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8/FJollibeeCentre,SanMiguelAvenue,OrtigasCenter,PasigCity,1605Philippines
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TAX ALERT
August 31, 2008
WHILE THE CTA HAS THE JURISDICTION TO RESOLVE TAX DISPUTES
IN GENERAL, WHERE WHAT IS ASSAILED IS THE VALIDITY OR
CONSTITUTIONALITY OF A LAW, OR A RULE OR REGULATION ISSUED
BY THE ADMINISTRATIVE AGENCY IN THE PERFORMANCE OF ITS
QUASI-LEGISLATIVE FUNCTION, THE REGULAR COURTS AND NOT THE
CTA HAVE JURISDICTION TO PASS UPON THE SAME. British American
Tobacco v. Camacho, et al., G.R. No. 163583 dated August 20, 2008.
THE CLASSIFICATION FREEZE PROVISION UNDER SECTION 145 OF RA8240 AS AMENDED BY RA 9334SATISFIEDTHE RATIONAL-BASIS TEST AS
IT ADDRESSED CONGRESS ADMINISTRATIVE CONCERNS IN THE
SIMPLIFICATION OF TAX ADMINISTRATION OF SIN PRODUCTS,
ELIMINATION OF POTENTIAL AREAS FOR ABUSE AND CORRUPTION IN
TAX COLLECTION, BUOYANT AND STABLE REVENUE GENERATION,
AND EASE OF PROJECTION OF REVENUES. CONSEQUENTLY, THERE
CAN BE NO DENIAL OF THE EQUAL PROTECTION OF THE LAWS.Ibid.
SECTION 4(B)(E)(C), 2ND
PARAGRAPH OF REVENUE REGULATIONS NO. 1-
97, AS AMENDED BY SECTION 2 OF REVENUE REGULATIONS 9-2003, AND
SECTIONS II(1)(B), II(4)(B), II(6), II(7), III (LARGE TAX PAYERS ASSISTANCEDIVISION II) II(B) OF REVENUE MEMORANDUM ORDER NO. 6-2003, AS
PERTINENT TO CIGARETTES PACKED BY MACHINE, ARE INVALID
INSOFAR AS THEY UNJUSTIFIABLY EMASCULATE THE OPERATION OF
SECTION 145 OF THE NIRC AND AUTHORIZE THE COMMISSIONER OF
INTERNAL REVENUE TO RECLASSIFY OR UPDATE THE
CLASSIFICATION OF NEW BRANDS EVERY TWO YEARS OR EARLIER.
Ibid.
WHERE THE ENTIRE INSURANCE PROCEEDS ARE USED TO
REHABILITATE AND REPLACE THE ASSETS DESTROYED BY FIRE, THE
EXCESS OF THE INSURANCE PROCEEDS OVER THE NET BOOK VALUEOR COST BASIS OF THE ASSETS IS NOT RECOGNIZED AS REALIZED
INCOME SUBJECT TO INCOME TAX.
Under the doctrine of Involuntary Conversion of Property such as destruction, theft,seizure, condemnation, where a property is converted into a property similar or related in
service or use or into money which is in good faith expended to acquire other property,no gain or loss shall be recognized. The excess of the total replacement cost over the net
book value of the damaged asset will not be a deductible loss but may be capitalized
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subject to depreciation. Neither will the insurance proceeds form part of gross sales forVAT purposes since the indemnification is not an actual sale of goods by the insured to
the insurer. BIR Ruling DA(VAT-004)050-2008 dated July 16, 2008.
PROCEEDS FROM THE SALE OF PRINCIPAL RESIDENCE FULLY
UTILIZED TO PAY OFF LOANS OBTAINED FOR THE PRIOR ACQUISITIONOF A LAND AND THE CONSTRUCTION OF A NEW PRINCIPAL RESIDENCE
SHALL BE EXEMPT FROM THE 6% CAPITAL GAINS TAX. BIR Ruling DA-
(I005)057-2008 dated July 18, 2008.
