The Importance of the Mandatory Statutory Requirement and Function of a Letter of Authority

The bureau has issued Revenue Memorandum Circular (RMC) No. 75-2018  to highlight the doctrinal rule enunciated by the Supreme Court in the case of "Medicard Philippines, Inc. vs. Commissioner of Internal Revenue" (G. R. No. 222743, 05 April 2017) on the mandatory statutory requirement of a Letter of Authority (LOA), for the guidance of all concerned, particularly internal revenue officers tasked with assessment and collection functions and review of disputed assessments.

The summary of judicial ruling is stated as follows:

The judicial ruling , involving a specific statutory' mandate, states that no assessments can be issued or no assessment functions or proceedings can be done without the prior approval and authorization of the Commissioner of Internal Revenue (ClR) or his duly authorized representative, through an LOA. The concept of an LOA is therefore clear and unequivocal . Any tax assessment issued without an LOA is a violation of the taxpayer's right to due process and is therefore "inescapably void."

The Court further emphatically clarified that :

1. The circumstances contemplated under Section 6 of the National Internal revenue Code (NIRC) , as amended, "where the taxpayer may be assessed through best evidence obtainable , inventory-taking or surveillance, among others, have nothing to do with the LOA. These are simply methods of examining the taxpayer in order to arrive at the correct amount of taxes. Hence unless undertaken by

the CIR himself or his duly authorized representatives, other tax agents may not validly conduct any of these kinds of examinations without prior authority."

2. A Letter Notice (LN)" is entirely different and serves a different purpose than an LOA". It is not found in.the NIRC and is not an authority to conduct an audit or examination of the taxpayer leading

to the issuance of deficiency assessments . Due process demands that after an LN has served its purpose , the revenue officer should have properly secured an LOA before proceeding with the further examination and assessment of taxpayer.

To help forestall any unnecessary controversy and to encourage due observance of the judicial pronouncements, any examiner or revenue officer initiating tax assessments or performing assessment functions without an LOA shall be subject to appropriate administrative sanctions.

The provisions of any internal revenue issuance inconsistent herewith are hereby repealed, amended or modified accordingly.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2018/RMC%20No%2075-2018.pdf of the full text of RMC No. 75-2018.

Rates on the Excise Tax on Automobiles

Are you planning of investing or buying vehicle today or in the future? Do you consider if it's subject to tax or exempt from tax? May be it is also important to consider the tax matters and other legal transactions in investing or purchasing vehicle.

Few months ago, the bureau has issued Revenue Regulations (RR) No. 5-2018 implementing the Adjustment of Rates on the Excise Tax on Automobiles pursuant to the Provisions of Republic Act No. 10963, otherwise known as the "Tax Reform for Acceleration and Inclusion (TRAIN) Law" amending for the purpose RR No. 25-2003 as follows:

SEC. 3. Section 4 of RR No. 25-2003 is hereby amended as follows:

"SEC. 4. - RATES AND BASES OF THE AD VALOREM TAX ON AUTOMOBILES. There shall be levied, assessed and collected ad valorem tax on automobiles based on the manufacturer's/assembler's or importer's selling price, net of excise tax and value-added tax, in accordance with the following schedule, EFFECTIVE JANUARY 1, 2018:

NET MANUFACTURER'S                                      TAX RATE

PRICE/ IMPORTER'S SELLING

PRICE

UP TO SIX HUNDRED                                              FOUR PERCENT (4%)

THOUSAND PESOS (P600,000.00)

OVER SIX HUNDRED                                              TEN PERCENT (10%)

THOUSAND PESOS (P600,000.00)

TO ONE MILLION PESOS

(P1,000,000.00)

OVER ONE MILLION PESOS                                  TWENTY PERCENT (20%)

(P1,000,000.00) TO FOUR

MILLION PESOS (P4,000,000.00)

OVER FOUR MILLION PESOS                                FIFTY PERCENT (50%)

(P4,000,000.00)

PROVIDED, THAT HYBRID VEHICLES SHALL BE TAXED AT FIFTY PERCENT (50%) OF THE APPLICABLE EXCISE TAX RATES ON AUTOMOBILES SUBJECT TO THE CONDITIONS IN SECTION 9(E) OF THIS REGULATIONS: PROVIDED, FURTHER, THAT IN THE CASE OF IMPORTED AUTOMOBILES NOT FOR SALE, THE TAX IMPOSED HEREIN SHALL BE BASED ON THE TOTAL LANDED VALUE, INCLUDING TRANSACTION VALUE, CUSTOMS DUTY AND ALL OTHER CHARGES."

