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Tax Rules and News 041-2024

Bureau of Internal Revenue Issuances

REVENUE MEMORANDUM ORDER

RMO No. 44-2024
October 18, 2024

Prescribing the revised guidelines for monitoring of Withholding Taxes remitted by National Government Agencies thru the Electronic Tax Remittance Advice System

Full Text | Annex A1 | Annex B | Annex C | Annex D | Annex E | Annex F | Annex G | Annex H | Annex I

RMO No. 45-2024
October 18, 2024

Àmending certain provision of Revenue Memorandum Order No. 39-2022 of BIR Service Desk System in relation to the number of requesters per office

Full Text

REVENUE MEMORANDUM CIRCULAR

RMC No. 113-2024
October 15, 2024

Announcing the availability of update of taxpayer classification, and resumption of business registration and other registration-related transactions in the Online Registration and Update System

Full Text

RMC No. 114-2024
October 18, 2024

Circularizing Department Order No. 072-2024 revoking the implementation of Department Order No. 062-2024 and filing of refund for taxes erroneously paid

Full Text  |  DO No. 72-2024

RMC No. 115-2024
October 18, 2024

Clarification of certain policies and procedures relative to the implementation of the Risk-Based Approach in the verification and processing of Value-Added Tax (VAT) Refund Claims, as introduced in Republic Act No. 11976, Otherwise Known as the “Ease of Paying Taxes Act”

Full Text | Annex A.1

RMC No. 116-2024
October 18, 2024

Clarifying the provisions of Republic Act No. 11976, or Otherwise Known as the “Ease of Paying Taxes Act”, applicable to the Power Industry

Full Text |  Annex A  |  Annex B |  Annex C

RMC No. 117-2024
October 18, 2024

Circularizing the availability of the revised BIR Form No. 1900 [Application for Permit to Use Loose-Leaf Books of Accounts/Invoices and Other Accounting Records] October 2024 (ENCS)

Full Text | BIR Form No. 1900

RMC No. 118-2024
October 21, 2024

Circularizing the updated list of accredited Microfinance Non-Government Organizations

Full Text | Updated List of Accredited MF-NGOs

Tax Law

REPUBLIC ACT No. 12022
Official Gazette / October 2, 2024

An act defining the crimes of agricultural economic sabotage, prescribing penalties therefor, vesting jurisdiction over such offenses with the court of tax appeals, providing mechanism for its implementation and enforcement, repealing for the purpose Republic Act No. 10845 or the “Anti-Agricultural Smuggling Act of 2018”

https://www.officialgazette.gov.ph/2024/09/26/republic-act-no-12022/

REPUBLIC ACT No. 12023
Official Gazette / October 3, 2024

AN ACT AMENDING SECTIONS 105, 108, 109, 110, 113, 114, 115, 128, 236, AND 288 AND ADDING NEW SECTIONS 108-A AND 108-B OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED.

https://www.officialgazette.gov.ph/2024/10/02/republic-act-no-12023/

Tax And Business Related News

Lumagui: BIR raided 408 Illicit Vape Retailers/Resellers in Nationwide Raid; Expect Regular Raids

Bureau of Internal Revenue (BIR) Commissioner Romeo D. Lumagui Jr. led a nationwide raid against illicit vape retailers last October 16, 2024. By current estimates, a total of 408 vape retailers have been found to be selling illicit vape products. Commissioner Lumagui has ordered the BIR to conduct a weekly surveillance and raid of illicit vape retailers after the nationwide raid. “The BIR Nationwide Raid against illicit vape retailers/resellers last October 16, 2024 shows our aggressive stance against illicit vape. We raided 408 illicit vape retailers. I have ordered weekly raids against illicit vape retailers, wherever they may be found. Walang illicit vape smuggler kung walang illicit vape retailer/reseller,” Commissioner Lumagui stated.

