Transfer Taxes

Transfer taxes are taxes imposed upon the gratuitous disposition of private properties or rights. Gratuitous transfer means that there's no burden impose nor requires consideration from transferee or recipient. With this, the transfer of ownership is free because of the absence of financial consideration. For this reason, gratuitous transfers are essentially donations.

Donation or gratuitous transfer may be take effect at the time of death of the donor (donation mortis causa subject to estate tax) or during the lifetime of both the donor and the donee (donation inter vivos subject to donor's tax). 

The opposite side of gratuitous transfer is onerous, one where the transferee gives consideration in return of the property or right(s) received. But, onerous transfers are subject to business taxes instead of transfer taxes.

The subject matter of a transfer tax is the privilege of the transferor to transfer property or rights. Even though the amount of transfer tax is based on net estate or net gifts, it shall not be construed as property tax. On this basis, transfer tax is classified as excise tax or privilege tax imposed on the act of passing the ownership of property and not on the value of the property or right.

References: New Civil Code of the Philippines, Title III Donation; Section 3;  RR 2-2003; Transfer and Business Taxation (Tabag/Garcia)

Mandatory Use of Electronic BIR Forms (eBIRForms) in Filing of All Tax Returns by Non-electronic Filing and Payment System (Non-eFPS) Filers

The bureau just recently issued last September 5, 2014 the Revenue Regulations No. 6-2014 prescribing the Mandatory Use of Electronic Bureau of Internal Revenue Forms (eBIRForms) in filing of all Tax Returns by Non-Electronic Filing and Payment System (Non-eFPS) Filers Particularly Accredited Tax Agents/Practitioners, Accredited Printers of Principal and Supplementary Receipts/Invoices, and One-Time Transaction (ONETT) Taxpayers.

Under Section 1 of the regulations, stated that pursuant to the provision of Section 244 of the National Internal Revenue Code of 1997 (Tax Code) as amended, in relation to Section 27 of republic Act No. 8792, otherwise known as the "Electronic Commerce Act", these Regulations are hereby promulgated by making it mandatory for non-eFPS filers or taxpayers to the use eBIRForms covering thirty six (36) BIR Forms in the preparation and filing of their returns starting September 01, 2014 relative to existing revenue issuances under RMC No. 61-2012, "Authorizing the Use of eBIRorms Package in Preparation and Filing of Tax Returns" and RMO No. 24-2013, "Prescribing the Guidelines, Policies, and Procedures on the Use of eBIRForms in Relation to RMC No. 61-2012".

The Mandatory Coverage as stated in Section 4 of the regulations are only those non-eFPS filers as follows:

1. Accredited Tax Agents/Practitioners and all its client-taxpayers;

2. Accredited Printers of Principal and Supplementary Receipts/Invoices;

3. One-Time Transaction (ONETT) taxpayers;

4. Those who shall file a "No Payment" Return;

5. Government-Owned or -controlled Corporations (GOCCs);

6. Local Government Units (LGUs), except barangays; and

7. Cooperatives registered with National Electrification Administration (NEA) and Local Water Utilities Administration (LWUA)

The returns as stated in Section 5 of the eBIRForms is an application covering thirty-six (36) BIR Forms comprised of Income Tax Returns; Excise Tax Forms; VAT Forms; Withholding Tax Forms; Documentary Stamp Tax Forms; Percentage Tax Forms; ONETT Forms and Payment Form that includes BIR Form No. 0605, 1600, 1600WP, 1601-C, 1601-E, 1601-F, 1602, 1603, 1604-CF, 1604-E, 1606, 1700, 1701, 1701Q, 1702-EX, 1702-MX, 1702-RT, 1702Q, 1704, 1706, 1707, 1800, 1801, 2000, 2000-OT, 2200A, 2200AN, 2200M, 2200P, 2200T, 2550M, 2550Q, 2551M, 2551Q, 2552, and 2553.

In Section 3 of the regulations stated that the eBIRForms shall be available to all Non-eFPS filers with or without internet access. Taxpayers with internet access shall download the eBIRForms Package from the BIR website www.bir.gov.ph, while taxpayers without internet shall download the eBIRForms package from the BIR e-lounges.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202014/RR%206-2014.pdf of the full text of Revenue Regulations 6-2014.

