INSIGHTS is a monthly publication of BDB LAW to inform, update and provide perspectives to our clients and readers on significant tax-related court decisions and regulatory issuances (includes BIR, SEC, BSP and various government agencies).

DISCLAIMER: The contents of this Insights are summaries of selected issuances from various government agencies, Court decisions and articles written by our experts. They are intended for guidance only and as such should not be regarded as a substitute for professional advice.

Copyright © 2019 by Du-Baladad and Associates (BDB Law). All rights reserved. No part of this issue covered by this copyright may be produced and/or used in any form or by any means – graphic, electronic and mechanical without the written permission of the publisher.

The presence of zerorated or effectively zero-rated sales is very critical for VAT refund.

The taxpayer filed a VAT refund for the alleged unutilized input VAT for the taxable year 2013. BIR counter-argues that the taxpayer is not entitled for refund considering that petitioner is not yet selling its geothermal energy power.

The CTA ruled that, the presence of zero-rated or effectively zero-rated sales is very critical. This is so because the said fourth, eighth, and ninth requisites are entirely dependent on the said presence of such zero-rated or effectively zerorated sales. The fourth requisite, it is explicit that taxpayer must be engaged in zero-rated or effectively zero-rated sales. As regards the eighth requisite, the presence of zero-rated or effectively sales are indispensable because the input VAT being refunded must be attributable thereto. In the same vein, the ninth requisite entails the existence of zero-rated or effectively zero-rated sales despite that there are also taxable or exempt sales, because the proportionate allocation on the basis of sales volume cannot be had in the absence the said zero-rated or effectively zero-rated sales.

In the instant case, there are no zero-rated sales yet unto which the subject input VAT can be attributed for the year 2013. Correspondingly, the taxpayer failed to comply with the eighth and fourth requisite. (Maibarara Geothermal Inc., vs. Commissioner of Internal Revenue, CTA Case Nos. 9119, 9201, 9254 and 933, March 4, 2019)

A request for reconsideration is not the same as a request for reinvestigation which suspends the running of the statute of limitations.

The BIR issued an assessment notice against the taxpayer on January 15, 1996. On February 6, 1996, the taxpayer filed its protest. Although there was no allegation of a Final Decision on Disputed Assessment, the taxpayer, on August 4, 1998, filed a supplemental protest. On February 1, 2018, petitioner received a letter dated November 6, 2017 from the BIR as the latter’s final action to the taxpayer’s assessment.

When the assessment was elevated to the CTA, the BIR argued that its right to collect the deficiency taxes has not yet prescribed since the request for reinvestigation filed by the taxpayer effectively suspended the running of the prescriptive period to collect.

The CTA ruled that, the law is categorical that the suspension of the statute of limitations shall only take effect when a taxpayer files a protest letter with a request for reinvestigation and the respondent granted the request for reinvestigation made by a taxpayer.

In the instant case, petitioner's supplemental protest letter dated August 4, 1998 did not request for reinvestigation. Rather, it is asking the concerned BIR Revenue District Officer that the "examiner's findings be properly reconsidered." Thus, it is a request for reconsideration which was not among the circumstances in the above-mentioned provision that will suspend the running of the statute of limitations. Further, the waiver of the taxpayer of the defense of prescription shall only be effective when there is a written agreement between both the taxpayer and the respondent. However, the facts and circumstances in the records of this case had no written agreement for such waiver of the defense of prescription. The running of the statute of limitations has not been effectively suspended. (WPP Marketing Communications Inc. (formerly known as J. Walter Thompson Company (Philippines) Inc.) vs. Commissioner of Internal Revenue, CTA Case No. 9778, March 5, 2019)

The taxpayer must receive the PAN, and the FAN to comply with the due process requirement.

The taxpayer is being assessed for deficiency income tax and VAT for taxable year 2005. During the course of its assessment, the BIR issued a PAN and FAN. However, the PAN, bore different addresses. Further, the said addresses are not the registered address of the taxpayer.