It also stated in the regulations of vehicles exempt from the excise tax on automobiles as follows:

SEC. 4. Section 9 is hereby amended as follows:

"SEC. 9. TAX-EXEMPT REMOVALS OF AUTOMOBILES. The following removals of locally manufactured/assembled or release of imported automobiles from the place of production or from customs' custody, respectively, are exempt for the payment of the appropriate excise taxes subject to certain conditions.

a. xxx 

xxx xxx xxx 

E. PURELY ELECTRIC VEHICLES SHALL BE EXEMPT FROM THE EXCISE TAX ON AUTOMOBILES. HYBRID VEHICLES SHALL BE SUBJECT TO FIFTY PERCENT (50%) OF THE APPLICABLE EXCISE TAX RATES ON AUTOMOBILES. PRIOR TO THE REMOVAL OF THE AUTOMOBILES FROM THE MANUFACTURING PLANT OR CUSTOMS CUSTODY, THE DEPARTMENT OF ENERGY (DOE) SHALL DETERMINE WHETHER THE AUTOMOBILES ARE HYBRID VEHICLES OR

PURELY ELECTRIC VEHICLES, AND FURNISH THE COMMISSIONER OF INTERNAL REVENUE, ATTENTION: CHIEF EXCISE LARGE TAXPAYERS REGULATORY DIVISION (ELTRD), CERTIFIED COPIES OF THE RESULTS OF SUCH EXAMINATION OR ENDORSEMENT TO THAT EFFECT. 

F. PICK-UPS."

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%205-2018.pdf of the full tax of RR No. 5-2018.

Use of Invoices / Receipts Registered from VAT to Non-VAT

Who else wants to know the guidelines of the Use of Invoices / Receipts Registered from VAT to Non-VAT?

Revenue Regulations (RR) No. 13-2018 was issued by the bureau amending RR No. 13-2018 Particularly on the Use of Invoices / Receipts of Previously Registered VAT Taxpayers who are now Non-VAT Taxpayers Pursuant to Section 84 of Republic Act (RA) No. 10963, or the "Tax Reform for Acceleration and Inclusion (TRAIN) Law".

It is stated in these regulations to read as follows:

SECTION 2. AMENDED. - Section 13 of RR No. 13-2018 is hereby amended providing deadline on the use of stamped Non-VAT invoices/receipts to read as follows:

"SECTION 13. TRANSITORY PROVISIONS. - 

XXX           XXX          XXX

A number of unused invoices/receipts, as determined by the taxpayer with the approval of the appropriate BIR Office, may be allowed for use, provided the phrase "Non-VAT registered as of (dated of final application for updated of registration). Not valid for claim of input tax." shall be stamped on the face of each and every copy thereof, until new registered non-VAT invoices or receipts have been printed and received by the taxpayer or until August 31, 2018, whichever comes first. Upon receipt of newly-printed registered non-VAT invoices or receipts, the taxpayer shall submit, on the same day, a new inventory list of, and surrender for cancellation, all unused previously-stamp invoices/receipts.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2019-2018.pdf of the full text of RR No. 13-2018.

Documentary Stamp Tax Rate Adjustment Under Republic Act No. 10963

Do you consider the importance of knowing the Documentary Stamp Tax (DST) Rate when doing transactions related to business? For me, it is necessary, to avoid circumstances that cause delays of the process of doing business. Besides, it's part for the growth and success of the business operations in the private and public business community.

Revenue Regulations (RR) No. 4- 2018 was issued by the bureau to implement the Documentary Stamp Tax Rate Adjustment Under Republic Act No. 10963, Otherwise Known as the "Tax Reform For Acceleration and Inclusion (TRAIN) Law" to read as follows: 

SEC. 2. NEW RATE OF DST ON ORIGINAL ISSUE OF SHARES OF STOCKS. - 

"SEC. 174. Stamp Tax on Original Issue of Shares of Stock - On every original issue. whether on organization. reorganization or for any lawful purpose, of shares of stock by any association, company. or corporation. there shall be collected a documentary stamp tax of two pesos (P2.00) on each Two hundred pesos (P200). or fractional part thereof. of the par value, of such shares of stock: Provided, That in the case of the original issue of shares of stock without par value. the amount of the documentary stamp tax herein prescribed shall be based upon the actual consideration for the issuance of such shares of stock: Provided, further, that in the case of stock dividends. on the actual value  presented by each share." 

The rate of DST on the original issue of shares has been increased from One peso (P1.00) to Two pesos (P2.00) on each Two hundred pesos (P200), or fractional part thereof, of the par value of such shares of stock.