Click the link below to read the full news from the source:
https://bir-cdn.bir.gov.ph/BIR/pdf/PR76OCT2124.pdf

BIR strikes hard at illicit cigarette trade in Cebu
Manila Bulletin / Jun Ramirez / October 24, 2024

The Bureau of Internal Revenue (BIR) has dealt another blow to illicit cigarette trade in the country, with the recent raid of a factory and warehouse in Cebu. BIR Commissioner Romeo D. Lumagui Jr. announced that the operation on Oct. 3 and 5 resulted in the seizure of 32,545 counterfeit internal revenue stamps. The operation also seized 44,310 packs of illicit cigarettes, 13 cigarette manufacturing machines, and raw materials used in the production of cigarettes.  The estimated tax liability for these items amounts to P107.7 million. “The BIR will not stop raiding all illicit trade activities, wherever they may be locate,” Lumagui said in a statement on Thursday, Oct. 24. “We will protect the legitimate agricultural sector and the thousands of jobs it produces for our Filipino farmers,” he added. The operators of the illicit cigarette factory and warehouse were found to have violated several provisions of the National Internal Revenue Code (NIRC), including possession of counterfeit stamps, unlawful possession of excise tax-related articles, failure to register with the BIR, and tax evasion.

Click the link below to read the full news from the source:
https://mb.com.ph/2024/10/24/bir-strikes-hard-at-illicit-cigarette-trade-in-cebu

CREATE MORE expected to resolve longstanding VAT refund complaints 
Business World / Justine Trish D. Tabile / October 20, 2024

LONG-RUNNING concerns about red tape and value-added tax (VAT) refunds stand a good chance of being addressed by the proposed amendments to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, according to analysts. Calixto V. Chikiamco, an economist, said that the CREATE law introduced issues that need to be fixed via amendment. CREATE “did not result in increased foreign investments and, in fact, dampened them,” he said, citing the ASEAN Investment Report 2024.“That is why Congress is trying to remedy the situation by passing CREATE MORE to address the issues that investors are raising, from the bureaucracy involved in getting approvals from the Fiscal Incentives Review Board (FIRB) to the value-added tax rebate,” he said via Viber.

Click the link below to read the full news from the source:
https://www.bworldonline.com/economy/2024/10/20/629318/create-more-expected-to-resolve-longstanding-vat-refund-complaints/

House considers fewer tax cuts under capital market reform measure
Business World / Kenneth Christiane L. Basilio / October 20, 2024

THE House of Representatives ways and means committee wants to trim the revenue loss from a capital market reform bill it approved in March to P18 billion from more than P30 billion yearly by limiting the tax cuts to stock transactions. Albay Rep. Jose Ma. Clemente S. Salceda, who heads the panel, said they are open to amending the House-proposed Capital Markets Efficiency Promotion Act by only lowering the stock tax to 0.1% from 0.6%. They might also keep the proposed 10% tax on dividend income when they meet with their Senate counterparts for a bicameral conference committee, he told BusinessWorld in a Viber message at the weekend.

Click the link below to read the full news from the source:
https://www.bworldonline.com/editors-picks/2024/10/20/629210/house-considers-fewer-tax-cuts-under-capital-market-reform-measure/

Toyota Financial Services PHL wins tax appeal vs Davao
Business World / Chole Mari A. Hufana / October 20, 2024

THE Court of Tax Appeals (CTA) overturned a lower court’s ruling holding Toyota Financial Services Philippines Corp. liable for over P4 million in alleged deficiency of local business taxes, fees, and charges assessed by Davao City from 2009 to 2018. “While [Toyota Financial] has been found to have been doing business in Davao City, the Court, nevertheless, finds that it should not be made to pay the assessed taxes against it, Davao City not being the situs of the taxes payable,” the 10-page ruling of the tax court’s Second Division read.

Click the link below to read the full news from the source:
https://www.bworldonline.com/the-nation/2024/10/20/629338/toyota-financial-services-phl-wins-tax-appeal-vs-davao/

BIR to miss excise target on weak tobacco demand
Business World / Beatriz Marie D. Cruz / October 20, 2024

THE Bureau of Internal Revenue (BIR) said it will likely miss its P362.2-billion excise tax collection goal this year due to declining demand for tobacco products. “The trend in tobacco consumption has been declining in the last 10 years. Tobacco excise is more than 40% of our excise tax take,” BIR Assistant Commissioner Jethro M. Sabariaga told BusinessWorld via Viber. “You don’t see a lot of people smoking cigarettes these days. Even visually, you can confirm the shift in market demand,” Mr. Sabariaga said, noting that the collection growth in other excisable articles will not be enough to offset the decline in tobacco excise. Excise taxes are imposed on the production, sale or consumption of a commodity. These include tobacco, alcohol, and non-essential goods.