THE TAX CONSEQUENCES OF A DEMERGER TAKING PLACE OUTSIDE
THE PHILIPPINES OF TWO FOREIGN CORPORATIONS WITH PHILIPPINE
BRANCHES ARE AKIN TO A MERGER UNDER SECTION 40(C)(2) OF THE
NIRC INASMUCH AS THE TRANSFER OF ASSETS AND LIABILITIES OF
THE ABSORBED FOREIGN CORPORATION, INCLUDING THAT OF ITS
BRANCH, TO THE SURVIVING CORPORATION IS IN EXCHANGE OF
SHARES OF STOCK IN THE LATTER. BIR Ruling DA(C003)017-2008 dated July9, 2008.
THE CONDITIONAL ASSIGNMENT OF RIGHTS OVER THE CERTIFICATE
OF SALE COVERING FORECLOSED REAL PROPERTY EXECUTED PRIOR
TO THE EXPIRATION OF THE REDEMPTION PERIOD, NOT BEING A
CONVEYANCE OF REALTY SUCH AS LAND OR BUILDING, IS NOT
SUBJECT TO CAPITAL GAINS TAX BUT ANY GAIN THEREFROM SHALL
BE SUBJECT TO REGULAR INCOME TAX. BIR Ruling DA-387-2008 dated
June 24, 2008.
SINCE THE REDEEMABLE PREFERRED SHARES UPON REDEMPTION
BECOME TREASURY SHARES WHICH ARE CONSIDERED RETIRED AND
NO LONGER ISSUABLE, THE REDEMPTOR NOT TAKING TITLE NOR
RECEIVING THEM FOR VALUE SHALL NOT BE LIABLE FOR INCOME
TAX. BIR Ruling DA-390-2008 dated June 27, 2008.
THE SHAREHOLDER OF THE REDEEMABLE PREFERRED SHARES SHALL
REALIZE CAPITAL GAIN OR LOSS CONSISTING OF THE DIFFERENCE
BETWEEN THE ADJUSTED BASIS OF THE SHARES AND THE
REDEMPTION PRICES OF THE SHARES.
Since the redeemable preferred shares will be redeemed at a price equal to its issue value,
the shareholders will not realize a taxable gain or deductible loss upon redemption. BIRRuling DA-390-2008 dated June 27, 2008.
THE LESSEES ABANDONMENT IN FAVOR OF THE LESSOR OF
LEASEHOLD IMPROVEMENTS AFTER PRE-TERMINATION OF THE
LEASE AGREEMENT AND WRITING OFF FROM THE LESSEES BOOKS OF
ACCOUNTS THE PRE-TERMINATION PENALTY EQUIVALENT TO THE
BOOK VALUE OF THE IMPROVEMENTS SHALL NOT BE SUBJECT TO
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DONORS TAX, THERE BEING NO DONATIVE INTENT. BIR Ruling DA-390-
2008 dated June 27, 2008.
WHERE IT IS THE SUPPLIER-IMPORTER WHO PAID EXCISE TAX ON
RAW ALCOHOL, THE MANUFACTURER-EXPORTER OF FINISHED
ALCOHOL IS NOT THE PROPER PARTY TO CLAIM A REFUND UNDERSECTION 130(D) OF THE NIRC. Dissent, Acosta: The law categorically grants themanufacturer-exporter the privilege to claim a refund of excise taxes paid on raw
materials used in its exported products as long as the following conditions are fulfilled: 1)excise taxes were actually paid on the locally-manufactured goods; (2) such locally
manufactured goods were exported either in their original state or as ingredients or partsof any manufactured goods or products; and (3) there must be proof of actual exportation
of the said goods and receipt of the corresponding foreign exchange payment. The excisetax paid attaches to the goods or products, irrespective of who paid it. Diageo
Philippines, Inc. v. CIR, CTA EB No. 260 (CTA Case No. 7369) dated July 2, 2008.
FAILURE TO INDICATE A CHOICE TO AVAIL OF EITHER THE TAXREFUND OR THE TAX CREDIT IN THE ANNUAL ITR IS NOT FATAL TO A
CLAIM FOR REFUND AND SHOULD NOT BAR THE AVAILMENT OF SUCH
REMEDY. CIR v. PERF Realty Corporation, G.R. No. 163345 dated July 4, 2008.