SEC Requirements for a Quasi-reorganization

A company or an entity in financial distress or difficulty may be permitted by the Securities and Exchange Commission (SEC) to undergo a quasi-reorganization and in the process may be allowed to revalue its property, plant and equipment if their current value is substantially more than their cost. 

Quasi-reorganization must be approved by the SEC and consider the requirements as follows:

1. An independent expert or specialist is needed if the result of the quasi-reorganization is the revaluation of property, plant and equipment.

2. The increase in the value of the property, plant and equipment is credited to "revaluation surplus".

3. The adjustments concerning "Other" assets shall be made through the retained earnings.

4. The resulting deficit from the quasi-reorganization is offset against the revaluation surplus.

5. Retained earnings subsequent to quasi-reorganization shall be restricted to the extent of the deficit wiped out during the reorganization and cannot be declared as dividend.

6. Losses subsequent to quasi-reorganization cannot be charged to the remaining revaluation surplus.

7. The quasi-reorganization shall be disclosed for at least 3 years.

"Preservation of Books of Accounts and Other Accounting Records"

The bureau just recently issued the Revenue Regulations No. 5-2014 amending Revenue Regulations No. 17-2013 dealing with the "Preservation of Books of Accounts and Other Accounting Records" as follows:

"SECTION 2. RETENTION PERIODS. - All taxpayers are required to preserve their books of accounts, including subsidiary books and other accounting records, for a period of ten (10) years reckoned from the day following the deadline in filing a return, or if filed after the deadline, from the date of the filing of the return, for the taxable year when the last entry was made in the books of accounts: Provided that, within the first five (5) years reckoned from the day following the deadline in filing a return, or if filed after the deadline, from the date of the filing of the return, for the taxable year when the last entry was made in the books of accounts, the taxpayer shall retain hardcopies of the books of accounts, including subsidiary books and and other accounting records in an electronic storage system which complies with the requirements set forth under Section 2-A hereof.

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_1/RR%205-2014/RR%205-2014.pdf of the full text of the Revenue Regulations No. 5-2014.

Professional Regulation Commission (PRC) announces that 1,107 out of 5,540 passed the July 2014 Certified Public Accountant (CPA) Licensure Examination

After three working days, the PRC released the results that 1,107 out of 5,540 passed the Certified Public Accountant Licensure Examination given by the Board of Accountancy in the cities of Manila, Baguio, Cagayan De Oro, Cebu, Davao, Iloilo and Legazpi last July 2014.

The successful examinees who garnered the ten (10) highest places in the July 2014

Certified Public Accountant Licensure Examination are the following: 

RANK NAME SCHOOL RATING(%)

1 ROMMEL RHINO CATUDIO EDUSMA ASIAN DEVELOPMENT FOUNDATION COLLEGE 94.57 

2 JOANNA MARIE LIM BARROZO SAN BEDA COLLEGE OF ALABANG,INC.(ST.BENEDICT COLL) 93.43 

3 RAY HAMODI BALAGBIS NGALOT UNIVERSITY OF SAN CARLOS 92.43 

4 ORVILE PERDON RABINO ADVENTIST UNIVERSITY OF THE PHILIPPINES 92.00 

5 JOSCEL BARRIO DELOS CIELOS XAVIER UNIVERSITY 91.57 

6 JAMAICA PEREZ ENGLIS UNIVERSITY OF SAN CARLOS 91.43 

7 KEN LESTER TANTIADO GUILLEN POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-MAIN-STA. MESA 91.29 

 DANN KARLO ALFARO MANZANO SAN BEDA COLLEGE 91.29 

8 EROS DELA ROSA HERRERA SAN BEDA COLLEGE OF ALABANG,INC.(ST.BENEDICT COLL) 91.14 

 THOMAS ZACHARY PINEDA SARIGUMBA UNIVERSITY OF SAN CARLOS 91.14 

9 JO-ANN HERRERA MERCADO POLYTECHNIC UNIVERSITY OF THE PHILIPPINES-STO. TOMAS 90.86 

10 LYNDON GIGANTO ASIS SOUTHWESTERN UNIVERSITY 90.43 

 ADRIAN CAGUETE ENRIQUEZ SAN BEDA COLLEGE 90.43 

Reference: http://www.prc.gov.ph/news/?id=794

Association Dues, Membership Fees, and Other Assessments/Charges Collected by Homeowners' Associations are Subject to Income Tax and VAT

The bureau has issued the Revenue Memorandum Circular No. 9-2013 to clarify the taxability of association dues, membership fees, and other assessments/charges collected by homeowners' associations from its homeowners-members and other entities.