Click the link below to read the full news from the source:
https://www.bworldonline.com/economy/2024/10/20/629325/bir-to-miss-excise-target-on-weak-tobacco-demand/

BIR rules DUs, power co-op ineligible to claim input VAT
Business World / Beatriz Marie D. Cruz / October 21, 2024

THE Bureau of Internal Revenue (BIR) said distribution utilities (DUs) and electric cooperatives (ECs) cannot claim input value-added tax (VAT) from generation and transmission charges, ruling these to be pass-through charges. “The DUs and ECs must issue an invoice to customers, which include the sale and transmission of electricity and ancillary services, including the VAT of generation companies (GenCos) and transmission companies,” the BIR said in a circular issued recently. “However, the DUs and ECs shall not claim any input from these. The proper claimant of input tax shall be the customers engaged in business based on the invoice to be issued by DUs/ECs.” The amount invoiced by GenCos and transmission companies, which is included in the invoice issued by DUs and ECs, including the VAT charges, will be the basis of GenCos and transmission companies’ income tax and VAT liabilities.

Click the link below to read the full news from the source:
https://www.bworldonline.com/economy/2024/10/21/629667/bir-rules-dus-power-co-op-ineligible-to-claim-input-vat/

Ex-DoF officials in P15-M tax case acquitted
Business World / Kenneth Christiane L. Basilio / October 22, 2024

THE Philippines’ anti-graft court has acquitted former Department of Finance (DoF) officials over the approval of P15 million worth of tax credit certificates (TCC) to a textile company in the 1990s, citing lack of evidence against them. In an 86-page decision promulgated on Oct. 22, the Sandiganbayan Seventh Division ruled the prosecution failed to establish that Finance department officials and alleged company officers conspired to defraud the state through the awarding of TCCs, committing graft and estafa through the falsification of documents in the process.

Click the link below to read the full news from the source:
https://www.bworldonline.com/the-nation/2024/10/22/629989/ex-dof-officials-in-p15-m-tax-case-acquitted/

‘Wealth tax’ can fund efforts to combat poverty, climate change — US economist Sachs
Business World / Beatriz Marie D. Cruz / October 21, 2024

COUNTRIES must consider imposing a wealth tax on the “super-rich” to generate much-needed funds to address issues like poverty and climate change, according to American economist Jeffrey D. Sachs. “We need a wealth tax. It should be a global tax that is paid directly to global public goods so that we can fund the fight against climate change, extreme poverty and so forth,” Mr. Sachs, president and co-founder of the United Nations Sustainable Development Solutions Network, told a forum at the Ateneo de Manila University on Oct. 17. LUXURY TAXES Meanwhile, House Ways and Means Committee Chairman and Albay Rep. Jose Ma. Clemente S. Salceda said he is still studying a separate proposal to increase the current rate of “luxury” taxes. Under Section 150 of the National Internal Revenue Code, a 20% luxury tax is imposed on goods and services deemed “nonessential,” such as jewelry, perfume, precious metals, and yachts and other vessels intended for pleasure and sports, among others. HB 6993, filed last year, seeks to hike the tax on nonessentials to 25%. It expects to raise around P15.5 billion every year.

Click the link below to read the full news from the source:
https://www.bworldonline.com/editors-picks/2024/10/21/629304/wealth-tax-can-fund-efforts-to-combat-poverty-climate-change-us-economist-sachs/

BIR flags over 400 illegal vape sellers
Business World / Beatriz Marie D. Cruz / October 21, 2024

THE Bureau of Internal Revenue (BIR) said it identified 408 sellers of illicit vape products, which are either unregistered or whose products do not carry the appropriate revenue stamps. The BIR carried out nationwide raids on the vape sellers on Oct. 16, BIR Commissioner Romeo D. Lumagui, Jr. said in a statement. It has yet to value the illegal vape products it found. The BIR found illicit sellers in Manila, San Juan, Makati, Pasay, Las Piñas, and Quezon City.

