Tax Development

TAX DEVELOPMENTS

 

REVENUE REGULATIONS (RR) NO. 6-2009

 

RR No. 6-2009 dated June 3, 2009 further amends RR No. 2-98, to provide for an additional criteria in the determination of top 20,000 private corporations, additional transactions subject to creditable withholding tax on income payments made by the top 5,000 individual taxpayers engaged in trade/business or practice of profession, and the threshold on the purchases of agriculture products made by top 20,000 private corporations and top 5,000 individual taxpayers.

 

The additional criteria in the determination of top 20,000 corporations provided under RR No. 6-2009, in addition to those provided under RR No. 14-2008, is as follows:

 

§         Total excise tax payment of at least P100,000 for the preceding year

 

The same regulations provide that income payments made by top 5,000 individual taxpayers to their local/resident suppliers of goods and services other than those covered by other rates of withholding tax shall now be subject to 1% and 2% expanded withholding tax (EWT), respectively.

 

Top 5,000 individual taxpayers shall refer to individual taxpayers engaged in trade or business or exercise of profession who have been determined and notified by the Bureau of Internal Revenue (BIR) as having satisfied any of the following criteria:

 

§         VAT payment or payable, whichever is higher, of at least P100,000 for the preceding year;

§         Annual income tax due of at least P200,000 for the preceding year;

§         Total percentage tax paid of at least P100,000 for the preceding year;

§         Gross sales of P10,000,000 and above for the preceding year;

§         Gross purchases of P5,000,000 and above for the preceding year;

§         Total excise tax payment of at least P100,000 for the preceding year.

 

Top 5,000 individual taxpayers are required to file returns and remit the taxes withheld through the Electronic Filing and Payment System (EFPS).

 

Lastly, purchases made by top 20,000 private corporations and top 5,000 individual taxpayers of agricultural products in their original state shall be subject to 1% EWT only on the excess of the cumulative amount of Php300,000 within the same taxable year.

 

RR No. 6-2009 was published in Manila Bulletin on July 15, 2009 and took effect on July 30, 2009.

 

REVENUE MEMORANDUM CIRCULAR (RMC) NO. 41-2009

 

On July 23, 2009, RMC No. 41-09 was issued to clarify the meaning of the term managerial and technical positions under Section 25 (C) of the 1997 Tax Code, as amended, and to revoke BIR Ruling [DA-061-04] issued in favor of Cypress Semiconductor Philippine Headquarters, Ltd. – Regional Operating Headquarters which held that certain positions of Filipino personnel of multinational companies qualify as managerial and/or technical positions are entitled to the 15% preferential tax rate in so far as it is inconsistent with the provisions of this RMC.

 

A “managerial employee” is one who vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. The test of “managerial status” depend on whether a person possesses authority to act in the interest of his employer and whether such authority is not merely routinary or clerical in nature, but requires the use of independent judgment. Where such recommendatory powers are subject to evaluation, review and final action by the department heads and other higher executives of the company, the person having such recommendatory powers is not a managerial employee. [Philippine Appliance Corporation vs. Laguesma, 226 SCRA 730 (1993)]

 

On the other hand, the term “technical position” is limited only to positions which are highly technical in nature or where there are no Filipinos who are competent, able and willing to perform the services for which the aliens are desired.

 

In view of the above clarifications, it was concluded that only Filipinos employed and occupying managerial and highly technical positions as defined above similar to the positions of the aliens employed by regional or area headquarters (RHQs) and regional operating headquarters (ROHQs) of multinational companies shall be entitled to the option to be taxed at either 15% of gross income or at the regular income tax rates (5%-32%) on their taxable income.

 

All other BIR rulings issued inconsistent with this RMC are likewise revoked accordingly.

 

REVENUE MEMORANDUM ORDER (RMO) NO. 18-2009

 

RMO No. 18-2009 dated April 26, 2009 is an order dispensing the requirement of securing a prior ruling before any Certificate Authorizing Registration (CAR) / Tax Clearance (TCL) can be issued by the concerned Revenue District Officer (RDO) allowing the transfer of the land and the common areas from the real estate developer to the Condominium Corporation established pursuant to the provisions of Republic Act No. 4726, otherwise known as the Condominium Act. The taxpayer, however, may at his option still secure a prior ruling from the BIR to confirm the tax-exempt status of such transfer.

 

The concerned RDO, upon receipt of all the documents as enumerated in this RMO, can proceed with the issuance of the CAR/TCL provided that the RDO is assured that the facts and the circumstances surrounding the transfer are analogous to the facts and circumstances contained in the previously promulgated rulings of the BIR resolving the tax issues on the matter.

 

The tax consequences of the transfer are also reiterated in the RMO, to wit: 1) Since the Deed of Conveyance was made without consideration and not in connection with a sale made to the Condominium Corporation, no taxable income is realized and therefore, no creditable withholding tax is payable and collectible; 2) The Deed of Conveyance is exempt from the imposition of DST. However, the notarial acknowledgment made to said Deed of Conveyance is subject to the DST of P15.00; and 3) The transfer of land and the common areas to the Condominium Corporation as embodied in the Deed of Conveyance is also not subject to VAT.

 

This order takes effect immediately.

 

SECURITIES AND EXCHANGE COMMISSION (SEC) OPINION NO. 09-12

 

In SEC-Office of the General Counsel (OGC) Opinion No. 09-12 dated May 29, 2009, the SEC ruled that a foreign corporation that has continuous commercial dealings in the Philippines in pursuit of the purpose and object of its business is considered to be “doing business” in the Philippines and is required to secure a license from the SEC.

 

In the said SEC opinion, A Co. (the subject company in this opinion) will make its services available to entities located in the Philippines. In the case of time division multiplexing (TDM), a local telecommunications company will render services to A Co. by installing and maintaining co-location services for equipment and international and domestic leased lines to local customers. In turn, the customers will remit their payment to A Co. abroad. As for private dedicated voice network via Voice over Internet Protocol (VOIP) technology, there would be equipment, such as routers and firewall, that would be installed at customer premises by the customer, either under A Co.’s supervision remotely or A Co.’s engineers/contractors on site. In effect, A Co. will make its services available here in the Philippines. It will render services within the premises of its clients through its own engineers or by remote supervision. The contracts between A Co. and its local customers are continuous commercial dealings in the country. These commercial transactions are in pursuit of the purpose and object of A Co. As such, the contemplated expansion of operations of A Co. involving Philippine companies constitutes doing business in the Philippines.

 

The SEC further opined that BIR Ruling No. 009-05 dated August 2, 2005 cited by A Co. in its request for clarification is useful in determining tax status of the corporation but not necessarily binding in determining whether a foreign corporation needs to secure a license from the SEC.

 

BOARD OF INVESTMENTS (BOI) BOARD RESOLUTION NO. 12-15

 

The BOI, through its Board Resolution No. 12-15 dated April 1, 2009, prescribes the following mitigating measures to assist BOI-registered firms affected by the global crisis:

 

a.        Suspension from compliance with export requirement by the BOI-registered export enterprise, regardless of location, from January 2008 to December 2009

 

This shall apply to BOI-registered enterprises which have suffered operational force majeure that have impaired their viability, or those who have to slowdown significantly due to loss of export market, cancellation of export orders, deferment of shipment, deterioration of commodity prices, and reduction of sales revenue. This may also include BOI-registered export enterprises, which may not yet have started commercial operations as a result of the global economic crisis.

 

b.        Suspension of ITH Availment Period from January 2009 to December 2009

 

This policy shall apply to BOI-registered enterprises which have not yet started commercial operations and to BOI-registered enterprises which started commercial operations during the crisis.