower corporate income-tax rates from 30 percent to 25 percent, as well as harmonizing fiscal incentives, was submitted to Congress in January. Package 1B of the first package of the CTRP, which is now the Tax Reform for Acceleration and Inclusion (TRAIN) law, is being eyed for passage by the end of this month.
“The Philippines grants the most generous tax incentives by giving them forever the GIE [gross income earned]. All other countries in the Asean impose a ceiling. This just proves that we have to revisit the way we do our incentives law,” Habitan said.
Under the TRAIN, which was signed into law by President Duterte in December 2017, the lowering of personal income-tax rates was implemented including a number of offsetting measures, such as increasing taxes on fuel, expanding the taxpayer base and limiting VAT exemptions, among others.
Under Package 1A, the increase in coal excise tax, which was originally proposed to be included in the DOF’s fifth package of the CTRP, was raised from the current P10 per metric ton to P50 per MT in the first year of implementation, P100 in the second year and P150 in the succeeding years.
And the increase in tobacco excise tax rates was also included, from the current P30 per pack, it will be raised to P32.5 in the first half of this year and to P35 starting from July 2018 to December 2019.
Finance Secretary Carlos G. Dominguez III earlier bared that Package 1B tackles tax administration measures, as well as tax amnesty provisions and lifting of the bank-secrecy law.
Package 3 of the DOF’s proposed CTRP tackles property taxation, with the goal of lowering the rate of donor’s and estate taxes, as well as the rate of transaction taxes on land. The offsetting measures include the rationalization of valuation of properties, or increasing valuation closer to market prices.
The fourth package covers capital income taxation, which aims to reduce the taxes imposed on interest income earned on peso deposit and investments from 20 percent to 10 percent. Its offsetting measures include the harmonization of capital income-tax rates for dollar deposits and investments, dividends, equity and fixed income rates to 10 percent. It also includes increasing tax on stocks traded in the stock market from 0.5 percent to 1 percent on gross selling price.
DOF Undersecretary Karl Kendrick T. Chua bared last year that the DOF wants all tax-reform packages approved before 2019, which is an election year. Packages 3 and 4 of the CTRP have yet to be submitted to Congress.
source: Business Mirror
During the Philippine Economic Briefing forum in Davao City last Friday, DOF Assistant Secretary Ma. Teresa S. Habitan bared that the DOF is eyeing for “Package 2 plus” to be ratified in Congress by December along with Package 3 and Package 4 of the CTRP.
“And we count on your support on the succeeding packages to be heard by Congress this year,” Habitan told businessmen during her presentation at the forum.
Package 2 plus includes measures tackling the increase in excise taxes on sin products, namely, tobacco and alcoholic products, mining, coal and casino operations.
The proposal to increase excise tax rates on sin products like tobacco and alcoholic beverages is being targeted for Congress ratification by June 2018, while the the comprehensive mining tax and that of the removal of the value-added tax for coal and casino operations is being eyed for December.
Package 2 of the CTRP, which aims to lower corporate income-tax rates from 30 percent to 25 percent, as well as harmonizing fiscal incentives, was submitted to Congress in January. Package 1B of the first package of the CTRP, which is now the Tax Reform for Acceleration and Inclusion (TRAIN) law, is being eyed for passage by the end of this month.
“The Philippines grants the most generous tax incentives by giving them forever the GIE [gross income earned]. All other countries in the Asean impose a ceiling. This just proves that we have to revisit the way we do our incentives law,” Habitan said.
Under the TRAIN, which was signed into law by President Duterte in December 2017, the lowering of personal income-tax rates was implemented including a number of offsetting measures, such as increasing taxes on fuel, expanding the taxpayer base and limiting VAT exemptions, among others.
Under Package 1A, the increase in coal excise tax, which was originally proposed to be included in the DOF’s fifth package of the CTRP, was raised from the current P10 per metric ton to P50 per MT in the first year of implementation, P100 in the second year and P150 in the succeeding years.
And the increase in tobacco excise tax rates was also included, from the current P30 per pack, it will be raised to P32.5 in the first half of this year and to P35 starting from July 2018 to December 2019.
Finance Secretary Carlos G. Dominguez III earlier bared that Package 1B tackles tax administration measures, as well as tax amnesty provisions and lifting of the bank-secrecy law.
Package 3 of the DOF’s proposed CTRP tackles property taxation, with the goal of lowering the rate of donor’s and estate taxes, as well as the rate of transaction taxes on land. The offsetting measures include the rationalization of valuation of properties, or increasing valuation closer to market prices.
The fourth package covers capital income taxation, which aims to reduce the taxes imposed on interest income earned on peso deposit and investments from 20 percent to 10 percent. Its offsetting measures include the harmonization of capital income-tax rates for dollar deposits and investments, dividends, equity and fixed income rates to 10 percent. It also includes increasing tax on stocks traded in the stock market from 0.5 percent to 1 percent on gross selling price.
DOF Undersecretary Karl Kendrick T. Chua bared last year that the DOF wants all tax-reform packages approved before 2019, which is an election year. Packages 3 and 4 of the CTRP have yet to be submitted to Congress.
source: Business Mirror
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