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Tag: Taxwise or Otherwise
In the last decade, there have been both substantial and minor revisions in government policy affecting not only corporate governance but also registrations. One of these was Republic Act (RA) No. 11232 or the Revised Corporation Code (RCC) of the Philippines, passed early last year. A notable amendment introduced by the RCC is that investors are now permitted to form One Person Corporations (OPCs) and corporations with two to four incorporators, directors, and stockholders.
Six months into the COVID-19 pandemic and the government is low on funds. This is an expected effect of almost standstill business operations given the rising positive cases and prolonged lockdowns. Despite aggressive tax audit efforts by the Bureau of Internal Revenue (BIR), the limited workforce and social distancing measures being implemented nationwide restrict the conduct of examinations.
The definition of fair market value or FMV for purposes of computing the capital gains tax on the transfer of shares has undergone numerous revisions over the years. What constitutes fair market value has long been a push-and-pull between taxpayers and the tax authority, as this affects the computation of the gain, and hence, the tax due on the transaction.
As the world continues to grapple with the pandemic, cross-border transactions are not spared from the impact of restrictions on human mobility. For tax purposes, such travel restrictions could result in the inadvertent creation of a taxable presence for a foreign employer or principal, or what is called a permanent establishment (PE) in treaty parlance.
Two years ago, I wrote about telecommuting, now commonly known as “work from home, (WFH)” focusing on its benefits to employees due to the worsening traffic situation in Metro Manila. At that time, I felt that this was a more viable option compared to building new roads, which is more costly and takes long to complete. Also, WFH allows work-life balance by removing some work stressors. Now trapped in this pandemic, I would never have thought that WFH acceptance would come sooner than expected.
Heraclitus, a Greek philosopher once said, “πάντα ῥεῖ (panta rhei) — everything flows.” In modern-day English, this translates to the age-old adage “the only constant in life is change.” Everything is in a constant state of flux, whether that’s the things or people around us, or even ourselves. Change is a universal fact of life and because of this, we can say that innovation is inevitable. It will happen, whether we want it or not. The only question is when.
Since the issuance of Revenue Memorandum Circular (RMC) 65-2012 eight years ago, the additional tax burden on condominium corporations and unit owners has often been the subject of much controversy. This is in no small part due to the shift in the position of the Bureau of Internal Revenue (BIR). Prior to 2012, the BIR had consistently confirmed in several rulings that dues, membership fees and other fees collected by condominium corporations are exempt from tax. The RMC, however, declared that the dues and fees paid by the members and tenants form part of the gross income of the condominium corporation as they constitute compensation for services rendered, hence, subject to income tax, value-added tax (VAT), and withholding tax.
Transfer pricing (TP) is one of the areas which produce tax issues for multinational companies. The Bureau of Internal Revenue (BIR) has released rules and fairly new issuances covering related-party transactions and enforcing the arm’s length principle as a way of determining transfer prices of associated enterprises, as it is applied internationally.
One of the common tax issues affecting multinational entities (MNE) is transfer pricing. Yet, at present, where the COVID-19 pandemic is seriously affecting economies worldwide, many companies may tend to overlook the transfer pricing consequences of every management decision they are taking in order to deal with more pressing and critical matters impacting the business.
There was a time when the weddings and events business in the Philippines was robust and thriving, with events-industry trade shows being staged month after month. Events organizing, catering, and other related services expanded exponentially over the last few years.
With the COVID-19 pandemic creating an unprecedented crisis for countries, organizations and individuals, fraudsters have been quick to identify opportunities to take advantage of retail businesses (both traditional and electronic), as well as consumers.
Digital technology has undeniably transformed the commercial landscape. Digitization allows businesses to access markets across borders even without establishing a physical presence. Due to territorial absence, and the novelty of digital technology that tax laws then could not have foreseen, for a time, tax authorities found themselves bereft of rights to collect taxes on digital businesses that cross international borders.
Prior to the pandemic and the various quarantines imposed in various parts of the country, the hard copy of duly filed Income Tax Return (ITR), along with the required attachments, had to be submitted manually and stamped “Received” at the Large Taxpayers Division (LTD)/Revenue District Office (RDO) where the taxpayer is registered, within 15 days from the statutory due date or date of filing/payment of the ITR, whichever comes later. This year, due to the state of emergency, the filing and payment of income tax have been extended until June 14. However, as June 14 falls on a Sunday, the deadline is automatically extended to the next working day (June 15). Consequently, the submission of the duly filed 2019 ITR and its attachments has been extended until June 30.
From TRABAHO (Tax Reform for Attracting Better and High-quality Opportunities) to CITIRA (Corporate Income Tax and Incentives Rationalization Act) and now CREATE (Corporate Recovery and Tax Incentives for Enterprises), the elusive Package 2 of the government’s tax reform program may finally see the light.