SEC. 3. NEW RATE OF DST ON STAMP TAX ON SALES, AGREEMENTS TO SELL, MEMORANDA OF SALES, DELIVERIES OR TRANSFER OF SHARES OR CERTIFICATES OF STOCK. - 

"SEC' 175. Stamp Tax on Sales, Agreements to Sell, Memoranda of  Sales, Deliveries or Transfer of Shares or Certificates of Stock. - On all sales, or agreements to sell. or memoranda of sales. or deliveries or transfer of such securities by assignment in blank. or by delivery or by any paper or agreement. of memorandum or other evidences of transfer or sale whether entitling the holder in any manner to the benefit of such stock. or to secure the future payment of money, or for the future transfer of any stock, there shall be collected a documentary stamp tax of One peso and Fifty centavos (P1.50) on each Two hundred pesos (P200), or fractional part thereof. of tire par value of such stock: Provided. That only one tax shall be collected on each sale or transfer of stock from one person to another, regardless of whether or not a certificate of stock or obligation is issued. indorsed, or delivered in pursuance of such sale or transfer: and Provided, further. That in the case of stock without par value the amount of the documentary stamp tax herein prescribed shall be equivalent to Fifty percent of the documentary stamp tax paid upon the original issue of said stock." 

The rate of DST on sales, agreements to sell, rnemoranda of sales, deliveries or transfer of shares or certificates of stock has been increased from Seventy-five centavos (P0.75) to One peso and fifty centavos (P1.50) on each Two hundred pesos (P200), or fractional part thereof, of the par value of such stock. In case of stocks without par value, the DST shall be equivalent to Fifty, percent (50%) of the DST paid upon the original issue of said stock.

SEC. 4, NEW RATE OF DST ON CERTIFICATES OF PROFITS OR INTEREST IN PROPERTY OR ACCUMULATIONS. - 

"SEC. 177. Stamp Tax on Certificates of Profits or Interest in Property or Accumulations. - On all certificates of profits. or any certificate or memorandum showing interest in the property or accumulations of any association. company or corporation, and on all transfers of such certificates or memoranda. there shall be collected a documentary stamp tax of One peso (P1.00) on each Two hundred pesos, or fractional part thereof, of the face value of such certificates or memorandum." 

The rate of DST on the Certificates of Profits or Interest in Property or Accumulations has been increased from Fifty centavos (P0.50) to One pesos (P1.00) on each Two hundred pesos, or fractional part thereof, of the face value of such certificates or rnemorandum

SEC. 5. NEW RATE OF DST ON BANK CHECKS, DRAFTS, CERTIFICATES OF DEPOSIT NOT BEARING INTEREST, AND OTHER INSTRUMENTS. - 

"SEC. 178. Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not Bearing Interest, and Other Instruments. - On each bank client. draft of certificate of deposit not drawing interest. or order for the payment of any sum of money drawn upon of issued by any bank, trust company. or any person or persons. companies or corporations. at sight or on demand, there shall be collected a documentary stamp tax of Three pesos (P3.00)." 

The rate of DST on bank checks, drafts, certificates of deposit not bearing interest, and other instruments has been increased from One peso and Fifty centavos (P1.50) to Three pesos (P3.00)." The rate of DST on bank ch drafts, certificates of deposit not bearing interest, attd other instruments has beerr increased fi"om One peso and Fifty centavos (P1.50) to Three pesos (P3.00)."

SEC. 6. NEW RATE OF DST ON ALL DEBT INSTRUMENTS. -

 "SEC. 179. Stamp Tax on ALL Debt Instruments. -

On every original issue of debt instruments. there shall be collected a documentary stamp tax of One peso and Fifty centavos (P1.50) otr each Two hundred pesos (P200.00). or fractional part threreof, of the issue price of any such debt instruments: Provided. that for such debt instruments with terms of less than one ( 1) year, the documentary stamp tax to be collected shall  be of a proportional amount in accordance with the ratio of its term in number of days to three hundred sixty-five (365) days: Provided, further. That only one documentary, stamp tax shall be imposed on either loan agreement. or promissory notes issued to secure such loan.

 xxx" 

The rate of DST on all debt instruments is increased from One peso (P1.00) to One

peso and Fifty centavos (P1.50) on each Two hundred pesos (P200.00), or fractional part

thereof, of the issue price of any such debt instruments.