The CTA ruled that, in compliance with the requirements of due process, not only must formal assessment notices be issued and received by the taxpayer, but such taxpayer must also receive a preliminary assessment notice or PAN. Also, denial by the taxpayer of receipt of any of these notices shifts the burden of proving receipt of said notices on respondent.

In the instant case, taxpayer consistently denied receipt of the PAN and the FAN because they were sent to the wrong address. Thus, it was incumbent upon the BIR to prove, not only that the PAN and the FAN were validly issued and mailed, but that they were duly received by the taxpayer. As the PAN and the FAN were never received by taxpayer, there was no valid service of said notices depriving taxpayer of the facts and the law upon which the assessment issued against it was based in violation of its right to due process. (Bostik Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 9019, March 05, 2019)

In case the basic tax exceeds P1,000,000.00 or where the settlement offered is less than the said prescribed minimum rates, the compromise must be approved by the Evaluation Board.

The taxpayer filed a motion to withdraw petition for review because an application for compromise settlement of the deficiency income tax and documentary stamp tax for taxable year 2013 to the BIR, which the latter accepted.

The CTA noted that, the Commissioner of Internal Revenue (CIR) is empowered to compromise the payment of internal revenue taxes, under certain conditions. The payment of any internal revenue tax may be compromised by respondent on either of the two (2) instances, namely: (1) a reasonable doubt as to the validity of the claim against the taxpayer exists; or (2) the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. In case the basic tax exceeds P1,000,000.00 or where the settlement offered is less than the said prescribed minimum rates, the compromise must be approved by the National Evaluation Board (NEB).

While the CIR’s power to compromise is sanctioned under the NIRC of 1997, the exercise thereof is subject to the determination of the CTA, whether the same is “within the parameters of law.” In this case, it was not shown that there is full compliance with the requirements set forth by law. Specifically, there is no showing that the compromise settlement has been duly approved by a majority of all the members of the NEB, considering that the basic assessed taxes in the instant case are more than P1,000,000.00. (C.F. Sharp Crew Management Inc., vs. Commissioner of Internal Revenue, CT A Case No. 9707, March 6, 2019)

Our Take Note: Although the taxpayer failed to show its full compliance with the legal parameters for the grant of a compromise settlement, the CTA nonetheless granted the motion to withdraw. The CTA said that considering that the taxpayer is no longer interested in pursuing the petition, the motion to withdraw must be granted.

A BOI-registered entity with 100% exports is not entitled to refund of input VAT. Otherwise, the taxpayer would unjustly be enriched at the expense of the government.

Taxpayer seeks the refund or issuance of a tax credit certificate representing unutilized input value-added tax (VAT) on its domestic purchases of goods and services and importation of goods. BIR denied the claim due to the alleged failure of Taxpayer to show substantial proof of the factual and legal bases of its claim for refund and that the Taxpayer is not the proper party who can claim the Refund.

The CTA ruled that the taxpayer was issued a Certification by the BOI attesting to the fact that it is a BOI-registered entity with 100% exports. Under Section 3.4 of RMO No. 9-00, said Certification shall serve as authority for the local suppliers of taxpayer to avail of the benefits of zero-rating on their sales to taxpayer. On the basis of said Certification, no output tax should be shifted by the local suppliers to latter. Thus, it follows that taxpayer is not entitled to a refund of input VAT from the said domestic purchases. Otherwise, to allow taxpayer a refund or issuance of tax credit certificate of input VAT on its domestic purchases of goods and services, where there is no right to demand it against the government, since its purchases are zero-rated, would unduly enrich taxpayer at the expense of the government. In instances when taxpayer paid input VAT, notwithstanding that under the law it is subject to VAT at zero percent rate, the taxpayer's recourse is not against the government, but against the seller. Thus, taxpayer is not entitled to the refund. (Hinatuan Mining Corporation vs. Commissioner of Internal Revenue, CTA Case No. 9287, March 6, 2019)

It is important for the taxpayer to prove that it has enough prior year's excess input VAT credits to cover its output VAT liability for the current taxable year.

