Let’s Talk Tax
By Gemmalu O. Molleno-Placido
Twenty years ago, RA 8792 (the Electronic Commerce Act) was signed into law. The government was preparing for the digital age as the world moved on to information and technology-based means of communication. It is safe to say that the progress towards using information technology for business did not escalate the way it was predicted. The cost involved in ensuring integrity of electronic documents has been one of the challenges of the business sector and the government in transforming to fully IT-based operation. Before the pandemic, the business sector relied on face-to-face interaction, including inquiries, follow-up and manual submission of reporting requirements to the government. The latter still uses traditional means of communication when sending notices to taxpayers as well. For signatures on reports submitted to the government, wet-ink signatures on documents have been consistently and strictly required.
Earlier this year, due to the pandemic, most of the government offices we deal with, such as the Board of Investments (BoI), the Philippine Economic Zone Authority (PEZA), the Bureau of Internal Revenue (BIR), the Securities and Exchange Commission (SEC) and even some Local Government Units (LGU), resorted to the use of e-mail as the main mode of communicating with clients. Memorandum circulars (MC) were issued to address the challenges in sending and receiving reporting requirements while working remotely. For instance, the SEC issued MC No. 10 series of 2020 to facilitate the receipt of submission of reporting requirements of corporations and other entities. The MC allowed submission by electronic mail (e-mail) and the use of electronic signature, as defined by RA 8792, for the reports and files. It was evident that the issuance was a temporary solution to the enhanced community quarantine (ECQ) being implemented at that time as companies were still required to ensure that reports be accompanied by wet-ink signatures of authorized signatories, with hard copies of the documents to be filed after the quarantine.
Recently, in an apparent move towards long-term reliance on Information and Communication Technology (ICT) for receiving and sending documents via electronic means, SEC MC No. 28 highlighted the validity and enforceability of electronic data messages based on RA 8792. Fundamentally, the MC aims to facilitate and expedite the transmission and receipt of official communications and enhance their integrity for all transactions with the SEC. To achieve this, security measures such as Multi-factor Authentication (MFA) are mandatory, including the use of mechanisms, such as One-Time Personal Identification Number (OTP) systems or two-step verification by a Software-based Authenticator.
The MC requires corporations, partnerships, associations, and individuals to formally designate an official and alternate e-mail and cellphone number for their transactions with the SEC. These entities and individuals are given 60 days from the date of effectivity of the circular to comply with the submission. For future applications and for those with pending applications, such information must either be indicated upon filing of registration forms or submitted within 30 days from the issuance of the certificate of registration, license, or authority. The MC further requires that beginning Feb. 23, 2021, the information should be included in the General Information Sheet (GIS) or Notification Update Form (NUF) regularly filed with the SEC; otherwise such documents will be considered incomplete.
The e-mail addresses and cellular phone numbers will be under the control of the corporate secretary, the person charged with the administration and management of the corporation sole, the resident agent of the foreign corporation, the managing partner, the individual, or their duly authorized representative. These requirements mean additional responsibilities for corporate secretaries and authorized representatives because under Section 8 of the MC, companies must use the official and alternate e-mail addresses for transactions, applications, letters, requests, papers and pleadings under the jurisdiction of, or for consideration by, the Commission. “The Commission may likewise send notices, letter-replies, orders, decisions and/or other documents through the e-mail addresses and there is a presumption that these notices are deemed received by the entities on the date so sent by the SEC. Service of notice through this process shall be considered compliance with the notice requirement of administrative due process.” Thus, these e-mail addresses and cellular phones must be strictly monitored to avoid prescription of the reglementary period required to respond to the notices, orders and similar documents sent by SEC.
While the MC entails additional work for corporate secretaries, authorized representatives, and practitioners like us dealing with the SEC, this is definitely a welcome development. These types of issuances ensure everyone’s safety while bringing into mainstream the online means to communicate. Establishing the use of information technology as the means to communicate will maximize the resources of both the government and private sector.
We are looking forward to other government agencies to follow suit and institutionalize the use of information and communications technology defined under RA 8792. Other government agencies may also establish clearer rules and remove any cloud of doubt on the validity of documents filed electronically and use of electronic signature.
On a related note, I think we can all agree that the time has come to apply the provisions of the two-decade-old law, especially in terms of using electronic signatures. While some government agencies receive and recognize reports, letters, and requests affixed with electronic signatures, there are several instances where filing was refused, and taxpayers were required to refile using another copy with wet-ink signatures on the document.
We hope that due consideration be given on Sections 8 and 9 of the Electronic Commerce Act on the legal recognition and presumption relating to electronic signatures in formulating memorandums and circulars relevant to the submission of electronic documents and the use of information-technology based communications.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Gemmalu O. Molleno-Placido is a senior associate of the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.