SEC. 7. NEW RATE ON ALL BILLS OF EXCHANGE OR DRAFTS. -

"SEC. 180.Stamp Tax on All Bills Exchange or Drafts. - On all bills of exchange (between points within the Philippines) or drafts. there shall be collected a documentary stamp tax of Sixty, centavos (P0.60) on each Two hundred pesos (P200.00) or fractional part thereof, of the face value of any such bill of exchange or draft." The rate of DST on all bills of exchange or drafts has been increased from Thirty, centavos (P0.30) to Sixty centavos (P0.60) on each Two hundred pesos (P200.00) or fractional part thereof. of the face value of any such bill of exchange or draft.

SEC. 8. NEW RATE OF DST UPON ACCEPTANCE OF BILLS OF EXCHANGE AND OTHERS. -

"SEC. 181 . Stamp Tax Upon Acceptance o.f Bills of Exchange and Others. - Upon any acceptance of payment of any bill of exchange or order for the payment of money purporting to be drawn in a foreign country but payable in the Philippines, there shall be collected a documentary stamp tax of Sixty centavos (P0.60) on each Two hundred pesos (P200) or fractional part thereof, of the face value of any such bill of exchange, or order, of the Philippine equivalent of such value. if expressed in foreign currency."

The rate of DST on acceptance of bills of exchange and others all bills of exchange or drafts has been increased from Thirty centavos (P0.30) to Sixty centavos (P0.60) on each Two hundred pesos (P200.00) or fractional part thereof, of the I'ace value of any such bill of exchange or draft, or the Philippine equivalent of such value, if expressed in foreign currency.

SEC. 9. NEW RATE OF DST ON FOREIGN BILLS OF EXCHANGE AND LETTERS OF CREDIT. -

"SEC. 182. Stamp Tax on Foreign Bills of Exchange and Letters of Credit. - On all foreign bills of exchange and letter of credit (including orders. by telegraph or otherwise, for the payment of money issued by express or steamship companies or by any person or persons) drawn in but payable out of the Philippines in a set of three (3) or more according to the custom of merchants and bankers. there shall be collected a documentary stamp tax of Sixty centavos (P0.60) on each Two hundred pesos (P200). or fractional part thereof of the face value of any such bill of exchange or letter or credit,

or the Philippine equivalent of such face value in foreign currency."

The rate of DST on all bills of exchange or drafts has been increased from Thirty centavos (P0.30) to Sixty centavos (P0.60) on each Two Hundred of fractional thereof, of the face value of any such bill of exchange or letter of credit, or the Philippine equivalent of such face value, if expressed in foreign currency.

SEC. 10. NEW RATE OF DST ON LIFE INSURANCE POLICIES. - 

'SEC. 183. Stamp Tan on Life Insurance Policies - On all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon any life or lives, there shall be collected a one-time documentary stamp tax at the following rates:

If the amount of it.insurance does not exceed P100,000      Exempt

If the amount of insurance exceeds 

     P100.000 but does not exceed P300,000     P20.00

If the amount of insurance exceeds

     P300,000 but does not exceed P500,000     P50.00

If the amount of insurance exceeds

     P500,000 but does not exceed P750,000     P100.00

If the amount of insurance exceeds

     P750,000 but does not exceed P1,000,000     P150

If the amount of insurance exceeds P1,000,000     P200.00"

The rates of DST on life insurance policies have been doubled.

SEC. 11. NEW RATE OF DST ON POLICIES OF ANNUITIES AND PRE-NEED PLANS. - 

"SEC. 186. Stamp Tax on Policies of Annuities and Pre-Need Plans. - On all policies of annuities, or other instruments by whatever name the same may be called, whereby an annuity may be made, transferred or redeemed, there shall be collected a documentary stamp tax of One peso (P1.00) on each Two hundred pesos (P200), or fractional part thereof, of the premium or contribution collected."

The rate of DST on annuities has been increased from Fifty centavos (P0.50) to One peso (P1.00) on each Two hundred pesos (P200), or fractional part thereof, of the premium or installment payment on contract price collected. Pre-need are now taxed at Forty centavos (P0.40) from the previous rate of Twenty centavos (P0.20).

SEC. 12. NEW RATE OF DST ON CERTIFICATES. -

"SEC. 188. Stamp Tax on Certificates. - On each certificate of damage or otherwise, and on every other person acting as such, and on each certificate issued by a notary public, and on each certificate of any description required by law or by rules or regulations of a public office, or which is issued for the purpose of giving information, or establishing prof of a fact, and not otherwise specified herein, there shall be collected a documentary stamp tax of  Thirty pesos (P30.00)."

The rate of DST on certificates has been increased from Fifteen pesos (P15.00) to Thirty pesos (P30.00).

