paguio, dumayas & associates, cpas certified public

Paguio, Dumayas & Associates, CPAs Certified Public Accountants and Management Consultants

QUALITY ASSURANCE BULLETIN I October 2018 Edition 1

www.paguiodumayasassoc.com



Revenue Regulations No. 22-2018: Further Amendment to Section 10 of Revenue Regulations No. 10-2010, as last

amended by Revenue Regulations No. 10-2018, relative to "Notice to Taxpayers"

Revenue Memorandum Circular No. 85-2018: Clarification on Certain Issues Relative to the Issuance of Electron-

ic Certificate Authorizing Registration (eCAR) for Transferring Real Properties with the Land Registration Authority

Revenue Memorandum Circular No. 86-2018: Circularizing the Lists of Withholding Agents Required to Deduct

and Remit the 1% or 2% Creditable Withholding Tax for the purchase of Goods and Services under Revenue Regulations

No. 11-2018.

RECENT BUREAU OF INTERNAL REVENUE ISSUANCES


10-2018

QUALITY ASSURANCE BULLETIN

RECENT COURT OF TAX APPEALS CASES

The FAN must be served and actually received by the taxpayer, otherwise further notices become null and void.—CTA

Case No. 8863.

The assessment is void for failure of the BIR to comply with the due process requirements in the issuance of the subject

assessments.—CTA EB No. 1677 (CTA Case No. 9070)

The cancellation of the sale gives rise to right to claim for refund of the Capital Gains Tax (CGT) paid on such sale, but,

if the claim for refund was not timely filed, the same should be denied.—CTA Case No. 9509

RECENT SECURITIES AND EXCHANGE COMMISSION ISSUANCE

SEC Memorandum Circular No. 13-Series of 2018

Subject: ADOPTION OF ACCOUNTING STANDARDS AND INTERPRETATIONS



REVENUE REGULATIONS NO. 22-2018

Further Amendment to Section 10 of Revenue

Regulations No. 10-2010, as last amended by

Revenue Regulations No. 10-2018, relative to

"Notice to Taxpayers"

This regulation is issued to effectively and

fully comply with the provisions on exchange of

information contained in international conventions

or agreements on tax matters to which the

Philippines is a signatory or a party with a view to

adapt them to the evolving international

environment and developments in transparency

for tax matters and to ensure compliance with the

international standard for exchange of

information.

Section 10 of RR No. 10-2010, as last

amended by RR No. 10-2018, is hereby further

amended to read as follows:

"Section 10. Notice to Taxpayers. - A

taxpayer shall be duly notified in writing by the

Commissioner that a foreign tax authority is

requesting for exchange of information held by

financial institutions pursuant to an international

convention or agreement on tax matters:

1) Within sixty {60) days following the transmittal

of all information requested from, and

provided for by, the concerned financial

institution to the requesting treaty partner; or

2) In cases where notification is likely to

undermine the chance of success of the

investigation conducted by the requesting

jurisdiction, and the requesting jurisdiction has

made a substantiated request for a deferment

of the notification based on these grounds,

notice to the taxpayer must only be given after

receipt of communication from the requesting

jurisdiction that the investigation has already

attained finality.

REVENUE MEMORANDUM CIRCULAR NO.

85-2018

Clarification on Certain Issues Relative to the

Issuance of Electronic Certificate Authorizing

Registration (eCAR) for Transferring Real

Properties with the Land Registration Authority

This circular is hereby issued to address

the problems being encountered by taxpayers

who have multiple transactions involving only one

(1) Title in transferring their real properties with

the Land Registration Authority.

Q-1: How many eCARS will be issued if

taxpayer submitted an Extra-Judicial Settlement

with Sale, or Extra-Judicial Settlement with

Waiver of Rights?

A-1: There are two (2) transactions involved,

one (1) for settlement of the estate and another

one (1) for transfer thru sale or donation, thus two

(2) eCARS will be issued.