As the world continues to face the effects of the COVID-19 pandemic, the government has acknowledged its immediate fiscal impact, including the adverse consequences on tax collections in recent months. Having missed collection targets by a significant margin starting in March, the Bureau of Internal Revenue (BIR) expects future collections to also fall below target as an effect of the economic slowdown.
Last week, I discussed the Revenue Memorandum Circular (RMC) which extended the deadlines for taxpayers to submit responses or protests to assessment notices, including documents to support requests for reinvestigation. In this article, let’s discuss another guideline released by the BIR concerning tax assessments.
After nearly two months under enhanced community quarantine (ECQ), Metro Manila is now looking to ease some of the restrictions without compromising public safety. In anticipation, local government units (LGUs) are preparing the guidelines to transition towards new normal. The call to adjust operations on an unprecedented scale is proving to be challenging to industries like the academe, among others.
A part from the health crisis, the other grim impact of the coronavirus pandemic is the disruption of business and workers’ livelihoods. To sustain operations, some companies have re-engineered their operations or adopted flexible work arrangements. Since staying at home has become a civic duty, the once home-work-home routine has been replaced by work-from-home arrangements for the more fortunate ones.
With steadily increasing COVID-19 cases, major cities on lockdown, and most businesses closed, the government has appealed to the private sector to contribute to relief efforts in the spirit of bayanihan. The Bureau of Internal Revenue (BIR) released Revenue Regulations (RR) No. 9-2020 in line with Republic Act No. 11469, otherwise known as the Bayanihan to Heal as One Act, the main objective of which is to adopt urgently-needed measures to address the novel coronavirus outbreak. In particular, RR No. 9-2020 liberalizes the grant of incentives for certain donations in response to the COVID-19 crisis.
In times of crisis, even clichés find renewed meaning. We all know that taxes are the lifeblood of the government. However, against the COVID-19 pandemic that has claimed thousands of lives worldwide, the maxim makes much more sense both literally and figuratively. Billions in public funds have been used to keep lives afloat, defray expenditures for medical supplies and equipment, and subsidize social amelioration projects for affected households, but much more is needed.
Following the World Health Organization’s declaration of COVID-19 as a pandemic, President Rodrigo R. Duterte issued Proclamation No. 929 on March 16, placing the country under a State of Calamity for six months and ordering an Enhanced Community Quarantine (ECQ) for Luzon to significantly limit the movement of people in the hopes of preventing the spread of the virus.
Undeniably, the effects of the COVID-19 outbreak have spread globally. In the Philippines, Luzon has been placed under Enhanced Community Quarantine, along with other areas across the nation. People were advised to stay home, most businesses are closed except for those serving the public, and social distancing is imperative where possible.
On March 12, President Rodrigo R. Duterte placed Luzon under community quarantine between March 15 and April 12 to contain the spread of COVID-19. With the income tax filing deadline for the 2019 tax year less than a month away, concerns were raised by taxpayers on how to proceed with their tax obligations.
One of the well-known and time-honored principles in the Law on Obligations and Contracts is solutio indebiti. The rule is that no person shall unjustly enrich himself at the expense of another. Accordingly, if something is received when there is no right to demand it, and it was unduly delivered by mistake, the obligation to return it arises. In such a situation, a creditor-debtor relationship is created under a quasi-contract. The payor becomes the creditor with the right to demand the return of payment made by mistake while the payee, who has no right to receive the payment, is obligated to return it.
The past couple of years demonstrated rapid growth in Robotics Process Automation (RPA), which continues to be a strategic priority for many organizations. Research published in December by Gartner showed that RPA adoption grew by 60% from 2018. It also predicted that in 2024, automation combined with redesigned operational processes will reduce 30% of an organization’s operational costs, making it even more enticing for industrial enterprises. With such momentum, RPA is revolutionizing business operations, including those of industry leaders, which has led to an automation-first mindset across all industries. In the face of RPA implementation, more organizations are finding ways to adapt quickly to the increasingly competitive business environment.
On Feb. 25, businesses, schools and government offices will be closed in celebration of one of the most significant events in Philippine history -- the People Power Revolution. It commemorates the day when Filipinos gathered along EDSA, a major public road and a historical stage for those who rallied to restore democracy in the Philippines and end decades of dictatorship. For millions of Filipinos, the protest in EDSA was a reclamation of liberty long denied.
According to a 2017 report on Infrastructure Financing Strategies for Sustainable Development in the Philippines written for the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), one of the fast-emerging mechanisms utilized to implement infrastructure projects at the level of local government units (LGUs) is through joint ventures (JVs). Majority of LGU-level JV projects that have progressed to actual implementation have been initiated by the private sector in partnership with local government entities in the water sector, government offices, and given recent developments, in reclamation as well.