The taxpayer filed a claim for refund of unutilized creditable input tax attributable to its zero-rated sales. The said zero-rated transactions allegedly originated from its sale of goods and services to export-oriented entities registered with the PEZA, such as the SBMA, the CDA the CEZA, and the BOI.

The CTA Special Third Division ruled that applying the laws, regulations and Cross-border doctrine, it is clear that taxpayer's sales of goods and services to its customers, which are entities located inside the Ecozones and/or BOIregistered, whose products are 100°/o exported, are considered "export sales" and therefore, subject to 0°/o VAT rate. Note that in claiming excess or unutilized input VAT from zero-rated transactions, it is the excess over the output VAT which should be refunded to the taxpayer or credited against other internal revenue taxes. Hence, it is important for the taxpayer to prove that it has enough prior year's excess input VAT credits to cover its output VAT liability for the current taxable year. Consequently, there being no excess input VAT which may be the subject of a claim for refund or issuance of tax credit certificate, the instant claim must be denied. (Maxima Machineries Inc. vs. Commissioner of Internal Revenue, CTA Case No. 9358, March 11, 2019)

The prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious. In order to stand the test of judicial scrutiny, the assessment must be based on actual facts.

BIR issued a FAN against the taxpayer assessing for its deficiency value-added tax (VAT). Based on the Details of Discrepancies, BIR explains that since there is no means by which the correctness and accuracy of the taxpayer's receipts can be ascertained, assessment based on estimate was used pursuant to Section 2.4(a) of RMC No. 23-2000. BIR’s comparison of petitioner's gross sales based on industry benchmark rate, pursuant to RMO No. 05-2012, against the gross sales reported per VAT Returns disclosed that petitioner failed to pay the corresponding VAT on the portion of its gross receipts.

The Court, in cancelling the VAT deficiency on undeclared sales, ruled that the BIR made no determination of the actual VATable sales of petitioner since the benchmark rate used by respondent pertains to the sales of other wholesaling companies as reflected in the computation. There was also no indication as to how the benchmark rate was derived by respondent or that it can at least be used to approximate the actual VATable sales of petitioner. BIR merely assumed that the amount of VATable sales of other wholesaling companies is the same with the VATable sales of the taxpayer.

The presumption of correctness of assessment being a mere presumption cannot be made to rest on another presumption. Hence, assessment should not be based on mere presumptions no matter how reasonable or logical said presumptions may be. Consequently, while there is a presumption of correctness of assessment issued by respondent, being a mere presumption, the same cannot be made to rest on another presumption, which is respondent's presumption that the amount of VATable sales of other wholesaling companies is the same with the VATable sales of petitioner. (Northern Mindanao Sales Corporation vs. Commissioner of Internal Revenue, CTA Case No. 8959, March 11, 2019)

It can be inferred from RMC No. 61-05 and Section 4.108-3 (f) of RR No. 16-05 that generation and transmission charges, including the VAT thereon, although billed to the end-user by the distribution companies and electric cooperatives, are not part of their gross receipts; neither can they claim an input tax on such charges.

This is a Resolution on the Motion for Reconsideration filed by the taxpayer assailing the Decision of the Court promulgated on June 9, 2017. The taxpayer contends that its sale of power to CEBECO III, which was eventually distributed to a PEZA- registered entity and a BOI-registered 100% export entity are subject to VAT zero-rating. BIR claims that CEBECO III is a non-PEZA registered or BOI - registered entity. Thus, taxpayer’s sales to the said entity should not be subject to zero-rating.

The Court ruled that considering that sales of services by a VAT-registered taxpayer to entities located in ecozones and to BOI-registered manufacturers/producers whose products are 100% exported are considered "export sales" subject to zero percent (0%) VAT rate pursuant to Section 108 (B) (3) of the NIRC of 1997, as amended, then, if the end-user who pays for the sale of electricity and related ancillary services through an electric cooperative for remittance to the generation company is a PEZA-registered entity or a BOIregistered 100% exporter, then the transaction should qualify for VAT zerorating. (Toledo Power Company vs. Commissioner of Internal Revenue, CTA Case Nos. 8450, 8512, 8547 & 8596, March 15, 2019)

Unsupported under-declaration of expenses does not automatically result in recognition of income.