The Revenue Officer assigned in the

One-Time Transaction (ONETT) Team must

advise the taxpayer to present the two (2) eCARS

simultaneously to the Registry of Deeds (RD),

since presentation of only one (1) eCAR to RD will

invalidate the second eCAR transaction in the

system resulting to the issuance of Notice of

Invalid eCAR by the RD.



Q-2: How many eCARS will be issued if the

documents submitted by the taxpayer are two (2)

separate documents, such as Extra-Judicial

Settlement and Deed of Absolute Sale or Deed of

Donation?

A-2: Two (2) eCARs must be issued. The

Revenue Officer assigned in the ONETT Team

shall first issue an eCAR for the estate settlement

to be presented by the taxpayer to the RD for the

issuance of a new Title.

The new title number that will be issued for

the first transaction on the settlement of estate

shall be the basis for the issuance of the eCAR for

the 2nd transaction, be it sale or donation.

The taxpayer may opt to pay for the

applicable taxes for both transactions at the

same time to avoid incurring penalties and

interest.

REVENUE MEMORANDUM CIRCULAR NO.

86-2018

Circularizing the Lists of Withholding Agents

Required to Deduct and Remit the 1% or 2%

Creditable Withholding Tax for the purchase of

Goods and Services under Revenue Regulations

No. 11-2018.

Pursuant to the provisions of Revenue

Regulations (RR) No. 11-2018, as implemented

by Revenue Memorandum Order (RMO) No. 26-

2018 this Circular is hereby issued to circularize

the withholding agents under the jurisdictions of

the Large Taxpayers Service and Revenue

Regions who are required to deduct either the one

percent (1%) or two percent (2%) creditable

withholding tax from their suppliers of goods and

services. Pursuant to the said revenue issuances,

the list of withholding agents is further classified

into (1) List of existing withholding agents (2) List

of additional withholding agents (3) List of

withholding agents for deletion from existing list.

Please visit the BlR's website at www.bir.gov.ph

where the lists are posted and provided with

search facility for the convenience of all

concerned.

Accordingly, the obligation to deduct and

remit to this Bureau the one percent ( 1%) and

two percent ( 2%) creditable withholding tax from

the suppliers of goods and services shall

continue, commence or cease, as the case may

be, effective November 1, 2018. All lists of

withholding agents issued pursuant to RR No. 11-

2018 that may have been previously published in

any newspaper or any other form of publication

are hereby repealed and superseded. Moreover,

should any taxpayer be not found in any of the

published lists, this taxpayer is deemed excluded

and therefore not required to deduct and remit the

1% or 2% creditable withholding tax under RR No.

11-2018.

Continuation...



TOP DRAW ANIMATION INC.

versus

COMMISSIONER OF INTERNAL REVENUE

The FAN must be served and actually received by the taxpayer, otherwise further notices become null and void.

Petitioner, filed for a Petition for Review

seeking the cancellation and the declaration of

nullity of the deficiency tax assessment.

Respondent contend that the Court of Tax

Appeals (CTA) has no jurisdiction on the instant

petition since the assessment has become final,

executory and demandable due to petitioner’s

failure to file a valid protest.

It must be noted that the jurisdiction of the

CTA regarding internal revenue taxes is provided

under Section 7(a) (1) of the R.A. 1125, as

amended.

“Decisions of the Commissioner of Internal

Revenue in cases involving disputed

assessments, refunds of internal revenue taxes,

fees or other charges, penalties in relation

thereto, or other matters arising under the

National Internal Revenue or other laws

administered by the Bureau of Internal Revenue.”

In this case, the Respondent insinuates

that since there is an absence of a valid protest by

the Petitioner, then there would be no disputed

assessment arising therefrom.

The absence of a valid protest will not

preclude the CTA from taking cognizance of the

instant petition especially when the allegation of

the Petitioner in assailing such argument is the

failure on the part of the Respondent to validly

serve the required FAN which allegedly violated

the right of Petitioner to due process.