In last week’s article, we laid down the foundation of the International Financial Reporting Interpretations Committee 23 (IFRIC 23) by discussing the key requirements of recognizing uncertain income tax treatments. The initial application of a new accounting standard often poses questions and challenges. Today, we take a closer look at concrete applications of IFRIC 23, as well as the challenges and key considerations it entails.
Globally adopted, the International Financial Reporting Standards (IFRS) were developed as a set of principle-based standards for a consistent approach to financial reporting. One of its principles, known as International Financial Reporting Interpretations Committee 23 or IFRIC 23 for short, entitled Uncertainty over Income Tax Treatments, was issued in May 2017 as a guide to recognize and account for uncertain income tax treatments. It covers annual reporting periods beginning on or after Jan. 1, 2019.
It has been several months since the issuance of Securities and Exchange Commission (SEC) Memorandum Circular (MC) No. 15-2019, requiring all registered domestic corporations to disclose their beneficial owners in their General Information Sheet (GIS). The MC aims to assist in the implementation of the Anti-Money Laundering Act (AMLA) and the Terrorism Financing Prevention and Suppression Act (TFPSA).
There’s a certain feeling of trepidation that most taxpayers get during tax audits. After all, a tax audit is no laughing matter. It involves flipping back the books and records of prior years to respond to the Bureau of Internal Revenue (BIR), and often, making sense of past transactions for hours on end. But this is all par for the course, and what a complicated course it is.
With the close of the decade, we have seen how Philippine taxation has been transformed by numerous developments unfolding in the landscape. Several changes that are in the works may make progress in the coming months. One of them is the second package of the tax reform, which proposes to rationalize tax incentives.
The start of a new year (and in this case, the closing of a decade) is usually filled with hope and optimism. People generally scribble their resolutions, looking forward to another year of achieving more goals and milestones. For finance and accounting practitioners, the new year also marks the beginning of busier times ahead (especially those in companies that follow the calendar year as their accounting period), starting with the closing of accounting books and typically ending with the filing of the annual income tax return.
December is indeed the most festive period of the year. For most, it is an opportunity to take a much-needed break from work and spend some quality time with loved ones to celebrate Christmas and New Year. However, for us accountants, this marks the start of the busy season as yearend approaches. And so, before taxpayers all go on hiatus this holiday season, here are a few important reminders to ponder in areas of tax and payroll compliance.
Those who are familiar with tax treaty provisions know that they apply only to residents of countries which are parties to the treaty. Thus, the main documentary requirement to support eligibility for tax treaty relief is the proof of residency of the non-resident income-earner. More commonly known as a tax residency certificate (TRC), such proof of residency is a certification issued by the tax authority of the country of the income-earner, attesting that the latter is a resident of such country in the tax year concerned for purposes of the tax treaty being invoked.
Generally, the power of taxation extends only as far as the territorial jurisdiction of a state. However, digitalization of the economy defies these boundaries as the goods and services of digital enterprises become accessible anywhere around the globe. Digitalization likewise reduces, if not eliminates, the need to maintain bricks-and-mortar shops in a specific market jurisdiction since the customers can easily conclude a transaction with just one click. This new normal in our way of doing business makes it harder for countries, including the Philippines, to impose the appropriate taxes on digital transactions, especially on those that do not have a physical presence in the archipelago.
For those who dare to do their Christmas shopping at the eleventh hour, the ordeal of treading through Manila’s urban jungle is not for the faint-hearted. Lest one is not forewarned, it is wise to start Christmas shopping early, steering clear of the horrendous rush that can risk spoiling the holiday spirit.
To enhance efficiency, the government has strengthened and broadened the Anti-Red Tape Act of 2007 by passing Republic Act (RA) 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018. The law took effect on June 17, 2018, intending to create programs that simplify requirements and streamline procedures in government transactions.
In Manila, you can tell that the Christmas season has begun when street posts and trees are adorned with glittering lights; traffic gets heavier, shopping malls become busier; and Christmas songs start playing on the airwaves. For Filipinos, Christmas is the most awaited holiday of the year, anticipated as early as September. Such festivities, fortunately or otherwise, come with gift-giving traditions and family celebrations that often obligate people to dig deeper into their pockets.
Comparable to our Bureau of Internal Revenue (BIR)-issued identification number, more popularly known as TIN, the US Internal Revenue Service (IRS) likewise issues an Individual Taxpayer Identification Number (ITIN), which is used as a tax processing number. The ITINs are issued to individuals who are required to obtain one under United States (US) tax law, but who do not have and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA).