BIR Issuances

Court Decisions

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Tax brief
May 2014

Contents
BIR Issuances
02 Use of computer-generated BIR forms
02 Waiver of late-filing penalties for eFPS
taxpayers
Court Decisions
03 Limitation on entitlement to five-year tax
exemption of consolidated rural banks
03 Printing of ATP on the invoices or
receipts not required
04 Gross receipts of HMOs for VAT
purposes
05 Statutory taxpayer on refund of
erroneously paid DST on listed shares
05 Effectivity of requirement to choose
OSD during the first quarter
06 Proof of receipt of assessment
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07 Tax seminars and training

BIR Issuances

Court Decisions

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BIR Issuances

Use of computer-generated BIR

forms

The Bureau of Internal Revenue

(BIR) has encouraged taxpayers to
use electronic/computer-generated
forms in filing their tax returns, and
other BIR forms that are available
through the use of the offline eBIR
Form Package. The eBIR Form
Package is a system developed by the
BIR that is intended to provide nonelectronic filing and payment system
(eFPS) taxpayers an alternative mode
of preparing their tax returns.
The eBIR Forms Package covers 36
BIR forms that can be downloaded
through the BIR website www.bir.
gov.ph or through the BIR internet
facility in e-lounges at the Revenue
District Offices (RDOs). Taxpayers
using the eBIR forms can directly
encode data, validate, edit, save,
delete, view and print tax returns.

The package provides automatic

computations and has the capability
to validate information encoded
by taxpayers. The PDF format of
the BIR forms is also available for
download and may be printed for
submission by taxpayers.
All copies of the computergenerated forms should be printed
on A4 size bond paper, with portrait
orientation. However, the setting of
the printer for the paper size should
be folio or legal. In lieu of manually
printed income tax return (ITR)
forms distributed by the BIR, clear
photocopies of the PDF/manually
printed returns may be used provided
all forms are originally signed by
the taxpayer/authorized officers/
representatives.

Waiver of late-filing penalties for

eFPS taxpayers

Due to system downtime, the BIR

has waived the late filing penalties
for eFPS taxpayers who failed to
electronically file and pay on April
15, 2014 their annual ITR for taxable
year ended December 31, 2013 and
quarterly ITR ended March 31, 2014
provided that they filed their ITRs
and paid the taxes due thereon on
April 16, 2014.
All eFPS taxpayers who manually
filed and paid their income tax due
should have refiled their ITRs using
eFPS until April 25, 2014.
(Revenue Memorandum Circular No. 282014, April 16, 2014)

(Revenue Memorandum Circular No. 262014, April 15, 2014)

May 2014

BIR Issuances

Court Decisions

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Court Decisions

Limitation on entitlement to
five-year tax exemption of
consolidated rural banks

Rural banks that are formed through

consolidation are not entitled to the
five-year tax exemption privilege
granted to newly formed rural banks
under Republic Act No. (RA) 7353
or the Rural Banks Act of 1992.
The Court of Tax Appeals (CTA)
held that the exemption provided
under RA 7353 does not cover
situations arising from mergers
or consolidation of rural banks.
Although Section 18 of RA 7353
encourages consolidation and
mergers of rural banks, the CTA
maintained that the same provisions
of RA 7353 did not expressly
provide for tax exemption in cases of
consolidation of banks. It held that
if Congress intended to provide such
tax exemption, the same would have
been easily inserted as part of the
incentives under RA 7353.

The CTA further held that the BIR

is not precluded from making a new
interpretation of the law, especially
when the old interpretation was
flawed. Hence, the BIR is within
its authority to issue Revenue
Memorandum Circular No. (RMC)
16-2012, which excluded from the
coverage of tax exemption under RA
7353 rural banks formed through
consolidation of existing rural banks
in cases when the constituent rural
banks previously availed of the
exemption. However, as provided
under RMC 16-2012, should any or
both the constituent rural banks not
be able to enjoy the tax exemption
for the entire five-year period, then
the consolidated rural bank shall
be entitled to the exemption for the
remaining period.
(One Network Bank, Inc. vs.
Commissioner of Internal Revenue, CTA
Case No. 8640, April 11, 2014)

Printing of ATP on the invoices or

receipts not required

The authority to print (ATP) need

not be reflected or indicated on the
invoices or receipts because there
is no law or regulation requiring it.
Thus, in the absence of any law or
regulation, failure to print the ATP
on the invoices or receipts should
not result in the outright denial of a
claim, or invalidation of the invoices
or receipts for purposes of claiming
a refund.