The BIR assessed the taxpayer for income tax based on the latter’s discrepancies between its declared expanded withholding taxes and the expenses reported in its audited financial statements (AFS). BIR alleged that the undeclared expenses which cannot be explained by the taxpayer through supporting documents constitute undeclared revenue that must be assessed since expenses lower the tax base in computing income tax.

In this Resolution, the CTA has reiterated in its decision the three elements in the imposition of income are the following: (1) there must be gain or profit; (2) that the gain or profit is realized or received, actually or constructively; and (3) it is not exempt by law or treaty from income tax. In the imposition of the assessed income tax, it must be clear that there was an income, and such income was received by the taxpayer, and not when there is an undeclared purchase or expense. (Lancaster Colors International, Inc. v Commission of Internal Revenue CTA Case No. 8933 dated March 28, 2019)

RR No. 2-2019, March 19, 2019 - This revenue regulation prescribes the rules in implementing the imposition of excise tax on non-essential services introduced by TRAIN Law.

The regulation imposes an excise tax equivalent to five percent (5%) based on gross receipts derived from the performance of services, net of excise tax and value-added tax on invasive cosmetic procedures, surgeries and body enhancements directed solely towards improving, altering, or enhancing the patient’s appearance and other surgeries that do not meaningfully promote the proper functions of the body or prevent or treat illness or disease.

RMC 34-2019, March 4, 2019 - This revenue memorandum circular clarifies the treatment and reporting requirements of input tax on drugs and medicines exempt from VAT as of December 31, 2018.

Pursuant to Section 34 of TRAIN Law, the sale of drugs and medicines prescribed for diabetes, high-cholesterol and hypertension shall be exempt from VAT beginning January 1, 2019.

RMC 38-2019, March 25, 2019 - This revenue memorandum circular amends RMC No. 102-2018 as regards the deadline for the processing of pending VAT Refund/Credit claims filed prior to the effectivity of RMC No. 54-2014.

This revenue memorandum circular further amends the deadline prescribed in RMC No. 102-2018 from March 29, 2019 to July 31, 2019.

SEC Memorandum Circular No. 5 series of 2019, March 14, 2019 - This memorandum circular provides the guidelines on the implementation of ASEAN Capital Market Forum (ACMF) Pass under the ASEAN Capital Market Professional Mobility Framework.

The guidelines provide for the scope of activities and the prohibited activities in the host jurisdiction, mode of performance of service, conditions for servicing retail and non-retail investors, and the application requirements, validity, renewal, termination, and revocation of the ACMF Pass. The role of the attached licensed firm of the host jurisdiction was also laid down, namely, to conduct the proper due diligence and record maintenance. Finally, the attached licensed firm in the host jurisdiction is required to notify the host regulator and the licensed firm in the home jurisdiction of any changes which may have an impact on the status of licensing, registration, approval, or authorization of the recognized representative. Upon receipt thereof, the licensed firm in the home jurisdiction shall notify the home regulator. The host regulator may take regulatory actions against the recognized representative if the latter contravenes the host jurisdiction’s laws and regulations.

These guidelines apply to professionals in the Philippines who intend to obtain an ACMF Pass in another country which is a signatory to the MOU, professionals in other signatory countries who intend to obtain an ACMF Pass in the Philippines, and attached license firms. Professionals from other signatory countries who are interested to obtain the ACMF Pass must be a licensed, registered, approved, or authorized by the Home Regulator, has no pending disciplinary action, and has not been convicted of an offense involving moral turpitude, fraud, embezzlement, counterfeiting, theft, misappropriation, forgery, bribery, false oath, perjury, or of a violation of securities, commodities, banking, real estate, or insurance laws.

SEC Notice, March 15, 2019 - This notice requests for comments, not later than 29 March 2019, on the proposed guidelines on the conversion of an ordinary stock corporation into One Person Corporation (OPC).

