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 © 2023 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 submission of SAWTs and MAPs is not required to prove entitlement to the refund of excess unutilized CWT.

This is a claim for a refund of excess unutilized CWT for CY 2016. The BIR argues that the submission of the SAWT and MAPs is mandatory to prove entitlement to the refund claim

The Court ruled that the evidentiary standards in proving a claim for refund of excess CWT have been well-established not only by relevant administrative regulations but also by jurisprudence, to wit:

1) the claim for refund must be filed within the two-year prescriptive period from the date of payment of the tax;

2) the fact of withholding is established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount of tax withheld therefrom; and

3) the income upon which the taxes were withheld was included in the ITR of the recipient as part of the gross income.

Thus, the submission of the SAWTs and the MAPs finds no basis in law and jurisprudence. What is required is the submission of a copy of the withholding tax statement issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom which specifically refers to the Certificates of CWT (BIR Form 2307). (CIR v. Sonoma Services, Inc., CTA EB No. 2416 (CTA Case No. 9771), December 7, 2022)

The actual date of filing is crucial for purposes of counting the 120-day period for the CIR to act on the claim, and ultimately, in determining the Court’s jurisdiction.

The taxpayer claims that it refiled its administrative claim on February 26, 2016 is not a bare allegation. The fact that the second filing was not stamped-received on its face does not automatically mean it was not filed at all. The taxpayer also claims that the 120-day period from the filing of the administrative claim and submission of complete documents in support thereof is reckoned from February 26, 2016.

While the Court En Banc agrees that re-filing of administrative claims within the prescriptive period is not prohibited, taxpayers are cautioned to act judiciously and with circumspect, considering that the actual date of filing is crucial for purposes of counting the 120-day period for the CIR to act on the claim, and ultimately, in determining Court’s jurisdiction. To uphold that Lantro’s claim that it re-filed its administrative claim on February 26, 2016, without any showing that it categorically and definitely abandoned its initial administrative claim, will give rise to an undesirable precedent and practice, wherein a taxpayer claimant may refile its administrative claim, without first withdrawing its earlier claim. (Lantro Philippines, Inc. vs. Commissioner of Internal Revenue, CTA EB No. 2406 (CTA Case No. 9436), December 20, 2022)

Section 15(g) of RA No.9513 does not require DOE-COE to claim VAT zero-rating on sales of renewable energy.

The taxpayer claimed that the Department of Energy Certificate of Endorsement (DOE COE) is not required by Section 15(g) of RA No. 9513, to reap the benefit of VAT zero-rating on its sales of renewable energy(RE). For the taxpayer, its DOE Certificates of Registration (DOE-COR) is sufficient to accord 0% VAT on its sales of RE. By mandating the DOE-COE as a precondition for the conferment of 0% VAT on its sales of RE, the DOE added a requirement not found in Section 15(g) RA No. 9513, which should not be countenanced.

The Court ruled that the VAT zero-rating embodied in Section 15(g) of RA No. 9513 does not even hint at such DOE COE as a requirement to claim a VAT zero-rating on sales of RE.

Therefore, the DOE went past the metes and bounds of Section 15(g) of RA No. 9513 by inserting the DOE-COE as a requirement to claim the incentive of VAT zero-rating, which may not be tolerated. (Philippine Geothermal Production Company, Inc. vs. Commissioner of Internal Revenue, CTA EB No. 2478 (CTA Case Nos. 9208 and 9274), December 13, 2022)

RMC No. 152-2022, December 7, 2022 – This clarifies the transitory provisions for the VAT zero-rate incentives under Sections 294(E) and 295(D), Title XIII of the Tax Code, as amended, and as implemented by Section 5, Rule 2 and Section 5, Rule 18 of the CREATE Act Implementing Rules And Regulations (CREATE IRR).

The Circular clarifies that there will be a retroactive application of RMC No. 24-2022. Transactions that transpired from the effectivity of RR No. 21-2021 on December 10, 2021 up to the day before the effectivity of RMC No. 24-2022 on March 8, 2022, shall remain as VAT zero-rated.

In case the purchaser is qualified for VAT zero-rate but was imposed 12% VAT by the seller for the said transitory period, the buyer and the seller may pursue any of the following procedures to correct the situation:

1) Retain the transaction as subject to 12% VAT. The seller shall still declare the sales as subject to 12% VAT. Consequently, the purchaser, if VAT-registered, can utilize the passed-on VAT as input tax and shall be deducted from output tax, if any. Should the purchaser be engaged in zero-rated activities, the same can be recovered through VAT refund pursuant to Section 112(A) of the Tax Code, as amended. If the purchaser is not a VAT-registered taxpayer, the VAT paid shall be claimed as part of the cost of sales or expenses.

2) Revert the transaction from VAT at 12% to VAT zero-rated. Where the transactions have already been declared in the VAT return/s, the seller may amend the same after reimbursing/returning the VAT paid by the buyer which is an REE.

The adjustment to sales shall only be to the extent of the reimbursed VAT to the REE. The resulting overpayment due to unutilized input tax credits, if any, may be recovered through VAT refund pursuant to Section 112(A) of the Tax Code, as amended, since the corresponding sale is reverted to VAT zero-rated.

RMC No. 154-2022, December 16, 2022 – This supersedes the provisions of RMC No. 142-2019 circularizing the Electronic Documentary Stamp Tax (eDST) System’s Balance Adjustment facility as an option for recovery of erroneously deducted DST.