[Note: In Revenue Memorandum

Order No. (RMO) 012-013 (May
2, 2013), the BIR required that the
ATP number, as well as the date of
its issuance and expiration, should be
printed at the bottom of the principal
and supplementary receipts and
invoices of taxpayers.
(Philex Mining Corporation vs.
Commissioner of Internal Revenue, CTA
Case No. 8371, April 15, 2014)

However, while there is no law or

regulation requiring the ATP to be
printed on the invoices or receipts,
the CTA held that Section 238 of
the Tax Code requires all persons
engaged in business to secure an
ATP from the BIR prior to printing
invoices or receipts. Hence, what
is required to be proven by the
taxpayer is that it has secured or
obtained the BIR authority to print,
and that its invoices or receipts are
duly registered with the BIR.
May 2014

BIR Issuances

Court Decisions

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Court Decisions

Gross receipts of HMOs for VAT

purposes

The gross receipts of health

maintenance organizations (HMOs)
for value-added tax (VAT) purposes
should be the payments of medical
plans and application fees actually
received from the members,
undiminished by any amount paid
or payable to owners/operators of
hospitals, clinics and medical and
dental practitioners.
The CTA held that the gross receipts
of HMOs should be the total amount
received as enrolment fee from their
members plus other charges received
based on the definition of gross
receipts under Section 108(A)(8)
of the Tax Code, as implemented by
Revenue Regulations No. (RR) 1605, as amended.

As explained by the CTA, under

Section 108(A)(8) of the Tax Code,
the term gross receipts is defined
as the total amount of money or
its equivalent representing the
contract price, compensation, service
fee, rental or royalty, including
the amount charged for materials
supplied with the services and
deposits and advance payments
actually or constructively received
during the taxable quarter for
the services performed or to be
performed for another person,
excluding VAT.
The same definition was adopted
under Section 4.108-4 of
RR 16-05, which implemented the
VAT provisions of the Tax Code.
Subsequently, RR 04-07 amended
RR 16-05, defining gross receipts
as the total amount of money or its
equivalent representing the contract
price, compensation, service fee,
etc., excluding the VAT, except

those amounts earmarked for

payment to third party or received as
reimbursement for advance payment
on behalf of another that do not
redound to the benefit of the payor.
Further, Section 4.108-3(K) of RR
16-05 defines HMOs gross receipts
as the total amount of money or
its equivalent representing the
service fee actually or constructively
received during the taxable period
for the services performed or to
be performed for another person,
excluding VAT. The compensation
for their services representing their
service fee is presumed to be the
total amount received as enrolment
fee from their members plus other
charges received.

to all sales of services, except those

specifically provided under Section
4.108-3 of RR 16-05. The CTA
pointed out that Section 10 of
RR 4-07 has amended Section 4.1083(e), (f), (h) and (i) of RR 16-05, but
not Section 4.108-3(k) of RR 16-05.
Thus, the definitions of HMOs and
their gross receipts stated in RR
16-05 are still valid and applicable to
HMOs.
(Maxicare Healthcare Corporation vs.
Commissioner of Internal Revenue, CTA
Case No. 8441, April 21, 2014)

According to the CTA, the definition

of gross receipts provided under
Section 4.108-4 of RR 16-05, which
was amended by RR 4-07, applies

May 2014

BIR Issuances

Court Decisions

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Court Decisions

Statutory taxpayer on refund of

erroneously paid DST on listed
shares

A securities dealer/broker that

purchased/traded listed shares of
stock through the Philippine Stock
Exchange (PSE) is deemed the
statutory taxpayer for purposes of
claiming refund of erroneously paid
documentary stamp tax (DST).
In the instant case, the subject
broker-dealer transacted in shares
of stock listed in the PSE. It filed
the DST returns and remitted the
DST on the transactions to the BIR
through the BIRs Authorized Agent
Banks (AABs). Considering that
shares of stock listed and traded in
the stock exchange are exempt from
DST under RA 9648, the taxpayer
sought refund from the AAB. It was,
however, informed by the AAB that
it can no longer refund the DST paid
on the transaction since it had already
been remitted to the BIR.

The BIR claimed that the broker/

dealer-refund claimant lacks the legal
personality to ask for refund of the
erroneously paid and collected DST
on secondary trading of listed shares
in the PSE. According to the BIR,
the AAB of the BIR that received
the payment from the broker-dealer
should be the one to file the claim for
refund with the BIR and the CTA.
The CTA held that the person
entitled to claim a tax refund is the
statutory taxpayer or the person
liable for or subject to tax, which in
this particular case is the securities
dealer/broker that purchased/traded
the listed shares of stock. Hence, the
securities dealer/broker has the right
to claim for refund of the erroneously
paid DST on the sale, barter or
exchange of shares of stocks listed
and traded through the local stock
exchange.