The draft included salient provisions, one of which states that only a domestic corporation organized as a stock corporation (Ordinary Stock Corporation) may be converted into a One Person Corporation (OPC). An Ordinary Stock Corporation (OSC) may apply for its conversion into an OPC. Also, applications for conversion from OSC into an OPC will be processed as an amendment of an Articles of Incorporation/By-laws.

Furthermore, the conversion of an OSC into an OPC shall take effect upon approval of the Amended Articles of Incorporation. The OPC will retain its SEC Company Registration Number with the addition of “-OPC” at the end thereof, once the conversion is approved and the Certificate of Filing of Amended Articles of Incorporation is issued. Finally, the OPC converted from an OSC shall succeed and be legally responsible for all the latter’s outstanding liabilities and obligations as of the date of approval of the conversion.

SEC Notice, March 15, 2019 - This notice clarifies rules for the filing of Audited Financial Statements (AFS) pursuant to the Revised Corporation Code of the Philippines.

The notice states that the Old Corporation Code shall apply to all financial statements covering the periods on or before February 22, 2019. The Revised Corporation Code (RCC) shall be applied prospectively. All companies required to file AFS under the RCC should comply with the required comparative presentation as provided under SRC Rule 68. If the financial statements of the prior year were not audited, it shall be marked prominently as “UNAUDITED” and the auditor shall disclose this in an “other matter” paragraph under the auditor’s report. A discussion of the impact of the RCC relative to the preparation and submission of financial statements shall be included in the Notes to FS.

SEC Notice, March 26, 2019 - This notice requests for comments, not later than 10 April 2019, on the draft Rules on Material Related Party Transactions for Publicly-Listed Companies.

The draft states that the board of directors shall have the overall responsibility in ensuring that transactions with related parties are handled in a sound and prudent manner, with integrity, and in compliance with applicable laws and regulations to protect the interest of the company’s shareholders and other stakeholders. The board shall adopt a group-wide material Related Party Transaction (RPT) policy encompassing all entities within the conglomerate, taking into account its size, structure, risk profile and complexity of operations. Furthermore, companies shall adequately disclose in their websites its material RPT policy and shall comply with reportorial requirements. Penalties may be imposed upon non/late filing of advisement report and incomplete advisement report or abusive material related party transactions.

A company’s corporate purpose may not be expanded by the mere adding of activities.

This opinion tackles general financing activities.

A holding company requested for an opinion on whether it may expand its corporate purpose by simply adding “financial activities” to its primary purpose in its Articles of Incorporation (AOI) and whether it may be allowed to retain its corporate name while being engaged in financial activities.

The Commission, citing the Financing Company Act of 1998 and its IRR, and the Corporation Code, held that the company’s corporate purpose may not be expanded by the mere adding of activities since a financing company must be primarily organized for the purpose of extending credit facilities. The mere adding of activities would effectively make such as secondary purposes only. It has also held that the company may not retain its corporate name, assuming that it would engage primarily in financing activities since Sec. 2(c) of the IRR provides that the corporate name of financing companies shall contain words which are descriptive of its operations and activities as a financing company. (SEC-OGC Opinion No. 19-04, March 4, 2019, Re: General Financing Activities)

Proper service of papers shall be done by tendering a copy of the same to an exclusive list of persons, an incorporator included, by leaving a copy at his dwelling house or residence with some person of suitable age and discretion residing therein; service to the last known or registered address with the Commission of the person being served shall suffice.

The sheriff, armed with a Cease and Desist Order (CDO), went to the address indicated in the corporation’s Articles of Incorporation to serve and post said CDO. However, upon arrival therein, the area was occupied by another entity. Nonetheless, the CDO was posted therein. Thereafter, the sheriff went to the address of two incorporators and left a copy of the CDO in their residences. The corporation claimed that it did not receive an official copy of the CDO.

