Measures To Consider For Every Establishment With Regards To Tax Compliance Verification Drive

Tax Compliance Verification Drive is one of the programs of the Bureau of Internal Revenue inspecting business establishments across the country, to verify compliance with registration, invoicing and bookkeeping requirements provided for under existing internal revenue laws, rules and regulations. 

However, the issuance of Reminder Letter to all business establishments during tax mapping operations is a requirement to be able to have an ample time for all businesses to prepare the important requirements at the time of tax mapping.

Needs to Do for Every Establishment of the Tax Compliance Verification Drive as follows:

1. Register your business with the BIR.

2. Display the BIR Certificate of Registration, the Registration Fee for the Current Year and "Notice to the Public/Ask for Receipt" signage in the place of business.

3. Issue registered invoices/receipts for sales of goods or services. Register the Cash Register Machines, Point-Of Sale machines, or other similar devices (if any).

4. Register and maintain Books of Accounts in the business premises.

5. Withhold taxes on compensation of employees, and on payments subject to final and expanded withholding tax and remit the correct tax as withheld.

6. File the necessary returns and pay the corresponding correct taxes at time/s required by law. 

Please refer http://www.bir.gov.ph/images/bir_files/old_files/others/annex_d_page1.jpg and http://www.bir.gov.ph/images/bir_files/old_files/others/annex_d_page2.jpg of the full text of Tax Compliance Verification Drive and detailed BIR Requirements, respectively. 

Policies and Procedures in the Issuance of eLA for VAT Credit/Refund Claims Filed with the VCAD

To answer the question regarding the policies and procedures in the issuance of (Electronic Letters (eLA) for Value-Added Tax (VAT) Credit/Refund claims filed by Direct Exporters filed with the VAT Credit Audit Division (VCAD), the bureau has issued Revenue Memorandum Circular (RMC) No. 19-2017 recently amending question and answer to Number 12 of RMC No. 80-2010 to read as follows:

Q12: What are the policies and procedures in the issuance of eLA for VAT credit/refund claims with the VCAD?

A12: The following policies and procedures shall be observed:

1. The Chief of the VCAD shall use the Electronic Letter of Authority Monitoring System (eLAMS) in requesting for the issuance of eLAs, as well as in updating of the status of the same, until the Case Management System (CMS) of the Electronic Tax Information System (eTIS) is rolled-out in the National Office.

2. The Assistant Commissioner, Assessment Service shall be authorized approving official/signatory for eLAs issued covering VAT credit/refund claims filed with the VCAD.

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2017/RMC%20No%2019-2017.pdf of the full text of RMC No. 19-2017

Issuance of Certificate of Tax Exemption (CTE) to Service Cooperatives

Have you read the new circular issued by the bureau recently related to the Issuance of Certificate of Tax Exemption (CTE) to Service Cooperatives?

Revenue Memorandum Circular (RMC) No. 18-2017 has issued by the CIR circularizing Memorandum No. 008-2017 dated February 24, 2017 Regarding Issuance of Certificate of Tax Exemption (CTE) to Service Cooperatives.

Attached as Annex "A" of the RMC stated the affected cooperatives of Article 23 of Republic Act (RA) No. 9520 as follows:

The affected cooperatives, however, posit that Article 23 of Republic Act (RA) No. 9520, specifically includes a definition of service cooperative as follows: 

Art. 23. Type and Categories of Cooperatives. – Types of Cooperatives - Cooperatives may fall under any of the following types: 

(a) xxx xxx xxx 

xxx xxx xxx 

(e) Service Cooperative is one which engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication, professional and other services;

 xxx xxx xxx 

(u) Other types of cooperatives as may be determined by the Cooperative Development Authority.” Aside from the service cooperatives, other cooperatives not specifically defined under the afore-quoted provision may also be registered as determined by the CDA. Moreover, RA 9520 expressly provides that any doubt in the interpretation and construction of said law should be resolved liberally in favor of the cooperatives, thus:

ART. 142. Interpretation and Construction. – In case of doubt as to the meaning of any provision of his Code or the regulations issued in pursuance thereof, the same shall be resolved liberally in favor of the cooperatives and their members.

