Change is indeed here. On July 1, immediately upon assuming office as Bureau of Internal Revenue (BIR) Commissioner, Caesar R. Dulay released three revenue issuances revoking or suspending those released during the previous commissioner’s administration, namely:
1. Revenue Memorandum Order (RMO) No. 38-2016, which revoked RMO Nos. 24-2016 and 25-2016 dated June 7 and 12, 2016, respectively.
It may be recalled that RMO 24-2016 was issued to prescribe the investigation of parties in transactions involving transfer/assignment/sale of properties, where the financial capacities of both parties (buyer and seller) to acquire properties are established. On the other hand, RMO 25-2016 was issued as a supplement to the guidelines and procedures in the conduct of investigation on the capacity of party/ies to acquire properties.
These issuances provide that in case the buyer lacks financial capacity to purchase the subject property for sale, the transaction will be deemed a donation, subject to donor’s tax. On the other hand, if the seller fails to provide support to prove financial capacity, it will be presumed that the seller earned income that he/she did not declare and taxes due thereon were not paid. An electronic Letter of Authority (LOA) will be issued to the seller on the taxable year when the sale/transfer of the subject property occurred and income taxes will be assessed against him/her.
2. Revenue Memorandum Circular (RMC) No. 69-2016 suspends the effectivity of all issuances promulgated within the period covering June 1-30, 2016. Affected by this suspension are as follows:
a. RMO 26-2016 dated June 13, 2016, where the BIR released guidelines for handling disputed assessments and for issuing Final Decision on Disputed Assessment (FDDA), with the following highlights:
The filing of protest against Preliminary Assessment Notice (PAN) is optional/not mandatory.
All decisions on protest to the Final Assessment Notice (FAN) shall be through the issuance of an FDDA.
An FDDA will automatically be issued if the taxpayer appeals to the Court of Tax Appeals (CTA) within the prescribed period.
b. RMC No. 61-2016 dated June 13, 2016, prescribing the guidelines for accounting and recording transactions involving “netting” or “offsetting.”
It was clarified that the accrued receivables or payables arising from sale or lease of goods or properties or the performance of service shall be recognized at gross for income and value-added tax or percentage tax purposes. In addition, income payments subject to creditable or final withholding taxes shall be recorded at gross, whether the transactions are actually offset, or the same provide for net settlement of cash flows. Any amount that the payor offsets against the income payments that are not subjected to creditable or final withholding tax shall not be allowed as deductible expense.
c. RMC No. 62-2016 dated June 13, 2016 for clarification on the proper tax treatment of “passed-on” Gross Receipts Tax (GRT)
d. RMO No. 27-2016 dated June 23, 2016 for the outright grant of preferential tax treaty rates for dividends, interest, and royalties and new requirements for tax sparing (country-domicile of the recipient corporation has no effective tax treaty with the Philippines, the country-domicile has a worldwide system of taxation, and the country-domicile allows credit against the tax due from the non-resident foreign corporation dividend taxes deemed to have been paid in the Philippines equivalent to 15 percent)
e. RMC No. 65-2016 dated June 23, 2016, which clarifies the appropriate due date of filing of tax returns and payment of taxes in case the exact due date falls on a Saturday, Sunday, or a holiday: for electronic and manual tax filers and payers of taxes, the due date shall be on the next business day.
We hope to see a prompt and final decision from the BIR whether the suspension will be lifted or altogether revoked. We hope the Bureau will also consider the merits of some issuances since some are beneficial to taxpayers.
3. RMC No. 70-2016, which suspends audit of the BIR effective July 1, 2016 and submission of inventory of pending letters of authority (LOA)/Letter Notices (LN) as of June 30, 2016
The BIR has suspended all field audits and other field operations relative to the examination and verification of taxpayer’s books of accounts, records, and other transactions. As such, no field audit, field operations, or any form of business visitation in execution of LOA/Audit Notices, LN, or Mission Orders shall be conducted.
Further, no written orders to audit and/or investigate taxpayers’ internal revenue tax liabilities shall be issued and/or served except in the following cases:
a. Investigation of cases prescribing on or before October 31, 2016
b. Processing and verification of estate tax returns, donor’s tax returns, capital gains tax returns, and withholding tax returns on the sale of real properties or shares of stocks together with the documentary stamp tax returns related thereto
c. Examination and/or verification of internal revenue tax liabilities of taxpayers retiring from business
d. Audit of National Government Agencies (NGAs), Local Government Units (LGUs) and Government-Owned and -Controlled Corporations (GOCCs), including subsidiaries and affiliates
e. Other matters/concerns where deadlines have been imposed or under the orders of the Commissioner of Internal Revenue
The service of Assessment Notices, Warrants and Seizure Notices, and Seizure Notices should still be effected. Also, taxpayers may voluntarily pay their known deficiency taxes without the need to secure authority from the concerned Revenue Officials.
In his first full work week at the BIR, are we to expect more changes from Commissioner Dulay? Should we, as taxpayers, have confidence in the direction of the tax office?
We quote from the inauguration speech of President Rodrigo Duterte: “Malasakit. Tunay na pagbabago. Tinud-anay nga kausaban (Compassion. Real change.). These are words which catapulted me to the presidency. These slogans were conceptualized not for the sole purpose of securing the votes of the electorate. Tinud-anay nga kabag-uhan. Mao kana ang tumong sa atong pang-gobyerno (Real change. This is the direction of our government).”
The author is a manager with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd., a member firm of Deloitte Touche Tohmatsu Limited—comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.