The Commission held that the corporation was properly served with the CDO. Citing the SEC Rules of Procedure, the Commission explained that service of papers shall be done by tendering a copy of the same to an exclusive list of persons, an incorporator included, by leaving a copy at his dwelling house or residence with some person of suitable age and discretion residing therein; service to the last known or registered address with the Commission of the person being served shall suffice. The CDO was properly served in this case as it was served at the residence of two incorporators to residents of suitable age and discretion. The Rules also provide that service to the last known or registered address with the Commission of the person being served is already sufficient. The corporation failed to update its address with the Commission, thus the sheriff’s act of posting the CDO on the address indicated in the corporation’s AOI is also considered as valid service. Since the corporation failed to file a pleading or motion to lift the CDO within 5 days from its receipt, the Commission deemed the CDO to be permanent. (Kapa-Community Ministry International, Inc. vs. Enforcement and Investor Protection Department, SEC Admin. Case No. 02-19-181, March 14, 2019)

Insurance Commission (IC) Circular Letter (CL) No. 2019-06, March 15, 2019 – This letter directs all preneed companies authorized to transact business in the Philippines on the Submission of Quantitative Impact Assessment Report relative to the Regulatory Relief provided to the Pre-Need Industry.

Pursuant to CL No. 2018-58, the Commission aims to monitor and assess the overall impact of the regulatory relief to pre-need companies for the year 2018 and to further improve the regulations for pre-need companies by requiring all pre-need companies authorized to transact business in the Philippines to submit Quantitative Impact Assessment Reports, as follows:

1. With and without regulatory relief comparative balance sheet (statement of financial position) as of December 31, 2018 of the preneed
   company following the format prescribed in Annex A;
2. With and without regulatory relief comparative balance sheet (statement of financial position) as of December 31, 2018 of trust fund
   account(s) following the format prescribed in Annex B;
3. With and without regulatory relief comparative reserve valuation report as of December 31, 2018 following the format prescribed in
   Annex C.

All reports shall be duly certified and signed by the accountant and ICaccredited Actuary together with the Chief Financial Officer (CFO) or its equivalent; it must form an integral part of the Annual Statement; and must be submitted on or before May 31, 2019. Late submission shall be subject to penalty of P5,000.00 for each day of delay; and P500.00 for every wrong data entry of material information.

IC Legal Opinion (LO) No. 2019-03, March 14, 2019 – This opinion deals with clarifications on certain issues regarding the Compulsory OFW Insurance

The insurer is seeking the IC’s interpretation and opinion on the following items:

1. Period of effectivity of the Compulsory OFW lnsurance relative to Accidental Death/Natural Death Claims;
2. Filing of a claim for Permanent Total Disablement;
3. Circumstances when Repatriation Claims may be granted; and
4. Filing and Coverage of Money Claims.

For the first item, the Commissioner opined that an insurance policy remains valid only for the duration of the employment contract of an OFW as long as this stipulation is clearly stated in the insurance policy. Notably, if there are controversies on the terms and conditions of a policy issued in favor of an OFW, the same should be resolved in favor of the OFW and all ambiguities in an insurance contract are construed against the insurer and are resolved in favor of coverage.

For the second item, based on Section 1, Guideline VII on Minimum Benefits, the Commissioner opined that the OFW may validly claim for personal total disablement if such disability is due to any accident, sickness or ailment suffered during the duration of his/her employment, irrespective of whether the same is work-related and irrespective whether such condition appeared only when such OFW is already in the Philippines.

For the third item, the insurer inquired on what is included in the term “just cause” for the purpose of determining payment of repatriation cost. Based on Section 23 of RA 10022 and Section 1 of Guidelines VII of the Insurance Guidelines, the Commissioner is of the opinion that, in order to determine whether or not the termination of employment is for "just cause" for purposes of determining payment of repatriation cost, reference should be made to the employment contract between the OFW and his/her employer. However, if an employment contract fails to define the just cause for the termination of the same, the term "just cause" as defined under Article 282 of the Labor Code of Philippines should be used.

Finally, the insurer is of the position that the payment of money claims shall be limited only to those awarded and/or settled before the NLRC, to the exclusion of POEA, OWWA and DOLE. Based on Section 7 and 23 of RA 10022, the Commissioner opined that NLRC has the exclusive and original jurisdiction to hear and decide money claims, whether by judgment award or settlement. Thus, only the amount awarded by NLRC upon judgment and the amount of settlement based on employer’s liability properly detailed in the same are subject of insurance coverage.

IC LO No. 2019-05, March 25, 2019 – This is an opinion in relation to the application/enrollment form of microinsurance.

The insurer raised the following inquiries:

1. Whether or not it is allowable for an applicant, instead of signing the approved application form by this Commission, to simply attach or bundle a photocopy of his/her valid proof of identification/lD to the Microinsurance form as sign of proof of insurability; and
2. Whether or not the Microinsurance purchasers can be considered as an "open" group, particularly, if there is no employer-employee relationship between the purchasers.

For the first query, the Commissioner is of the opinion that the signature of the applicant to the form is an indispensable requirement that cannot be disregarded nor substituted by submitting a photocopy of a valid identification/ID. This is because the application form itself indicates that it is a document which requires that an applicant sign to affirm and give his/her consent.

Finally, the Commissioner is of the opinion that microinsurance purchasers may be considered as an “open” group outside of the employee group and can be insured under a group policy, provided that the following matters are complied with:

1. Such group, other than the employee group, has a commonality of purpose, interest or circumstances or engaging in a common economic and/or social activity;
2. The insured members are not its employees;
3. Such group was formed not for the main purpose of availing insurance; and
4. Such group policy should not be issued to an insurance agent or broker as a policyholder, except if the covered members are its employees.

Bangko Sentral ng Pilipinas (BSP) Circular Letter (CL) No. 2019-019, March 4, 2019 – This letter provides for an advisory for all BSP-Supervised Financial Institutions (BSFIs) to comply with the amendments to the foreign exchange transactions under Circular No. 1030.

Pursuant to the amendments made on foreign exchange transactions by BSP Circular No. 1030 dated February 5, 2019, BSP enjoins all BSFIs to familiarize themselves and strictly comply with the revised rules and regulations governing foreign exchange transactions. BSFIs are given a transitory period of six (6) months from the from the effectivity of the said issuance to facilitate the adoption of the new and revised reports that are based on International Monetary Fund Balance of Payments and International Investments Position Manual Standards.

BSP Circular No. 1034, March 15, 2019 – This circular approves the amended subsections X176.5/4176Q.5 of the Manual of Regulations for Banks (MORB)/Manual of Regulations for Non-Bank Financial Institutions (MORNBFI) pertaining to the extension of observation period for the Basel III Framework on Liquidity Standards – Net Stable Funding Ratio (NSFR) for subsidiary banks/quasi-banks (QBs) of universal and commercial banks.

The Monetary Board (MB), in its Resolution No. 300 dated 21 February 2019, amended subsections X176.5/4176Q.5 of the MORB and MORNBFI which approved the extension of the observation period for the Basel III Framework on Liquidity Standards - Net Stable Funding Ratio (NSFR) for subsidiary banks/quasi-banks (QBs) of universal and commercial banks (UBs/KBs), and adoption of a seventy percent (70%) NSFR floor for subsidiary banks/QBs during the observation period.

As to its reporting and monitoring requirements, the requirement for the submission of the NSRF reports shall be accompanied by a certification under oath to the effect that a covered bank/QB has fully complied with the NSFR requirement on all calendar days of the reference period; and shall take effect on January 1, 2019 for UBs/KBs and on January 1, 2020 for subsidiary banks/QBs.

As to implementation, the minimum NSFR shall be phased in to help ensure that the covered banks/QBs can meet the standard through reasonable measures without disrupting credit extension and financial market activities. In order to facilitate compliance, covered banks/QBs shall undergo an observation period before the NSFR becomes a minimum requirement. Subsidiary banks/QBs of UBs/KBs shall be subject to an NSFR floor of seventy percent (70%) during the observation period. The observation period for UBs/KBs, as well as their subsidiary banks/QBs are from July 1, 2018 up to December 31, 2018 and July 1, 2018 up to December 31, 2019, respectively.