SEC. 13. NEW RATE OF DST ON WAREHOUSE RECEIPTS. -

"SEC. 189. Stamp Tax on Warehouse Receipts. - On each warehouse receipt for property held in storage in a public or private warehouse or yard for any person other than proprietor of such warehouse or yard, there shall be collected a documentary stamp tax of Thirty pesos (P30.00); Provided, That no tax shall be collected on each warehouse receipt issued to any one person in any one calendar month covering property the value of which does not exceed Two hundred pesos (P200)."

The rate of DST on warehouse receipts has been increased from Fifteen pesos (P15.00) to Thirty pesos (P30.00).

SEC. 14. NEW RATE OF DST ON JAI--ALA-, HORSE RACE, TICKETS, LOTTO, OR OTHER AUTHORIZED NUMBERS GAMES. -

"SEC. 10. Stamp Tax on Jai-alai, Horse Race, Tickets, Lotto, or Other Authorized Number Games. - On each jai-alai, horse race ticket, lotto or other authorized numbers games, there shall be collected a documentary stamp tax of Twenty centavos (P0.20): Provided, That if the cost of the ticket exceed One peso (P1.00), an additional tax of Twenty centavos (P0.20) on every One peso (P1.00), or fractional part thereof, shall be collected."

The rate of DST on jai-alai, horse race, tickets, lotto, or other authorized number game has been increased from Ten centavos (P0.10) to Twenty centavos (P0.20); and if the cost of ticket exceeds One pesos (P1.00), the additional tax has been increased from Ten centavos (P0.10) to Twenty centavos (P0.20) on every One peso (P1.00), or fractional part thereof.

SEC. 15. NEW RATE OF DST ON BILLS LADING OR RECEIPTS - 

"SEC. 191. Stamp Tax on bills of Lading or Receipts. - On each set of bills of lading or receipts (except charter party) for any goods, merchandise, or effects shipped from one port, there shall be collected a documentary stamp tax of Two pesos (P2.00), if the value of such goods exceeds One hundred pesos (P100) and does not exceed One thousand pesos (P1,000); Twenty pesos (P20.00), if the value exceeds One thousand pesos (P1,000): Provided, however, That freight tickets covering goods, merchandise or effects carried as accompanied baggage of passengers on land and water carriers primarily engaged in the transportation of passengers are hereby exempt."

The rate of DST on each bill of lading or receipt has been increased from One pesos (P1.00) to Two pesos (P2.00), if the value of goods exceeds One hundred pesos (P100) and does not exceed One thousand pesos (P1,000); and the rate of DST has been increased from One thousand pesos (P1,000).

Modes of Payment of Internal Revenue Taxes Through AABs

Do you think taxpayers need to know the importance of Modes of Payment of Internal Revenue Taxes Through Authorized Agent Banks (AABs)? In this regard, the bureau has issued Revenue Regulations (RR) No. 16-2002 that refers the Modes of and Procedure of Internal Revenue Taxes Through Agent Banks Amending RR No. 4-97, as amended by RR No. 6-98.

The Modes of Payment of Internal Revenue Taxes Through AABs are stated in these regulations to read as follows:

SEC. 3. MODES OF PAYMENT TO AABs - Aside from the electronic payment system currently used by some taxpayers in paying their BIR taxes, the rest shall pay their tax liabilities through any of the following modes: a) over-the-counter cash payments; b) bank debit system; or c) check payment system.

a) "Over-the-counter cash payment" refers to payment of tax liabilities to authorized agent bank in the currencies (paper bills or coins) that are legal tender in the Philippines. The maximum amount allowed per tax payment shall not exceed ten thousand pesos (P10,000.00)

b) "Bank debit system" refers to the system whereby a taxpayer, through a bank debit memo/advice, authorizes withdrawals from his/its existing bank accounts for payment of tax liabilities.

The bank debit system mode is allowed only if the taxpayer has a bank account with the AAB branch where he/it intends to file and pay his/its tax return/form/declaration, provided said AAB branch is within the jurisdiction of the BIR Revenue District Office (RDO) / Large Taxpayers District Office (LTDO) where the tax payment is due and payable.

c) "Checks" refers to a bill of exchange or Order Instrument drawn on a bank payable on demand.

In the issuance and accomplishment of checks for the payment of internal revenue taxes, as illustrated below, the taxpayer shall indicate in the space provided for "PAY TO THE ORDER OF" the following data: (1) presenting/collecting bank or the bank where the payment is to be coursed and (2) FAO (For the Account Of) Bureau of Internal Revenue as payee; and under the "ACCOUNT NAME" the taxpayer identification number (TIN).

