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 © 2024 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 issuance of Final Notice Before Seizure constitutes the final decision of the CIR that is appealable before the Court of Tax Appeals.

The CIR assessed the taxpayer with alleged deficiency taxes and compromise penalties.

Later on, the taxpayer received a PCL stating that to avoid accumulation of interest and surcharges, it is requested that taxpayer pay the assessments within 10 days from receipt of the PCL. The taxpayer then filed a Letter with the BIR raising its objections to the PCL, including the fact that its FAN protest is still pending resolution.

Subsequently, taxpayer received an FNBS demanding the settlement of taxpayer’s tax liabilities within 10 days from notice otherwise there will be service and execution of Warrants of Distraint and/or Levy and Garnishment. Hence, the taxpayer filed a Petition for Review before the CTA within thirty days from the receipt of the FNBS.

The CIR vehemently argues that the CTA has no jurisdiction over the case since the thirty (30)-day appeal period must be reckoned from the taxpayer’s receipt of the PCL, instead of the FNBS.

The Court held that it has exclusive appellate jurisdiction to take cognizance of decisions involving disputed assessments and the concerned taxpayer or party adversely affected by a decision of the BIR may file an appeal with the Court within thirty (30) days after the receipt of such decision. In Commissioner of Internal Revenue vs. Isabela Cultural Corporation (Isabela case), the Supreme Court held that the FNBS which indicates that the taxpayer was being given "this LAST OPPORTUNITY" to pay; otherwise, its properties would be subjected to distraint and levy, constitutes the CIR's final decision. Applying the Isabela case, the FNBS issued in this case constitutes as the final decision of CIR on taxpayer's protest, which is appealable to the CTA. (Commissioner of Internal Revenue v. Intervet Philippines, Inc. CTA EB No. 2693 [CTA Case No. 9909], October 7, 2024)

The service of NIC is a mandatory part of due process requirement in the issuance of a deficiency tax assessment.

The BIR issued a LOA for the examination of the books of account and other accounting records of taxpayer. After a while, the taxpayer received a Preliminary Assessment Notice indicating the result of the BIR’s audit. Not agreeing with the BIR’s audit’s result, the taxpayer filed its Reply to PAN which the BIR denied. The taxpayer continued to appeal its case through the filing of Protest and later on the filing of a Petition for Review with the CTA.

The Court ruled that one of the first requirements of Section 3 of RR No. 12-99, as amended by RR No. 07-18, the prevailing regulation on the due process requirement in the issuance of a deficiency tax assessment, is that the NIC be primary accorded to the taxpayer.

The use of the word ''shall" in subsection 3.1.1. describes the mandatory nature of the service of a NIC. As with the other notices required under the regulation, the purpose of sending a NIC is but part of the "due process requirement in the issuance of a deficiency tax assessment," the absence of which renders nugatory any assessment made by the tax authorities. The Notice of Informal Conference is part of due process. It gives both the taxpayer and the Commissioner the opportunity to settle the case at the earliest possible time without the need for the issuance of a FAN. Failure of the Commissioner to issue the NIC as required by RR No. 12-99, as amended, deprives the taxpayer of its right to due process, and evidently, renders the assessment void. (Berong Nickel Corporation v. Commissioner of Internal Revenue, CTA Case No. 10319, October 3, 2024)

Business permits are not considered as local taxes for purposes of applying “in lieu of income tax and any and all taxes, duties, fees and charges of any kind, nature or description levied, established or collected by any authority whatsoever, local or national” provision

The City Treasurer issued an assessment against the taxpayer for the payment of Regulatory Fees and Charges, including Mayor’s Permit Fee.

The taxpayer argues that it is exempt from paying Mayor’s Permit Fee by virtue of Section 9 of RA 9511, which provides that the taxpayer’s payment of franchise tax shall be in “in lieu of income tax and any and all taxes, duties, fees and charges of any kind, nature or description levied, established or collected by any authority whatsoever, local or national”; that the said “in lieu of taxes” clause applies to national and local taxes; and, that the Mayor’s Permit Fee is a tax imposed on its activities.