FAILURE TO FORMALLY OFFER THE 1998 ITR IS NOT FATAL TO A
CLAIM FOR REFUND WHERE THE SAID DOCUMENT IS ATTACHED TO A
SUBSEQUENT MOTION FOR RECONSIDERATION AND HAS BECOME
PART OF THE RECORDS OF THE CASE. Id.
WHILE PPA-NCR MAY BE HELD LIABLE FOR PENALTIES, SURCHARGES
AND INTEREST FOR THE DELAY IN THE REMITTANCE OF
WITHHOLDING TAXES, ITS PROPERTIES CANNOT BE SUBJECT OF
DISTRAINT AND/OR LEVY, PPA-NCR BEING A GOVERNMENT AGENCY
PERFORMING AN ESSENTIAL PUBLIC SERVICE. Parole and ProbationAdministration - NCR v. CIR, CTA Case No. 7153 dated July 2, 2008.
THE DEPOSIT REQUIRED BEFORE COURTS ENTERTAIN ANY ACTION
ASSAILING THE PUBLIC AUCTION OF REAL PROPERTY UNDER SECTION
257 OF RA 7160 IS NOT APPLICABLE ON THE GOVERNMENT OR ITS
AGENCIES SUCH AS NHA ESPECIALLY WHEN ITS TAX-EXEMPT STATUS
IS THE BASIS OF THE SUIT. NHA v. Iloilo City, et al., G.R. No. 172267 dated
August 20, 2008.
DISMISSAL BY THE RTC OF A PETITION FOR DECLARATORY RELIEF
INVOLVING THE LEGALITY OF ASSESSMENT FOR REAL PROPERTY
TAXES IS NOT APPEALABLE TO THE CTA.
Facts:NPC filed before the RTC a petition for declaratory relief, annulment of notice of
delinquency, warrant of levy, notice of sale and public auction sale to question thelegality of the assessment of real property taxes under R.A. 7160. On the ground that
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NPC failed to exhaust its remedies before the LBAA and the CBAA, the RTC dismissedthe petition for lack of jurisdiction. NPC filed a petition for review before the CTA.
Held: The petition is dismissed for lack of jurisdiction considering that: (A) The petitiondoes not fall under Section 7(a)(5) of R.A. 9282 wherein decisions of the CBAA
involving assessment and taxation of real property are appealable; (B) The petition does
not fall under Section 7(a)(3) of R.A. 9282 involving local taxes since real property taxesare governed by the more specific provision under Section 7(a)(5) thereof; (C) It is theCA, not the CTA which has jurisdiction over petitions for declaratory relief and appeals
of such cases; (D) Though NPC raises the purely legal question of propriety of impositionof real property tax on its machineries and equipment, it should have exhausted its
administrative remedies before the LBAA and the CBAA. Dissent, Palanca-Enriquez:(A) Where NPC questions the legality of the real property tax and not the correctness of
the computation of the amount being assessed, the petition for declaratory relief and notthe appeal to CBAA is the proper remedy; (B) Sections 7(a)(3) and 7(a)(5) of R.A. 9282
are not general and special provisions, respectively, but are two different jurisdictions ofthe CTA involving decisions of the RTC and the CBAA; (C) Cases involving pure
questions of law are exempt from exhaustion of administrative remedies; (D) Realproperty tax is a local tax which is within the jurisdiction of the CTA under Section
7(a)(3) of R.A. 9282. NPC v. Municipal Government of Navotas, et al., CTA AC No. 37(Civil Case No. 4658-MN) dated July 18, 2008.
THE DENIAL BY THE CUSTOMS COMMISSIONER TO REVIEW THE
DECISION OF THE CUSTOMS COLLECTOR WHICH HAS BECOME FINAL
AND EXECUTORY IN VIEW OF THE ABSENCE OF A WRITTEN PROTEST
DOES NOT CONSTITUTE A DECISION OF THE CUSTOMS COMMISSIONER
APPEALABLE TO THE CTA. GST Philippines, Inc. v. Commissioner of Customs
and Secretary of Finance, CTA Case No. 7133 dated July 17, 2008.
CTA DISMISSED ON THE GROUND OF FORUM SHOPPING A PETITION
FOR REVIEW OF THE CUSTOMS COMMISSIONERS DECISION ON THE
PROPRIETY OF TARIFF CLASSIFICATION WHERE PETITIONER: (A)
FAILED TO DISCLOSE A PENDING APPEAL BEFORE THE DEPARTMENT
OF FINANCE INVOLVING THE SAME ISSUE BETWEEN PETITIONER AND
ANOTHER PARTY; (B) SUBSEQUENTLY FILED A PETITION BEFORE THE
COURT OF APPEALS INVOLVING SAME PARTIES, ISSUES AND RELIEFS
THEREBY CREATING THE POSSIBILITY OF CONFLICTING DECISIONS BY
THE DIFFERENT FORA. Kraft Foods (Philippines), Inc. v. Commissioner of
Customs and Sugar Regulatory Administration, CTA EB No. 326 (CTA Case No. 7306)
dated July 18, 2008.
THE FACT THAT IMPORTED ARTICLES WERE WITHDRAWN FROM THE
WAREHOUSE WITHOUT PAYMENT OF DUTIES AND TAXES, OR THAT
THE SURETY WAS NOT NOTIFIED OF THE ACTS OF THE IMPORTER,
DOES NOT RELIEVE THE SURETY OF ITS SOLIDARY OBLIGATION, THE
NATURE OF SURETY AGREEMENT BEING TO HOLD THE SURETY
JOINTLY AND SEVERALLY LIABLE FOR THE IMPORTERS OBLIGATION
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TO PAY DUTIES, TAXES AND CHARGES DUE. Intra-Strata Assurance
Corporation, et al. v. Republic of the Philippines, G.R. No. 156571 dated July 9, 2008.
AN IMPORTED ARTICLE IS DEEMED ABANDONED WHEN THE OWNER,
IMPORTER, CONSIGNEE OR INTERESTED PARTY FAILS TO FILE AN
ENTRY WITHIN A NON-EXTENDIBLE PERIOD OF 30 DAYS FROM THEDATE OF DISCHARGE OF THE LAST PACKAGE FROM THE VESSEL OR
AIRCRAFT AFTER DUE NOTICE. IT IS THE FILING AND ACCEPTANCE OF
BOTH THE IMPORT ENTRY DECLARATION (IED) AND THE IMPORT
ENTRY AND INTERNAL REVENUE DECLARATION (IEIRD) WHICH
CONSTITUTES ENTRY UNDER SECTION 205 OF THE TARIFF AND
CUSTOMS CODE OF THE PHILIPPINES AND WHICH BECOMES THE BASIS
OF THE NON-EXTENDIBLE 30-DAY PERIOD. SUCH ABANDONED
ARTICLES SHALL IPSO FACTO BE DEEMED THE PROPERTY OF THE
GOVERNMENT. A DECLARATION AND NOTICE BY THE COLLECTOR OF
CUSTOMS THAT THE GOODS HAVE BEEN ABANDONED BY THE
IMPORTERS IS NOT REQUIRED BEFORE ANY ABANDONMENT CANBECOME EFFECTIVE.Chevron Philippines, Inc. v. Commissioner of the Bureau of
Customs, G.R. No. 178759 dated August 11, 2008.
THE DELAY IN THE FILING OF THE IEIRD WHICH RESULTED IN THE
PAYMENT OF LOWER DUTY FROM 10% TO 3% WAS DEEMED
CALCULATED, PRECONCEIVED AND PURPOSELY DONE TO EVADE
PAYMENT OF CORRECT DUTIES. IT WAS A CLEAR INDICATION OF THE
INTENTION TO DEFRAUD THE GOVERNMENT WHICH RENDERED THE
PRESCRIPTIVE PERIOD INAPPLICABLE. Ibid.
A RESOLUTION BY THE CTA DIVISION DENYING A MOTION TO QUASH,
BEING AN INTERLOCUTORY ORDER, IS NOT PROPER SUBJECT OF AN
APPEAL BY PETITION FOR REVIEW BEFORE THE CTA EN BANC. Judy
Anne L. Santos v. People and BIR, G.R. No. 173176 dated August 26, 2008.