The law and jurisprudence provide that the

subject matter on the issuance of FNBS in the

absence of a valid service of a FAN falls squarely

under the classification of “other matters arising

under the National Internal Revenue Code” .

Thus, this Court has jurisdiction on the instant

petition.

Petitioner argues that, although it received

the PAN, it did not receive the required FAN,

hence, respondent deprived the former of its right

to protest the assessment which is a violation of

its right to due process.

Further study of the BIR Records prove

that the subject PAN was received by a certain

person without any indication as to the latter’s

privity to or connection with the Petitioner or his

authority in receiving the document.

Also, there is an absence of proof of

receipt of the FLD/FAN.

Section 3.1.4 of the Revenue Regulation

(RR) No. 12-99 or the rules “Implementing the

Provisions of the National Internal Revenue Code

of 1997 Governing the Rules on Assessment of

National Internal Revenue Taxes, Civil Penalties

and Interest and Extra-judicial Settlement of a

Taxpayer’s Criminal Violation of the Code

Through Payment of a Suggested Compromise

Penalty” provides that:

3.1.1 Formal Letter of Demand and

Assessment Notice

“The formal letter of demand and

assessment notice shall be issued by the

Commissioner or his duly authorized

representative. The letter of demand calling for

payment of the taxpayer’s deficiency tax or taxes

shall state the facts, the law, rules and

regulations, or jurisprudence on which the

assessment is based, otherwise, the formal letter

of demand and assessment notice shall be void.

The same shall be sent to the taxpayer only by

registered mail or by personal delivery. If sent by

personal delivery, the taxpayer or his duly

authorized representative shall acknowledged

receipt thereof in the duplicate copy of the

letter of demand, showing the following:

1) His Name

2) Signature

3) Designation and authority to act for and behalf

of the taxpayer, if acknowledged by the

person other than the taxpayer himself

4) Date of receipt thereof.

WHEREFORE, premises considered, the

instant Petition for Review is hereby GRANTED.

Accordingly, the subject Preliminary Collection

Letter and Final Notice Before Seizure are hereby

CANCELLED for being NULL AND VOID.




versus

PACIFIC BAYVIEW PROPERTIES INC.

The assessment is void for failure of the BIR to comply with the due process requirements in the issuance of the subject assessments.

The Petitioner, the Commissioner of

Internal Revenue (CIR) vie that contrary to the

ruling in the Assailed Decision, the subject FAN/

FLD were validly issued to respondent.

Allegedly, the issuance of the FAN and FLD a

day before the expiration of the period to

respond to the PAN shall not be deemed

deprivation of respondent’s right to procedural

due process.

Under the existing rules and regulations, a

FAN shall be issued after the taxpayer filed or

failed to file a reply to the preliminary

assessment notice within fifteen (15) days from

receipt thereof.

While the FAN was issued a day before

the period to respond to the PAN, respondent

nevertheless received the PAN and FAN, was

informed of the factual and legal basis of the

assessments and was able to intelligently

respond to the PAN and FAN.

Meanwhile, respondent claims that it was

not afforded an opportunity to present its side on

the subject tax assessment since petitioner

already made up his mind even before

respondent could present its case and submit

evidence in support thereto.

It must be emphasized that while taxes

are lifeblood of the government, the power to tax

has its limits, in spite of all its plenitude. Even as

we concede to the inevitability and

indispensability of taxation, it is a requirement in

all democratic regimes that it be exercised

reasonably and in accordance with the

prescribed procedure.

Furthermore, the persuasiveness of the

right to due process reaches both substantial and

procedural rights and failure of the CIR to strictly

comply with the requirements laid down by law

and its own rules is a denial of the

taxpayer’s right to due process.

In sum, with no cogent reason to deviate

from the Court in Division’s findings that petitioner

failed to comply with the mandatory requirements

of Section 228 of the NIRC and Section 3 of the

RR No. 12-99, thereby denying respondent its

right to due process.