(Below is a sample of a tax check payment where the drawee bank and presenting bank are different from each other.)

(Below is sample of check tax payment drawn from and presented to the same bank.)

The following checks are, however, not acceptable as check payments for internal revenue taxes:

1. Accommodation checks - checks issued or drawn by a party other than the taxpayer making the payment;

2. Second endorsed checks - checks issued to the taxpayer as payee who indorses the same as payment for taxes;

3. Stale checks - checks dated more than six (6) months prior to presentation to the authorized agent bank;

4. Postdated checks - checks dated a day or several days after the date of presentation to the authorized agent bank;

5. Unsigned checks - checks with no signature of the drawer;

6. Checks with alterations/erasures.

AABs accepting checks for the payment of BIR taxes and other charges must see to it that the check covers one tax type for one return period only. Moreover, AABs must strictly comply with the systems and procedures for the reception, processing, clearing and accounting of the checks to be prescribed under a separate regulation.

Second indorsement of checks which are payable to the Bureau of Internal Revenue or Commissioner of Internal revenue is absolutely prohibited.

Please refer https://www.bir.gov.ph/images/bir_files/old_files/pdf/2007rr16_02.pdf of the full text of RR No. 16-2002.

Reckoning Point for Valuation of Gifts Made in Property

May be taxpayers and other concerns will ask when is the action of calculating for valuation of gifts made in property?

The bureau recently issued Revenue Regulations (RR) No. 17-2018 amending RR No. 12-2018 Particularly Section 13 Thereof.

The amendment is stated in Section 2 of RR No. 17-2018 to read as follows:

"SECTION 13. VALUATION OF GIFTS MADE IN PROPERTY. - The valuation of gifts in the form of property shall follow the rules set forth in Section 5 of these regulations: Provided, That the reckoning point for valuation shall be the date when the donation is made."

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No%2017-2018.pdf of the full text of RR No. 17-2018.

Requirements for deductibility of certain expenses

In general, all expenses are deductible unless stated by law or regulations that are nondeductible or it requires certain requirements for deductibility of such expenses.

Requirements for deductibility of certain expenses is an intriguing tax issue based on Revenue Regulations (RR) No. 6-2018 that was issued by the bureau in the previous months. These regulations revokes RR No. 12-2013 Thereby Reinstating the Provisions of Section 2.58.5 of RR No. 14-2002, as Amended by RR No. 17-2003 of the Requirements for Deductiblity of Certain Expenses to read as follows:

"Sec. 2.58.5. Requirements for Deductiblity. - Any income payment which is otherwise deductible under the Code shall be allowed as a deduction from the payor's gross income only if it is shown that the income tax required to be withheld has been paid to the Bureau in accordance with Secs. 57 and 58 of the Code.

A deduction will also be allowed in the following cases where no withholding of tax was made:

(A) The payee reported the income and pays the tax due thereon and the withholding agent pays the tax including the interest incident to the failure to withhold the tax. and surcharges, if applicable, at the time of the audit/investigation or reinvestigation/reconsideration.

(B) The recipient/payee failed to report the income on the due date thereof. but the withholding agent/taxpayer pays the tax. including the interest incident to the failure to withhold the tax and surcharges" if applicable at the time of audit/investigation or reinvestigation/reconsideration.

(C ) The withholding agent erroneously underwithheld the tax but pays the difference between the correct amount and the amount of tax withheld including the interest. incident to such error. and surcharges, if applicable, at the time of the audit investigation or reinvestigation/reconsideration.

Items of deduction representing return of capital such as those pertaining to purchases of raw materials forming part of finished product or purchases of goods for resale. shall be allowed as deductions upon withholding agent's payment of the basic withholding tax and penalties incident to non-withholding or underwithholding.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%206-2018.pdf of the full text of RR No. 6-2018.

The Importance on the Use of Non-Thermal Paper for All Cash Register Machines (CRMs) / Point of Sales (POS) Machines and Other lnvoice / Receipt Generating Machine / Software

Why all business establishments and others need to know the importance on the Use of Non-Thermal Paper for All Cash Register Machines (CRMs) / Point of Sales (POS) Machines and Other lnvoice / Receipt Generating Machine / Software?

Recently, the bureau has issued Revenue Regulations (RR) No. 16-2018 amending RR No. 10-2015 as amended by RR Nos. 12-2015, 14-2015 and 6-2016. In Section 2 of these Regulations stated the AMENDMENTS of Sections 2, 3, 4, 5 and 6 of RR 10-2015 to read as follows:

All taxpayers using CRM/POS machines or other invoice/receipt generating machine/software shall have the option to use the type of paper depending on their business requirements, subject to the retention and preservation of accounting records for a period within which the Commissioner is authorized to make an assessment and collection of taxes, as prescribed in Section 203 and 222 of the 1997 National Internal Revenue code, as amended. 