BIR ISSUES SUPPLEMENT TO REV. REGS. NO. 09-2004, AS AMENDED BY
REV. REGS. NO. 10-2004, CLARIFYING THAT THE TRANSACTIONS OF
BANGKO SENTRAL NG PILIPINAS ENTERED INTO IN THE EXERCISE OF
ITS GOVERNMENTAL/REGULATORY AUTHORITY ARE OUTSIDE OF THE
COVERAGE OF THE GROSS RECEIPTS TAX. Revenue Regulations No. No. 8-
2008 dated August 29, 2008.
BIR PUBLISHES THE FULL TEXT OF DEPARTMENT ORDER NO. 9-08,
IMPLEMENTING RULES AND REGULATIONS ON THE ACCESSIBILITY
OF INFORMATION ON TAXPAYERS BETWEEN THE BUREAU OF
INTERNAL REVENUE AND THE LOCAL GOVERNMENT UNITS FOR TAX
COLLECTION PURPOSES PURSUANT TO EXECUTIVE ORDER NO. 646.
Revenue Memorandum Circular No. 44-2008 dated May 5, 2008.
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CLARIFICATION THAT REV. REGS. NO. 30-2002 AS AMENDED BY REV.
REGS. NO. 8-2004 ON THE EXERCISE OF COMPROMISE POWER OF THE
BUREAU OF INTERNAL REVENUE SHALL, IN CASE OF CONFLICT,
PREVAIL OVER THE PROVISIONS OF RMO NO. 20-2007. Revenue
Memorandum Order No. 27-2008 dated June 16, 2008.
BIR OUTLINES THE PROCEDURE ON THE HANDLING OF TAXPAYERS
APPLICATION FOR CANCELLATION OF BUSINESS REGISTRATION, AND
ISSUES WARNING ON THE USE OF OFFICIAL RECEIPTS/SALES INVOICES
OF DISSOLVED BUSINESSES FOR PURPOSES OF CLAIMING INPUT TAXES.
Revenue Memorandum Circular No. 56-2008 dated July 25, 2008.
BIR ISSUES CLARIFICATION ON THE TIME WITHIN WHICH TO RECKON
THE REDEMPTION PERIOD ON THE FORECLOSED ASSET AND THE
PERIOD WITHIN WHICH TO PAY CAPITAL GAINS TAX OR CREDITABLE
WITHHOLDING TAX AND DOCUMENTARY STAMP TAX ON THE
FORECLOSURE OF REAL ESTATE MORTGAGE BY THOSE GOVERNED BYTHE GENERAL BANKING LAW OF 2000, AS WELL AS THE VENUE FOR
THE PAYMENT OF THESE TAXES. Revenue Memorandum Circular No. 58-2008
dated August 15, 2008.
BIR ISSUES AMENDMENTS TO CERTAIN PORTIONS OF RMC NO. 30-2008
ON THE TAXABILITY OF INSURANCE COMPANIES FOR MINIMUM
CORPORATE INCOME TAX, BUSINESS TAX AND DOCUMENTARY STAMP
TAX PURPOSES. Revenue Memorandum Circular No. 59-2008 dated August 27,
2008.
Note: The information provided herein is general and may not be applicable in allsituations. It should not be acted upon without specific legal advice based on particular
situations. If you have any questions, please feel free to contact any of the following attelephone number (632) 633-9418, facsimile number (632) 633-1911, or at the indicated
e-mail address:
Atty. Carlos G. Baniqued [email protected]. Laura Victoria A.S. Yuson-Layug [email protected]
Atty. Terence Conrad H. Bello [email protected]. Suzette A. Celicious-Sy [email protected]
Atty. Madeline L. Zialcita-Villapando [email protected]. Kathleen L. Saga [email protected]
Atty. Excelsis V. Antolin [email protected]. Cheryll Ann R. Trinidad [email protected]
Atty. Bernadette V. Quiroz [email protected]
Past issues of the Tax Alert are available at our website www.baniquedlaw.com.