The circular stated that under Income Tax - Section 18 of R. A No. 9904 which exempts from taxation the association dues and income derived from rental subject to certain conditions is an implied recognition by Congress that such receipts are subject to tax under existing laws. Thus, the amounts paid in as dues or fees by homeowner-members of a homeowners' association form part of the gross income of the latter subject to income tax. 

Besides, since a homeowners' association is subject to income tax, income payments made to it are subject to applicable withholding tax under existing regulations.

Moreover, it is also stated in the circular that associations dues, membership fees, and other assessments/charges collected by a homeowners' association are subject to VAT or Percentage Tax (wherever is applicable) since they constitute income payment or compensation for the beneficial services it provides to its homeowner-members.

Requisites of a Reasonable Retirement Benefit Plan

The requisites of a reasonable retirement benefit plan include the following:

1. It must be a definite written program setting forth all provisions essential for qualifications;

2. it must be permanent and continuing program unless sooner terminated by virtue of a valid business reason;

3. It must cover at least 70% of all officials and employees.

4. It must provide for the non-diversion of the corpus.

5. It must not provide for discrimination in contributions or benefits in favor of officials and employees who are officers, shareholders, supervisors or highly compensated officers;

Under Republic Act No. 4917, retirement benefits received by employees of private firms in accordance with a reasonable private benefit plan maintained by the employer are exempt from all taxes, provided that the retiring employees has been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of hi retirement.

Keeping of Books of Accounts

Books of Accounts is classified into Manual Books of Account and Computerized Accounting Books/Record.

The following are required for keeping of books of accounts:

1. Corporation, companies, partnership or persons are required to keep books of accounts.

2. Quarterly sales, earnings receipts do not exceed P50,000 SIMPLIFIED Set of Bookkeeping Records.

3. Quarterly sales, earnings receipts exceed P50,000 - Journal and Ledger

4. Corporations, partnership, or persons whose gross quarterly sales, earnings, receipts exceed P150,000 shall have their Books of Accounts audited by independents CPA

The method of accounting use is Cash or Accrual Basis.

Besides, the preservation of Books of Accounts and other Accounting Records, all the books of accounts, including the subsidiary books and other accounting records or corporations, partnership, or persons, shall be preserved for a period of three (3) years beginning from the last entry in the book.

Remedies Available to the Taxpayer under the Tax Code in Connection with the Collection of Taxes

The remedies available to the taxpayer under the Tax Code in connection with the collection of taxes are as follows:

1. Administrative Remedies

a. Before payment
1. filing a petition for reconsideration or reinvestigation
2. entering into compromise

b. After payment
1. filing of claim for tax refund
2. filing of claim for tax credit

2. Judicial Remedies

a. Civil action
1.appeal to the Court of Tax Appeals
2. action to contest forfeiture of chattel
3. action for damages

b. Criminal action
1. filing of criminal complaint against erring Bureau of Internal Revenue Officials and employees.

Substantiation Requirements of Input tax

In general, the requirements of Input Tax are as follows:

1. Proof that the input tax was incurred in the course of trade or business.

2. Supported by VAT invoice or receipt bearing VAT number or seller.

3. Seller must be VAT registered.

4. Purchases must also be VAT registered.

5. Invoice must be in the name of the buyer.

6. Address of buyer is indicated.

7. Business style of buyer.

Substantiation requirements of Input Tax:

Input tax on importation:

1. Import entry or equivalent document.
2. Payment of VAT on imported goods (official receipts).

Transitional and/or Presumptive Input Tax:

1. Inventory of unused tax credits duly accounted in the books and returns.
2. Inventory of goods filed with the BIR

Input Tax on Deemed Sale Transactions:

1. Inventory filed with the BIR.