Click the link below to read the full news from the source:
https://www.bworldonline.com/economy/2024/10/21/629662/bir-flags-over-400-illegal-vape-sellers/

Uncovering the hidden costs of non-compliance for micro and small taxpayers
The Philippine Star / Samantha Joy Almogela / October 22, 2024

These days, many individuals aspire to launch their own businesses with some choosing to start on a smaller scale. Establishing a small business can be both rewarding and challenging. Entrepreneurs need to focus on building their business while also managing the complexities of tax regulations. Small businesses encounter distinct tax compliance challenges, which vary significantly from those faced by larger corporations in terms of structure, responsibilities and penalties. In relation to this, the Bureau of Internal Revenue released a new classification of taxpayers, pursuant to the provisions of Section 244 and 245 of the Tax Code, as amended by Republic Act 11976, otherwise known as the “Ease of Paying Taxes (EOPT) Act.” The provisions are implemented by Revenue Regulations 8-2024, which classifies micro, small, medium and large taxpayers based on gross sales:

1. Micro taxpayer – a taxpayer whose gross sales for a taxable year are less than P3 million.
2. Small taxpayer – a taxpayer whose gross sales for a taxable year range from P3 million to less than P20 million.
3. Medium taxpayer – a taxpayer whose gross sales for a taxable year range from P20 million to less than P1 billion.
4. Large taxpayer – a taxpayer whose gross sales for a taxable year are P1 billion and above.

Gross sales shall only cover business income from trade or profession, net of VAT and other deductions applicable during the taxable year, excluding compensation income earned under the employer-employee relationship, passive income under Sections 24, 25, 27 and 28 of the Tax Code and exclusions from gross income under Section 32(B) of the Tax Code.

Click the link below to read the full news from the source:
https://www.philstar.com/business/2024/10/22/2394227/uncovering-hidden-costs-non-compliance-micro-and-small-taxpayers

Taxing Non-Resident Foreign Corporations: What now? (Let’s Talk Tax)
Business World / Lorenzo Miguel A. Soriano / October 22, 2024

2024 will go down as the year of numerous clarifications and amendments in Philippine tax rules. Both the Bureau of Internal Revenue (BIR) and National Government are active in improving the tax laws and streamlining processes to ease the taxpayer’s burden. The BIR and the government recognize the impact of digitalization and the growing connectedness of economies, driven by cross-border trade in goods and services, technological advancements, and flows of investment, people, and information.

THE FORMER NRFC TAX REGIME
Generally, NRFCs are taxable only on income received from sources within the Philippines. The income tax rate is 25% based on gross income. In determining whether the income is sourced from the Philippines, Section 42 of the 1997 National Internal Revenue Code (Tax Code), as amended, provides for the qualification. For example, income payments for services rendered by NRFCs are considered income sourced from the Philippines if the labor or personal services are performed in the Philippines. On the other hand, the income is sourced outside the Philippines if the labor or personal services are performed outside of the Philippines. As regards the value-added tax (VAT), Section 108(A) provides that the sale or exchange of services, including the use or lease of properties, are subject to 12% VAT if such services are performed in the Philippines. Accordingly, for income from services, the NRFCs are liable only for VAT if the service is performed in the Philippines.

RMCS AND JURISPRUDENCE AFFECTING NRFC TAXATION
Earlier this year, the BIR issued Revenue Memorandum Circulars (RMC) No. 5 and 38-2024, which clarify the tax treatment of cross-border services in light of the Supreme Court En Banc decision in Aces Philippines Cellular Corp. v. Commissioner of Internal Revenue. The RMC laid down the guidelines and crucial factors in determining the source of income of cross-border services.

VAT ON DIGITAL SERVICES
In addition to the amendments in the Tax Code, the VAT on Digital Services Law, or Republic Act No. 12023, was signed on Oct. 2, 2024. It imposes 12% VAT on digital service providers. A digital service provider is defined as a resident or nonresident supplier of digital services to a consumer who uses digital services subject to VAT in the Philippines.

TAXPAYER’S QUESTION: WHAT NOW ARE THE TRANSACTIONS OF NRFCs NOT SUBJECT TO TAX?
Based on the above discussions, apparently, there is now a thin line that separates the taxability and non-taxability of services performed by NRFCs outside the Philippines. Before, NRFCs enjoyed the benefits of tax exemption if they could establish that the labor or personal services were performed outside the Philippines. However, it can be gleaned from the latest issuances and new law that the BIR is now imposing tax on NRFCs for some types of services consumed in the Philippines.