WHEREFORE, in light of the foregoing

considerations, the instant Petition for Review is

DENIED for lack of merit.

TECHNOGAS PHILIPPINES MANUFACTURING CORPORATION

versus


This involves the Petition for Review filed

by Technogas Philippines Manufacturing

Corporation appealing the inaction of the

Commissioner of Internal Revenue on its claim for

refund of capital gains tax (CGT) paid on sale of

property which was subsequently cancelled

during the year.

Petitioner submits that legally paid taxes

can likewise be refunded when a supervening

event occurs entitling the taxpayer to a refund. In

this case, the transaction which gave rise to

petitioner’s obligation to pay the tax has been

cancelled with the cancellation of the certificate of

sale. As petitioner and PNB reverted to their

previous positions, petitioner became entitled to

claim for a refund and the BIR became

duty-bound to return the remitted CGT.

Petitioner also states that it timely filed its

claim for refund, citing Insular Lumber Company

v. Court of Tax Appeals, et. al., where the

Supreme Court ruled that when the tax was

legally paid, the prescriptive period commences to

run from the time of the occurrence of the

supervening event entitling the taxpayer to clam

for refund and not from the time of payment

thereof.

The cancellation of the sale gives rise to right to claim for refund of the Capital Gains Tax (CGT) paid on such sale, but, if the claim for refund was not timely filed, the same should be denied.



On the other hand, Petitioner points out

that the prescriptive period under Section 229 of

the NIRC is mandatory regardless of any

supervening cause that may arise after the

payment.

Section 204 (C) and 229 of the NIRC

provides that:

Section 204. Authority of the

Commissioner to Compromise, Abate and Refund

or Credit Taxes - The Commissioner may:

(C) Credit or refund taxes erroneously or

illegally received or penalties imposed without

authority, refund the value of internal revenue

stamps when they are returned in good condition

by the purchases, and, in his discretion, redeem

or change unused stamps that have been

rendered unfit for use and refund their value upon

proof of destruction. No credit or refund of taxes

or penalties shall be allowed unless the taxpayer

filed in writing with the Commissioner a claim for

credit or refund within two (2) years after the

payment of the tax or penalty: Provided, however,

That a return filed showing overpayment shall be

considered as a written claim for credit or refund.

Section 229. Recovery of Tax Erroneously

or Illegally Collected - No suit or proceeding shall

be maintained in any court for the recovery of any

national internal revenue tax hereafter alleged to

have been erroneously or illegally assessed or

collected, or of any penalty claimed to have been

collected without authority, or of any sum alleged

to have been excessively or in any manner

wrongfully collected, until a claim for refund or

credit has been duly filed with the Commissioner;

but such suit or proceeding may be maintained,

whether or not such tax, penalty, or sum has been

paid under protest or duress.

In any case, no such suit or

proceeding shall be filed after the expiration of

two (2) years from the date of payment of

the tax or penalty regardless of any

supervening cause that may arise after

payment: Provided, however, That the

Commissioner may, even without a written claim

therefor, refund or credit any tax, where on the

face of the return upon which payment was made,

such payment appears clearly to have been

erroneously paid.

The 2-year period, therefore, cannot be

stretched to allow for other special circumstances,

when none has been provided.

Thus, when the CGT was withheld and

paid on October 5, 2004, the 2-year period to file

a claim for refund has already started.

The execution of the said Compromise

Agreement on December 4, 2014, and the

subsequent cancellation of the sale of property

from which the CGT arose, is precisely a

"supervening cause that occurs after payment"

which should be disregarded in determining the

prescriptive period. This is in accordance with the

clear provision of Section 229 that claims for

refund must be filed within two years after the

date of payment of the tax, regardless of any

supervening cause that may arise after such

payment.

Clearly, petitioner' s claim for refund was

filed out of time and must be denied.

WHEREFORE, the instant Petition for

Review is DENIED for lack of merit.