The Court cited the case of Bases Conversion and Development Authority and John Hay Management Corporation v. City Government of Baguio City, which held that business permits are not local taxes in exemption to statutes. Thus, the CTA has no jurisdiction of and is precluded from the payment of mayor’s permit fees, cancellation of the assessment for mayor’s permit fees, and refund of the paid mayor’s permit fees for taxable years 2020 and 2021. (National Grid Corporation of the Philippines v. Municipality of Bayombong, Nueva Vizcaya, CTA EB No. 2795, October 10, 2024)

RMO No. 42-2024, October 2, 2024 - This provides that VAT refund claims with incomplete information are automatically considered as High-Risk or requiring full verification

RMC No. 113-2024, October 15, 2024 -This announces the availability of certain functions in the ORUS

Availability of Functions in the BIR ORUS

Application for update of taxpayer classification in ORUS

Resumption of business registration and other registration-related transaction functionalities/features in ORUS

The following functionalities/features are now available in ORUS:

• Registration of business and issuance of Electronic Certificate of Registration (eCOR) and Authority to Print (ATP) with Electronic Payment (e-Payment) of Loose Documentary Stamp Tax (DST)
• Registration of New Branch
• Application for Authority to Print (Subsequent)

RMC No. 116-2024, October 18, 2024 - This clarifies the provision of the “Ease of Paying Taxes Act” applicable to the power industry

Tax Treatment of Pass-Through Charges

VAT Declaration and Reporting by GCs and TCs

Considering the various types of customers/end-users (i.e. VATable, zero-rated, exempt), the following shall be observed:

- Once the GCs and TCs have issued the invoice, the DUs, ECs, and RESs shall provide a certification of zero-rated/exempt transactions on or before the 5th day of the month following the invoice period.

- GCs and TCs will issue adjustment documents (i.e. Debit/Credit Memo/Note, Journal Voucher, Negative Invoice) to adjust output tax liability charged on zero-rated/exempt transactions 

Tax Treatment of Specific Charges

 [3] Includes: (i) Energy Tax; (ii) Universal Charges; (iii) Benefits to Host Communities; (iv) Feed-in Tariff Allowance; (v) National and Local Franchise Taxes; (vi) Real Property Tax

Transitory Provisions

GCs and TCs shall not be liable to the remittance of all outstanding deferred VAT from the effectivity of RR No. 3-2024 on April 27, 2024. However, the following transitory provisions shall be observed:

 - Submission by GCs and TCs, in hard and soft copies, of an inventory of outstanding deferred VAT prior to April 27, 2024, from DUs, ECs, and others. The submission shall be made to the concerned RDO/LT office on or before September 30, 2024.

- DUs and ECs shall remit the deferred VAT on behalf of the GCs and TCs using BIR Form No. 0605. The TIN of the GCs and TCs shall be clearly indicated and that the payment shall be specified as for “DEFERRED VAT – RMC No. ________”

- Submission by DUs and ECs, in hard and soft copies, of the summary of the remittance of deferred VAT. The submission shall be made to the concerned RDO/LT office on or before the 10th day from the date of remittance of BIR Form No. 0605.

- DUs and ECs shall provide the BIR Form No. 0605 and the proof of payment to the GCs and TCs within 3 days from the remittance to the BIR. This shall be the basis of the GCs and TCs for the issuance of the invoice (pursuant to the transitory provision of RR No. 7-2024) and to record the payment of the deferred VAT. The unremitted portion of the deferred VAT prior to April 27, 2024, if any, shall remain outstanding until fully collected or closed in a tax audit.

Notes:
1. RMC No. 116-2024 includes the following annexes:
 - Annex A – Certification of zero-rated/exempt transactions
 - Annex B – Inventory of outstanding deferred VAT
 - Annex C – Summary of the remittance of deferred VAT

2. Deadline of submission of the inventory of outstanding deferred VAT is September 30, 2024, despite RMC No. 116-2024 being published on October 18, 2024. This may be due to the fact that RMC itself was dated August 21, 2024, but published only on October 18, 2024