Click the link below to read the full news from the source:
https://www.bworldonline.com/economy/2024/10/21/629696/taxing-non-resident-foreign-corporations-what-now/

CTA partially grants Royal Caribbean’s refund claim
Business World / Lorenzo Miguel A. Soriano / October 22, 2024

THE COURT of Tax Appeals (CTA) partially granted Royal Caribbean Cruises Ltd.’s petition for review, ordering the Bureau of Internal Revenue (BIR) to issue a tax credit certificate worth over P7 million, representing its unutilized input value-added tax (VAT) attributable to its zero-rated sales for the fourth quarter of 2018. The cruise company originally sought over P14 million in refund, but the tax court’s Second Division said it did not provide substantial evidence with the required documentation to be allowed the full amount.

Click the link below to read the full news from the source:
https://www.bworldonline.com/corporate/2024/10/23/629960/cta-partially-grants-royal-caribbeans-refund-claim/

BIR warns document deficiencies will raise VAT refund risk category
Business World / Beatriz Marie D. Cruz / October 22, 2024

THE Bureau of Internal Revenue (BIR) said the lack of supporting documents beyond a certain threshold on sales and purchases involved in a value-added tax (VAT) refund application will automatically bump the claim into the high-risk category. “Sales and purchases determined to be ‘NSD’ or “no supporting documents” (e.g., a supporting document indicated in the schedules cannot be found in the physical documents submitted) during cursory checking of the completeness of the supporting documents shall not be considered as incomplete submission, but the same shall result in the disallowance of the unsubstantiated portion of the sales or purchases regardless of the risk classification,” the BIR said in a circular. “However, in the event that the ‘NSD’ for sales and purchases exceeded at least 1% of the total amount of sales (for sale transactions) or total amount of claim (for purchase transactions), the application shall automatically be classified as high-risk and shall require 100% verification.” Republic Act (RA) No. 11976 or the Ease of Paying Taxes Act introduced a risk-based approach in classifying VAT refund claims — low, medium, or high risk.

Click the link below to read the full news from the source:
https://www.bworldonline.com/economy/2024/10/22/629966/bir-warns-document-deficiencies-will-raise-vat-refund-risk-category/

CTA orders release of ERS Surplus’ goods
Business World / Chloe Mari A. Hufana / October 23, 2024

THE Court of Tax Appeals (CTA) partially granted the petition of ERS Surplus Venture in a case involving the seizure and forfeiture of chainsaws, truck tires, and other goods, ordering the Philippine government to release the items covered by a Certificate of Authority to Import (CAI). In a 24-page ruling promulgated on Oct. 15 but was only publicized on Oct. 21, the tax court’s First Division held that the Bureau of Customs (BoC) was correct in seizing five used chain saws and ten pieces of used tires because the petitioner, ERS, did not have the required permit from the Department of Environment and Natural Resources before importing them.

Click the link below to read the full news from the source:
https://www.bworldonline.com/the-nation/2024/10/23/630302/cta-orders-release-of-ers-surplus-goods/

BIR WEEKENDER BRIEFS
Volume No. 15 Issue No 42 Week ending October 18, 2024

A BIR district office filed a Run After Tax Evaders (RATE) case against a taxpayer under its jurisdiction last October 14, 2024. 

Click the link below to read the full news from the source:
https://bir-cdn.bir.gov.ph/BIR/pdf/v15n42%20FINAL.pdf

Marcos to sign CREATE MORE bill by November: Tax cuts await domestic and foreign firms
Bilyonaryo.com / October 24, 2024

President Ferdinand R. Marcos Jr. is expected to sign the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill next month, which aims to reduce the tax rate for both domestic and foreign companies from 25 percent to 20 percent.“It’s scheduled for signing in November, specifically on the 11th, barring any typhoons or calamities,” Senate President Francis Escudero said at the 13th Arangkada Philippines Forum held at the Marriott Hotel in Pasay City. The CREATE MORE bill seeks to attract greater foreign investment into the Philippines by creating a more predictable and sustainable business environment, which, in turn, is expected to generate job opportunities for Filipinos and encourage local employment rather than seeking work abroad.

Click the link below to read the full news from the source:
https://bilyonaryo.com/2024/10/24/marcos-to-sign-create-more-bill-by-november-tax-cuts-await-domestic-and-foreign-firms/business/

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