This supersedes the provisions of RMC No. 142-2019 circularizing the Electronic Documentary Stamp Tax (eDST) System’s Balance Adjustment facility as an option for recovery of erroneously deducted DST.

The following procedures in availing the balance adjustment facility shall be observed:

1) A written request for adjustment in the taxpayer's ledger balance shall be filed by the taxpayer-user with the Chief, Miscellaneous Operations Monitoring Division (MOMD), Collection Service (CS) located at the National Office of the BIR, together with all the necessary documentary proofs on the incident(s) that gave rise to the erroneous deduction of DST from the taxpayer's ledger balance.

2) Within twenty-four (24) hours from receipt of the written request, the MOMD shall check the completeness of the documentary proofs submitted by the taxpayer-user and, if determined complete, shall endorse the taxpayer's request to the Chief, Administrative Systems Division (ASD) using the Balance Adjustment Recovery Data Request Form (Annex "A").

3) The ASD shall validate/verify the request of the taxpayer and the results of such validation/verification shall be indicated in the space provided for under the same data request form. The accomplished data request form shall be returned by the ASD to the MOMD within five (5) days from receipt of the same.

4) The MOMD shall then forward the data request form to the Assistant Commissioner (ACIR), CS for review and approval or denial thereof.

5) Upon receipt of the data request form from the ACIR, CS, the MOMD shall perform the following:

a) The MOMD shall notify the taxpayer-user, in writing or through email, the results of the request for balance adjustment within one (1) working day from receipt of the duly accomplished request form from the ACIR, CS.
b) In case of approval, the Chief, MOMD shall approve the taxpayer-user's request in the "Balance Adjustment Details" facility of the eDST System indicating briefly the reasons for adjustment in the box provided for.
c) In case of denial, the reason(s) for the denial of the taxpayer's request shall be clearly stated in the notice to the taxpayer.

RMO No. 55-2022, December 15, 2022 – This suspends all audit and other field operations of the BIR effective December 16, 2022.

This suspends all field audits and other field operations of the BIR relative to examinations and verifications of taxpayers' books of accounts, records, and other transactions for the period December 16, 2022 to January 8, 2023. Likewise, no written orders to audit and/or investigate taxpayers' internal revenue tax liabilities shall be served, except in the following cases:

• Investigation of cases prescribing on or before April 15, 2023;
• Tax evasion cases;
• Processing and verification of Estate Tax returns, Donor's Tax returns, Capital Gains Tax returns, and Withholding Tax returns on the sale of real properties or shares of stocks together with the Documentary Stamp Tax returns related thereto;
• Examination and/or verification of internal revenue tax liabilities of taxpayers retiring from business;
• Monitoring of privilege stores (tiangge); and
• Other matters/concerns where deadlines have been imposed.

In general, examiners and investigators shall make use of this period to do office work on their cases and to complete the report on those with already completed fieldwork.

BSP Circular No. 1162 Series of 2022
dated December 1, 2022
This provides the legal tender limit of Philippine coins for a single transaction.

Pursuant to Section 52 of Republic Act (“R.A.”) No. 7653 (otherwise known as, “The New Central Bank Act”), as amended by R.A. No. 11211, the legal tender limits for coins are set, as follows:

Note that the legal tender limit for a single transaction of coins does not preclude transactions above the stated coin limit so long as both parties have prior and mutual agreement.

IC Legal Opinion No. 2022-07
dated December 6, 2022
Insurance companies may purchase preferred shares subject to the limitations set forth in Sections 206 and 211 of the Insurance Code.

FGIC, an insurance corporation intends to convert its unissued common shares to preferred shares as part of its capital build-up plan. It requests a confirmation from the IC confirming that (a) subscriptions of the intended preferred share offering may be admitted for net worth purposes insofar as FGIC is concerned, and (2) an insurance company may purchase preferred shares.

As to FGIC’s first query, it ruled that subscriptions of the intended preferred share offering may be considered as equity in relation to FGIC’s capital build-up plan subject to its compliance with applicable rules and regulations on net worth requirement considering that (1) the preferred shares is cumulative, non-voting, non-participating, peso-denominated, redeemable and perpetual preferred shares that are non-convertible into common shares and the redemption is at the option of the issuing company, hence, no obligation is created on part of FGIC, and (2) with respect to the declaration of dividend, the company has no obligation to deliver cash or another financial asset to another entity, or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the issuer.

And as to the second query, the IC ruled that insurance companies may purchase FGIC's preferred shares, subject to the limitations set forth in Sections 206 and 211 of the Insurance Code, as amended, without prejudice to the application of Circular Letter No. 2017-29 or the "Guidelines on Related Party Transactions for Insurance Commission's (IC) Covered institutions (Cls)" and Circular Letter No. 2022- 23 or the "Guidelines on Domestic investments that Do Not Require Prior Approval".

FIRB Resolution No. 033-22 dated December 23, 2022
This involves Extending the deadline for affected RBEs in the IT-BPM sector to transfer registration to BOI.

Fiscal Incentives Review Board (FIRB) Resolution No. 026-22, issued on 14 September 2022, allows existing registered business enterprises (RBEs) in the Information Technology—Business Process Management (IT-BPM) sector to transfer their registration to the Board of Investments (BOI) from the investment promotion agency (IPA) administering an economic zone or freeport zone where their project is located, until 31 December 2022, to allow these RBEs to adopt up to 100% work-from-home (WFH) arrangement without loss of incentives.

The effectivity of FIRB Resolution No. 026-22 is hereby extended until 31 January 2023.