It is also stated in the memorandum that service cooperatives must not be totally prohibited from availing of the tax incentives provided under RA 9520 provided that they are duly registered with the CDA and have been issued Certificates of Good Standing to show that they are bona fide cooperatives falling under RA 9520. Provided, however, that these cooperatives will be subject to post audit verification to check on whether they are just being used as a tax shield to avoid or evade payment of taxes.

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%2018-2017.pdf of the full text of RMC No. 18-2017 and http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/Annex%20A-RMC%2018-2017.pdf of the full text of Annex "A" Memorandum with regards to Issuance of Certificate of Tax Exemption (CTE) to Service Cooperatives and the guidelines for the registration of the Service Cooperatives.

Implementing The Tax Provisions Of The "MICROFINANCE NGOs ACT"

Are you interested about the new regulations issued by the bureau recently with regards to Revenue Regulations (RR) No. 3-2017, Implementing the Tax Provisions of Republic Act (RA) No. 10693, Otherwise Known As, The "MICROFINANCE NGOs ACT."? 

Republic Act (RA) No. 10693, otherwise known as the “Microfinance NGOs Act”, was signed into law on November 3 2015. The Act is pursuant to the declared policy of the State to pursue a program of poverty eradication wherein poor Filipino families shall be encouraged to undertake entrepreneurial activities to meet their minimum basic needs including income security. It aims to encourage non-government microfinance institutions to work with the government to pursue community development and improvement in the socio-economic welfare of the poor and other basic and marginalized sectors through financially inclusive and pro-poor financial and credit policies and mechanisms, such as microfinance and its allied services. 

On August 16, 2016, the Implementing Rules and Regulations of RA No. 10693 were duly approved by the concerned government agencies. Subsequently, this Bureau issued Revenue Memorandum Circular (RMC) No. 124-2016 dated November 25, 2016, circularizing the said Implementing Rules and Regulations. 

SECTION 4. – Accreditation of Microfinance NGOs Microfinance NGOs must secure a Certificate of Accreditation from the Council as a condition for the availment of the incentives of RA No. 10693. As required under the said Act, a Microfinance NGO must be a non-stock, non-profit corporation with a capital contribution of at least One Million Pesos (P1,000,000.00) and must conform to the following requirements: 

(1) The word “Microfinance” shall be included in the corporate and trade name of the Microfinance NGO; and 

(2) Its Articles of Incorporation and By-Laws shall specifically state that: 

(a) It is “non-stock and non-profit”; RA NO. 10693 (MICROFINANCE NGOs ACT) 

(b) It has the primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products, and services for the poor; 

(c) Shall specifically provide that upon dissolution, the net assets shall be distributed to another NGO organized for similar purposes, or the State for public purpose/s or as may be determined by a competent court of justice; 

(d) No part of the property or income shall inure to the benefit of any member, officer, organizer or any individual person; 

(e) The trustees shall not receive any compensation or remuneration, except reasonable per diem; 

(f) The level of administrative expenses shall not exceed thirty percent (30%) of the total expenses for the taxable year; and 

(g) Other requirements which the Council may deem necessary. 

Only Microfinance NGOs with duly issued Certificates of Accreditation from the Council shall be eligible to avail of the 2% gross receipts tax on income from microfinance operations as set forth under Section 6 hereof. 

SECTION 5. Transitional Accreditation Microfinance NGOs which have been certified by the Securities and Exchange Commission (SEC) to have no derogatory information and are deemed accredited, in accordance with Section 2, Rule 11 of the IRR, as Microfinance NGOs for a period of one (1) year from the effectivity of RA No. 10693, unless sooner revoked, shall be entitled to avail of the 2% gross receipts tax on its income from microfinance operations. 

SECTION 6. - Taxation of Microfinance NGOs 

(1) A duly registered and accredited Microfinance NGO shall pay a two percent (2%) tax based on its gross receipts from microfinance operations in lieu of all national taxes: Provided, that preferential tax treatment shall be accorded only to NGOs whose primary purpose is microfinance and only on their microfinance operations catering to the poor and low-income individuals in alignment with the main goal of RA No. 10693 to alleviate poverty. Provided, further, that the Certificate of Accreditation issued by the Council or the Certificate of No Derogatory Information issued by the SEC, as the case may be, shall be an essential requirement for granting the 2% preferential tax treatment of Microfinance NGOs. 

(2) The preferential rate of two percent (2%) tax based on gross receipts from microfinance operations should only refer to lending activities and insurance commission which are bundled and forming integral part of the qualified lending activities of the Microfinance NGOs. 

(3) All other income by the Microfinance NGOs which are not generated from the lending activities and insurance commissions shall be subject to all applicable taxes, which shall include but not limited to the following: RA NO. 10693 (MICROFINANCE NGOs ACT) 

(1) Interest income derived from loans other than those extended to qualified borrowers under RA No. 10693; 

(2) Commission fees and other charges on the provision of electronic payment system such as mobile or any innovative digital platforms or channels; 

(3) Commission fees and other charges on the provision of money transfer and other related remittance services; 

(4) Interest income from any currency bank deposit, yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements including a depository bank under the expanded foreign currency deposit system; 

(5) Royalties; 

(6) Prizes and other winnings; 

(7) Cash and/or property dividends; 

(8) Capital gains from the sale or dispositions of real property; 

(9) Capital gains tax on the sale, barter, exchange or other disposition of shares of stock in a domestic corporation; 

(10) Stock transaction tax on the sale, barter, or exchange of shares of stock listed and traded through the local stock exchange; 

(11) All other forms of income not related to microfinance operations (lending activities and insurance commission) catering to the poor and low-income individuals. 

(4) The availment of the benefits under RA No. 10693 by Microfinance NGOs for their microfinance operations shall be evaluated in conjunction with their other lines of business in order to determine the appropriate tax treatment of revenues derived from those other activities. 

(5) The Microfinance NGOs shall be constituted as a withholding agent for the government if they act as employer and any of their employees received compensation income subject to compensation withholding tax, or if they make payments to individuals or corporations subject to the withholding taxes at source as required under Chapter XIII and Section 57 of the Tax Code of 1997, as amended and implemented by Revenue Regulations (RR) No. 2-98, as amended. 

(6) Finally, the Microfinance NGOs’ books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether they are complying with the conditions under which they have been granted tax incentives and their tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. 

SECTION 7. Update of Registration with the Revenue District Office. Duly registered and accredited Microfinance NGOs, including those deemed accredited as Microfinance NGOs under Section 2, Rule 11 of the IRR, must update their registration with their concerned Revenue District Offices to reflect their accreditation as Microfinance NGOs. Moreover, their clients shall likewise be required to have a Taxpayer Identification Number (TIN). The documentary requirements for the application of TIN are provided under Revenue Memorandum Circular (RMC) No. 93-2016, as amended by RMC No. 137-2016. 

In order to assist their clients in securing TIN, the Microfinance NGO, with proper authorization from the clients, may apply for the issuance of TIN in behalf of their clients, by collating the duly accomplished BIR Form 1904 of the clients and valid identifications in support thereof, which shall be submitted to the concerned RDO for the processing and issuance of the TIN. 

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202017/RR%20No.%203-2017.pdf of the definition of terms and full text of RR No. 3-2017.

Clarification on the Submission of Certificate by the Responsible CPAs on the Compilation Services for the Preparation of Financial Statements and Notes Thereto and Amendment of RMC No. 36-2016

The bureau has issued Revenue Memorandum Circular (RMC) No. 16-2017 dated February 22, 2017 with regards to the Amendment of RMC No. 36-2016 and Clarification on the Requirement of Professional Regulatory Board of Accountancy (BOA) under BOA Resolution No. 03, Series of 2016.

The Circular is issued to amend RMC No. 36-2016 to read as follows: 

For the information of all concerned, relative to RMC No. 21-2016 circularizing the BOA Resolution No.03. Series of 2016 entitled "Requiring the Submission of Certificate by the Responsible Certified Public Accountants on the Compilation Services for the Preparation of Financial Statements and notes Thereto", the implementation of the aforesaid BOA requirement shall be on December 31, 2016 as per BOA Resolution No. 115, Series of 2016. 

In line with the government's thrust on improving ease of doing business and streamlining of bureaucratic requirements, it is further clarified that only the existing documentary requirements in the filing of Income Tax Returns shall be submitted to the Bureau.

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2017/RMC%20No%2016-2017.pdf of the full text of RMC No. 16-2017.

2017 Filing of Annual Financial Statements (AFS) and General Information Sheet (GIS)

The Chairperson of the Securities and Exchange Commission (SEC) has issued SEC Memorandum Circular No. 1 Series of 2017 recently related to the 2017 Filing of Annual Financial Statements (AFS) and General Information Sheet (GIS).

In accordance to its authority under the Corporation Code and Securities Regulation Code, adopt the following measures in the filing of annual reports:

I. AUDITED FINANCIAL STATEMENTS OF COMPANIES WHOSE FISCAL YEAR ENDS ON DECEMBER 31, 2016:

1. All corporations, including branch offices, representative offices, regional headquarters and regional operating headquarters of foreign corporations, shall file their AFS depending on the last numerical digit of their SEC registration or license number in accordance with the following schedule:

April 17, 18, 19, 20, 21:     1 and 2

April 24, 25, 26, 27, 28:     3 and 4

May 2, 3, 4, 5:     5 and 6

May 8, 9, 10, 11, 12:     7 and 8

May 15, 16, 17,18, 19:     9 and 10

All SEC Satellite Offices and Extension Offices in Cebu, Iloilo and Davao shall be governed also by the above coding schedule in 2017. However, any corporations may file on or before its respective filing dates.

II. GENERAL INFORMATION SHEET (GIS)

1. All corporations shall file their GIS within 30 calendar days from:

a. Stock Corporations - date of annual stockholders' meeting per By-Laws.

b. Non-Stock Corporations - date of annual members meeting per By-Laws.

c. Foreign Corporations - anniversary date of the issuance of the SEC License.

III. ALL REPORTS

All corporations may directly file their AFS and GIS in SEC Head Office, PICC Building, all Satellite Offices (Ali Mall-Cubao Quezon City, SM Manila, SM North EDSA, Robinson's Galleria and Muntinlupa City Hall) and Extension Offices (Cebu, Davao and Iloilo) applying 

the SEC issued number coding schedule for AFS.

All filers of GIS and AFS, regardless of the number of reports to be filed at SEC, complying with the circularized SEC-issued number coding schedule (for AFS only) may choose to avail of any of the following options:

a. SEC Express Nationwide Submission (SENS)

b. Any Courier/ Regular Mail

c. SEC Express Online Submission with or without return copy.

Please refer: http://www.sec.gov.ph/wp-content/uploads/2017/03/2017MCno02-new.pdf of the full text of SEC Memorandum Circular No. 1 Series of 2017.

Temporary Suspension of Enrollment to Electronic Filing and Payment System (eFPS) Facility

The CIR of the bureau has issued Revenue Memorandum Circular (RMC) No. 14-2017 recently with regards to the Temporary Suspensions of Enrollment to Electronic Filing and Payment System (eFPS) Facility.

It is issued to encourage taxpayers to proceed with eFPS enrollment before the start of the filing season. In order to give the full resources during the deadline of filing the Annual Income Tax Return, eFPS enrollment will be temporarily suspended beginning March 1 to April 30 of every year.

Taxpayers required to secure the BIR Importer's Clearance Certificate (ICC) and Broker's Clearance Certificate (BCC) and Government Bidders Tax Clearance can still proceed with eFPS Enrollment during the period of suspension by presenting their duly accomplished and notarized application form to the Revenue District Office (RDO).

eFPS Enrollment shall resume on May 1.

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%2014-2017.pdf of the full text of RMC No. 14-2017. 

When Payment of Taxes Through Credit/Debit/Prepaid Card is Deemed Made?

Did you know that the CIR of the bureau has issued Revenue Regulations (RR) No. 2-2017 recently amending RR No. 3-2016 particularly Section 4(a) and (b) thereof?

 

The amendment is as follows:

 

SECTION 2. Amendment. - Section 4 of RR No. 3-2016 is hereby amended to read as follows:

 

"SECTION 4. When Payment is Deemed Made. - The payment of taxes through credit/debit/prepaid card shall be deemed made on the date and time appearing in the system-generated payment confirmation receipt issued to the taxpayer-cardholder by the AAB-Aquirer.

 

However, in case of late remittance or non-remittance of taxes to the BIR, despite the timely issuance of a valid confirmation receipt by the AAB-Acquirer to the taxpayer-cardholder, the liability to pay the tax rests upon the AAB-Acquire considering that from the time of issuance of a valid confirmation receipt to the taxpayer-cardholder, the AAB-Acquirer becomes the trustee of the government with the obligation to remit the payment on time to the BIR.

 

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202017/RR%20No%202-2017.pdf

Acceptance of Tax Returns/Payments of Internal Revenue Taxes by Authorized Agent Banks (AABs) & Extension of Banking Hours

Have you read about the new circular issued by the bureau with regards to the Acceptance of Tax Returns/Payments of Internal Revenue Taxes by Authorized Agent Banks (AABs) and Extension of Banking Hours?

 

The CIR has issued Revenue Memorandum Circular (RMC) No. 12-2017 recently to inform the taxpayers and all concerned in relation with the Acceptance of Tax Returns/Payments of Internal Revenue Taxes by Authorized Agent Banks (AABs) on April 1, 2017 and April 8, 2017 and Extension of Banking Hours from 3:00 P.M. to 5:00 P.M. for the period April 1 to April 17, 2017.

 

This is in connection with the forthcoming tax deadline and pursuant to the Memorandum of Agreement executed by the AABs, the Bureau of Internal Revenue (BIR) and the Bureau of the Treasury (BTr), more particularly item 2.1.2 of the bank obligations which states that:

 

"The AAB shall:

 

1. xxx

 

2. xxx

2.1.1 xxx

2.1.2 To open bank operations two (2) Saturdays immediately prior to April 15 of every year and extend banking hours from 3:00 p.m. to 5:00 p.m. from April 1 to income tax payment deadline."

 

all concerned revenue personnel are hereby informed and guided that all AABs have been reminded to open bank operations on April 1, 2017 and April 8, 2017. Moreover, and considering that April 15, 2017 falls on a Black Saturday, they are also advised to extend the banking hours from 3:00 P.M. to 5:00 P.M. for the period April 1 to April 17, 2017, for purposes of accepting tax payments.

 

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%2012-2017.pdf of the full text of RMC No. 12-2017.

 

 

Prescribe Format for the Certificate of Availment / Approval and Notice of Denial Relative to Application for Compromise Settlement and / or Abatement of Penalties

The BIR has issued Revenue Memorandum Order (RMO) No. 3-2017 recently amending further the Prescribe Format for the Certificate of Availment / Approval and Notice of Denial Relative to Application for Compromise Settlement and / or Abatement of Penalties Pursuant to Section 204 of the Tax Code, as Amended.

It is stated in the RMO that all approved applications for compromise settlement and / or abatement of penalties shall be issued Certificate of Availment (CA) following the prescribed format as per attached Annexes "A" and "B", while denied applications shall be issued Notice of Denial (ND) following prescribed format as per attached annexes "C" and "D". 

Both CA and ND shall be included as accountable forms of the Bureau.

The RMO dated February 1, 2017 takes effect immediately.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202017/RMO%20No.%203-2017.pdf of the full text of RMO No. 3-2017.