Effectivity of requirement to
choose OSD during the first
quarter

During the first three quarters

of taxable year 2009, a brokerage
company used the itemized method
of deduction in determining its
income tax payable in accordance
with Section 7 of RR 16-08
(November 26, 2008). On February
24, 2010, the BIR issued RR 02-10
amending Section 7 of RR 16-08,
requiring taxpayers to choose a
method of deduction during the first
quarter, which will be applied during
the next three quarters of the taxable
year.
On April 12, 2010, the brokerage
company filed its annual ITR for
taxable year 2009 using the optional
standard deduction (OSD) method
and paid the corresponding income
tax due. On April 15, 2010, the
company paid under protest an

additional income tax to avoid

imposition of interests, penalties and
surcharges should the BIR require
the company to use the itemized
deductions for its annual ITR. Prior
to the expiration of the two-year
prescriptive period to file a claim
for refund, the taxpayer sought the
refund of the additional income tax it
paid for taxable year 2009.
Under RR 16-08, which implemented
Section 34(L) of RA 8424, as
amended by RA 9504, corporate
taxpayers have the option of using
either itemized or OSD method
in preparing their quarterly ITRs,
provided only one method shall be
applied in preparing the annual ITR.
This option allowed taxpayers to shift
from two deduction options from
quarter to quarter.

(Commissioner of Internal Revenue vs.

Asiasec Equities, Inc. CTA EB No. 1112,
April 21, 2014)
May 2014

BIR Issuances

Court Decisions

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Court Decisions

On February 24, 2010, the BIR issued

RR 2-10, which amended Sections
6 and 7 of RR 16-08. To clarify the
applicability of RR 02-10, the BIR
issued RMC 016-2010 on February
26, 2010 stating that RR 02-10 shall
apply to taxable year 2009.
Under RR 2-2010 and RMC 162010, the BIR curtailed the option
to choose the deduction method
from quarter to quarter, which was
previously allowed under RR 162008. Instead, the BIR required
taxpayers to choose during its first
quarterly filing by indicating on
the form whether it will opt for the
itemized or OSD deduction. The
choice of deduction method for the
first quarter obligates the taxpayer
to use the same method throughout
the taxable year, as well as in the
preparation of the annual ITR.
The CTA held that RR 02-10 cannot
be applied retroactively, i.e., starting
taxable year 2009. According to

the CTA, to apply RR 02-10 and

RMC 16-2010 retroactively would
effectively move the deadline given to
the taxpayer for electing a deduction
to an earlier date.
In the present case, instead of having
until April 15, 2010 to decide on the
deduction method, the company had
only until May 30, 2009, or when
the first quarterly ITR was due. The
CTA also pointed out that when
the company filed its first quarterly
return, no such policy to commit to a
deduction method at the first quarter
filing existed. The CTA maintained
that a taxpayer shall not be penalized
for merely complying with the
effective regulation at that time,
simply because a new regulation was
issued after. Hence, the CTA granted
the taxpayers request for refund.
(COL Financial Group vs. Commissioner
of Internal Revenue, CTA Case No. 8454,
April 15, 2014)

Proof of receipt of assessment

In case a taxpayer denies receiving

an assessment from the BIR, it is
incumbent upon the BIR to prove by
competent evidence that the notice
of assessment sent by registered mail
was indeed received by the taxpayer.
To prove the fact of mailing, the
Court has ruled that the registry
receipt issued by the Bureau of Posts
or the registry return card signed
by the taxpayer or its authorized
representative, or at the very least,
the certification issued by the Bureau
of Posts and any other pertinent
document executed with the
intervention of the Bureau of Posts
should be presented by the BIR.

presented the registry receipt and

certification issued by the Office of
the Postmaster. In addition, the BIR
also presented the judicial affidavit
of the BIR official who had personal
knowledge of the preparation and
mailing of the notice of assessment.
Given the evidence presented to
the CTA, the BIR had satisfactorily
proven its compliance with the
requirements and, hence, it had duly
established that the formal letter of
demand was indeed mailed or sent to
the taxpayer.
(South Entertainment Gallery, Inc., vs.
Commissioner of Internal
Revenue, CTA Case No.
8286, April 15, 2014)

In the instant case, the taxpayer

denied receiving the assessment
notice (formal letter of demand).
To prove that the notice of
assessment was indeed received by
the taxpayer, the BIR offered and

May 2014

BIR Issuances

Court Decisions

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Tax seminars and training

We offer seminars and training on

tax-related developments and special
issues of interest to taxpayers. Upon
request, we provide customized inhouse tax training designed jointly
by P&A and the client that directly
addresses the specific issues of the
clients industry and the training
needs of its personnel.

If you would like to know more about our tax seminars and
training services, please contact:

Senen M. Quizon
Senior Manager
Tax Advisory and Compliance
T + 632 988 2288 ext. 538
F + 632 886 5506
E Senen.Quizon@ph.gt.com

May 2014

Tax Brief is a regular publication of Punongbayan & Araullo (P&A) that

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T +632 988-2288 ext. 507
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E Lina.Figueroa@ph.gt.com

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