All tape receipts issued and the data printed on the tape receipts shall show the information required under Section 5 of RR l-0-201-5, as amended, namely: 

1. Taxpayer's (TP) Registered Name; 

2. TP's BLrsiness Name/style, if any;

3. A statement that the taxpayer is VAT or NON VAT registered followed by the Taxpayers Identification Number (TIN) and 4-digit branch code. Example: VAT Registered TIN 123-456-789-0000; 

4. Machine Identification Number (MIN); 

5. Serial number of the CRM/PoS machine; 

6. Detailed business address where such Official Receipts (ORs) / Sales Invoices (SIs) / Commercial Invoices (CIs) shall be used/located; 

7. Date of transaction; 

8. Serial Number of the OR/SI/CI printed prominently; 

9. A space provided for the Name, Address and TIN of the buyer; 

10. Description of the items/goods or nature of service; 

11. Quantity; 

12. Unit cost 

13. Total cost; 

14. VAT amount (if transaction is subject to 12%V AT); 

15. If the VAT taxpayer is engaged in mixed transactions, the amounts involved shall be broken down to: VATable sales, VAT Amount, Zero Rated Sales, and VAT Exempt Sales; 

16. For Non-VAT ORs/Sls and Cls (VAT or NON-VAT) such as delivery receipts, order slips, purchase orders, provisional receipts, acknowledgment receipts, collection receipts, credit/debit memo, job orders and other similar documents that form part of the accounting records of the taxpayer and/or issued to the customers, in addition to the above-enumerated applicable information, the phrase "THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX" in bold letters, shall be conspicuously printed at the bottom of the NON VAT ORs/SIs/CIs; 

17. Taxpayers whose transactions are not subject to VAT or Percentage Tax shall issue NON-VAT principal receipts/invoices indicating prominently at the face of such receipts/invoices the word'EXEMPT'; 

18, If the taxpayer is subject to percentage tax under Title V of the 1997 NIRC, as amended, but also sells goods/services under Section 109 (A) to (W), excluding (E) of the same Code, as amended by Republic Act (RA) No. 10378, the non-VAT principal receipts/invoices shall indicate the breakdown of Sales Subject to Percentage Tax (SSPT) and Exempt Sales; 

19. The following shall be printed at the bottom portion of the OR/SI/CI: 

* Name, address and TIN of the accredited supplier of CRM/POS/Other similar machines/software; 

* Accreditation number and the date of accreditation (date issued "mm/dd/yyyy" and valid until "mm/dd/yyyy") of the accredited supplier; 

* BIR Final Permit To Use (PTU) Number; 

* The phrase "THIS INVOICE/RECEIPT SHALL BE VALID FOR FIVE (5) YEARS FROM THE DATE OF THE PERMIT TO USE." 

20. For taxpayers transacting with a Senior Citizen (SC) and/or Person/s With Disability (PWD) pursuant to RA 9994 (Expanded Senior citizens Act of 2010) and RA 10754 [(An Act Expanding the Benefits and Privileges of Persons With Disability (PWD)], respectively, a space for the following shall also be required: 

* Senior Citizen/PwD TIN; 

* OSCA lD No./PWD ID No.

* Senior Citizen / PWD discount (show detailed breakdown of the 20% discount and/or 12%VAT exemption, whichever is applicable; and 

* Signature of the SC/PWD. 

However, for taxpayers whose transactions ore not covered by RA 9994 / 70754, the above information may not be indicated, Moreover, the buyer/customer who maybe needing proof of such payment to be able to claim for expense (for income tax purposes) or input tax (for VAT purposes), may return the issued tape receipt to the seller and request for issuance of a manual invoice or receipt. Whenever so requested by the buyer/ customer, the seller shall issue the manual receipt/invoice, whichever is applicable, to replace the previously issued tape receipt. 

Sales generated from CRM / POS machines where tape receipts issued were replaced by manual invoice / receipt shall be deducted from the sales to be reported in the eSALES system of the BIR. This deduction shall be reflected as an adjustment in the CRM Sales Book/Back end report. 

The returned tape receipt shall be attached to the duplicate copy of the manually issued invoice / receipt and shall be the basis in adjusting the sales. However, the sales that were replaced with manual invoice / receipt shall still be included but separately indicated in the Summary List of Sales (SLS) required to be submitted by VAT registered taxpayers.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2016-2018.pdf of the full text of RR No. 16-2018.

Submission of the Quarterly Alphabetical List of Payees (QAP) that shall accompany the Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) [BIR Form No. 1601-EQ] and Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ)

Are you aware of the Submission of the Quarterly Alphabetical List of Payees (QAP) that shall accompany the Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) [BIR Form No. 1601-EQ] and Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ)?

In Section 2.58 of Section 5 of Revenue Regulations (RR) No. 11-2018 describes the Returns and Payments of Taxes Withheld. Besides, it also identifies the Manner, Venue and Time of Filing of Withholding Tax Returns and Payment of Taxes Withheld at Source to read as follows:

Taxpayers mandated to electronically file and pay shall use the BIR’s electronic system, while those not mandated has the option to either use the said electronic system, or file with the Authorized Agent Banks (AABs) under the jurisdiction of the Revenue District Office where they are registered. Withholding agents located at municipalities where there is no AAB, the returns shall be filed with the Revenue Collection Officer assigned in the said municipality. The filing of the withholding tax returns (BIR Form No. 1601EQ for creditable withholding tax and Form Nos. 1602 for final tax on interest on bank deposits, 1603 for final tax withheld on fringe benefits, and 1601FQ for all other final withholding taxes) and payment of the taxes withheld at source shall be made not later than the last day of the month following the close of the quarter during which the withholding was made. 

For this purpose, the quarter shall follow the calendar quarter, e.g., for taxes withheld during the quarter ending March 31, the same shall be remitted by the withholding agent on or before April 30. The return filed shall be accompanied by the Quarterly Alphabetical List of Payees (QAP), reflecting the name of income payees, Taxpayer Identification Number (TIN), the amount of income paid segregated per month with total for the quarter (all income payments prescribed as subject to withholding tax under these regulations, whether actually subjected to withholding tax or not subjected due to exemption), and the total amount of taxes withheld, if any.

The bureau recently issued a Tax Advisory with regards to the submission of Quarterly Alphabetical List of Payees (QAP) to read as follows:

In line with the submission of the Quarterly Alphabetical List of Pavees (QAP) that shall accompany the Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) BIR Form No. 1601-EQ] and Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ), please be informed that the Alphalist Data Entry and Validation module Version 6.0 is now available for use. This can be downloaded from the Bureau's website at www.bir.gov.ph as follows: 

1. Click on the "Downloadables" button at the lower left side of the web page; 

2. Scroll down to search the the section showing the "Alphalist Data Entry and Validation Module Version 6.0 (new)"; and 

3. Follow the instructions stated on the said section to install the module. The QAP shall be submitted either through the eSubrnission facility (esubmission@bir.gov.ph) of the Bureau or through the dedicated email account of the Revenue District Officer having jurisdiction over the withholding agent's registered address. This is required to be submitted on or before the last day of the month following the close of the quarter as an "attachment" to the quarterly withholding tax returns prescribed under Revenue Regulations No. 1 1-201 B, as amended.

Please refer the full text of the regulations and tax advisory as follows: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2011-2018/RR%20No.%2011-2018.pdf and https://www.bir.gov.ph/images/bir_files/internal_communications_1/Advisory/Advisory-Alphalist%20data%20entry.pdf

Taxpayers Who Are Not Qualified Of The 8% Income Tax Rate

Do you consider to avail of the 8% Income Tax rate? If not, taxpayers may consider of the following individuals who are not qualified to avail of the 8% Income Tax Rate as follows:

1. Purely compensation income earners;

2. VAT-registered taxpayers, regardless of the amount of gross sales/receipts and other non-operating income;

3. Non-VAT taxpayers whose gross sales/receipts and other non-operating income exceeded the P3,000,000.00 VAT threshold;

4. Taxpayers who are subject to Other Percentage Taxes under Title V of the Tax Code, as amended, except those under Section 116 of the same title;

5. Partners of  a General Professional Partnership (GPP) since their distributive share from the GPP is already net of costs and expenses; and

6. Individuals enjoying income tax exemption such as those registered under the Barangay Micro Business Enterprises (BMBEs), etc., since taxpayers are not allowed to avail of double or multiple tax exemptions under different laws, unless specifically provided by law.

The above mentioned is stated in Revenue Memorandum Circular (RMC) No. 50-2018 that clarifies certain provisions of Revenue Regulations (RR) Nos. 8-2018 and 11-2018 Implementing the Income Tax Provisions of Republic Act (R. A.) No. 10963, Otherwise Known as the "Tax Reform for Acceleration and Inclusion (TRAIN)" Act.