The Commission, in its meeting held on September 18, 2018, approved the adoption of the

recently approved accounting standards and interpretations as part of SEC’s rules and regulations on

financial reporting:

SEC Memorandum Circular No. 13

Series of 2018

Subject: ADOPTION OF ACCOUNTING

STANDARDS AND INTERPRETATIONS

TITLE BRIEF DESCRIPTION

Prepayment Features with Negative Compensation [Amendments to Philippine Financial Reporting Standards (PFRS 9)]

An entity shall apply these amendments for annual periods beginning on or after January 1, 2019. Earlier application is permitted.

Long-term Interest in Associates and Joint Ventures (Amendments to PAS 28)

An entity shall apply these amendments for annual periods beginning on or after January 1, 2019. Earlier application is permitted.

PFRS Practice Statement 2: Making Materiality Judgments

An entity chooses to apply the guidance in the Practice Statement is permitted to apply it to financial statements prepared from November 8, 2017.

Guidance on Financial Reporting (June 2017 Edition) Effective immediately.

PFRS 15, Implementation Issues Affecting the Real Estate Industries

The consensus in these Q&A are effective date of PFRS 15.

Q&A No. 2017-02 Philippine Accounting Standard (PAS) 2 and PAS 2 – Capitalization of operating lease cost as part of construction costs of a building

The consensus in the Q&A is effective from the date of approval by the FRSC.

Q&A No. 2017-03 PAS 28- Elimination of profits and losses resulting from transactions between associates and/or joint ventures


Q&A No. 2017-06 PAS 2, 16 AND 40 – Accounting for collector’s items


Q&A No. 2016-03 Accounting for Common Areas and the Related Subsequent costs by Condominium Corporations

The consensus in the Q&A is effective from annual periods beginning on or after January 1, 2018 and should be applied retrospectively. Earlier application is permitted.

Q&A No. 2017-04 PAS 24 – Related Party Relationship Between Parents, Subsidiary, Associate and Non-Controlling Shareholder


Q&A No. 2017-05 Philippine Financial Reporting Stand-ard (PFRS) 7 – Frequently Asked Questions on the Disclo-sure Requirements of Financial Instruments under PFRS 7, Financial Instruments, Disclosures


Q&A No. 2017-07 PFRS 10 – Accounting for Reciprocal Holdings in Associates and Joint Ventures


Q&A No. 2017-08 PFRS 10 – Requirement to Prepare Consolidated Financial Statements Where an Entity Disposes of its Single Investment in a Subsidiary, Associate or Joint Venture


Q&A No. 2017-09 PAS 17 and Philippine Interpretation SIC 15 – Accounting for Payments Between and Among Lessors and Lessees


Q&A No. 2017-10 PAS 40 – Separation of Property and Classification as Investment Property


Q&A No. 2017-11 PFRS 10 and PAS 32 – Transaction Costs Incurred to Acquire Outstanding Non-Controlling Interest or to Sell Non-Controlling Interest Without a Loss of Control


Q&A No. 2017-12 Subsequent Treatment of Equity Component Arising from Intercompany Loans

The consensus in the Q&A is effective from the date of approval by the FRSC. It shall be applied retrospectively.



We are a team of Certified Public Accountants, who

aim to be the accounting firm of choice for

business entities in terms of:

Audit and Assurance

Taxation

Business Process Outsourcing

Management Consultancy

[email protected]

PAGUIO, FLOYD C.

Managing Partner

[email protected]

GALLEGOS, AIRA G.

Tax Specialist

[email protected]

MELCHOR, AILEEN P.

Senior Tax Specialist

[email protected]

ASADON, KEN JOHN B.

Tax Supervisor

This bulletin is a compilation of relevant issuances, rulings and memoranda from

various government agencies to enhance the technical skills of the professional

staff of Paguio, Dumayas and Associates, CPAs and is not intended to

replace the original issuances of the related government agencies.

Unit 3207 Cityland Pasong Tamo Condominium, Pasong Tamo St., Barangay

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Contact us at: 950-9853/950-9854

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