INSIGHTS is a monthly publication of BDB LAW to inform, update and provide perspectives to our clients and readers on significant tax-related court decisions and regulatory issuances (includes BIR, SEC, BSP, and various government agencies).

DISCLAIMER: The contents of this Insights are summaries of selected issuances from various government agencies, Court decisions, and articles written by our experts. They are intended for guidance only and as such should not be regarded as a substitute for professional advice.

Copyright © 2022 by Du-Baladad and Associates (BDB Law). All rights reserved. No part of this issue covered by this copyright may be produced and/or used in any form or by any means – graphic, electronic, and mechanical without the written permission of the publisher.

Withholding Agent and the taxpayer need not be related parties in order for the withholding agent to have a right to file a claim for refund on behalf of the taxpayer.

This is an appeal from the decision of the CTA First Division granting the claim for refund of Toledo Power Company on erroneously paid final withholding taxes during the taxable year 2014 and 2015 arising from income payments made to Yashima & Co. Ltd, a non-resident foreign corporation exempt from tax under RP-Japan Tax Treaty, as amended.

The Commissioner of Internal Revenue (“CIR”) argues that Toledo, being a mere withholding agent, has no personality to file the claim for refund. The CIR insists that Toledo is not the statutory taxpayer who is the proper person to file a claim for refund or tax credit. Thus, Toledo has no legal standing to pursue the present petition since it is not the real party in interest.

The CTA En Banc ruled that the withholding agent and the taxpayer need not be related parties in order for the withholding agent to have a right to file a claim for refund on behalf of the taxpayer. The CTA En Banc cited the decision of the Supreme Court in Commissioner of Internal Revenue v. Smart Communication, Inc., (G.R. Nos. 179045-46) dated August 25, 20210 stating that in case the taxpayer does not file a claim for refund, the withholding agent may file the claim. (Commissioner of Internal Revenue v. Toledo Power Company, CTA EB No. 2359, January 5, 2022)

A protest is denied absent an FDDA upon the taxpayer's receipt of a demand for payment of its tax liabilities.

This is an appeal seeking the reversal of the decision of the CTA – First division which dismissed the Petition filed by Ten-Four for lack of jurisdiction due to prescription.

On May 18, 2018 Ten-Four filed a protest against the Commissioner of Internal Revenue’s (“CIR”) Formal Letter of Demand dated April 10, 2018. However, on December 21, 2018, Ten-Four received a Preliminary Collection Letter (PCL) dated November 27, 2018 and a Final Notice Before Seizure (FNBS) dated December 17, 2018 despite its non-receipt of respondent's decision on its protest. Ten-Four only filed its Petition for Review before the CTA on May 20, 2019.

The CIR then filed a motion for early resolution on the issue of jurisdiction considering the Petition for Review was filed out of time. Ten-Four argued that the CTA has jurisdiction and the case falls under “other matters” since the CIR hasn’t decided on its Protest.

The CTA En Banc ruled that although Ten-Four did not receive an FDDA, it was however served with a PCL and an FNBS. It could be reasonably assumed that the Protest had been denied with the issuance of the PCL and the FNBS, both of which are unequivocal demands of payment of tax deficiencies. Thus, the counting of the thirty (30) day period to appeal before the CTA starts from the receipt of the PCL. (Ten-Four Readymix Concrete, Inc. v. Commissioner of Internal Revenue, CTA EB No. 2311, January 25, 2022)

A LOA becomes invalid as a result of the failure to serve the same on the taxpayer within the prescribed period of 30 days.

This is a Petition seeking to nullify the Formal Letter of Demand issued against Vanguards Logistics in connection with its alleged internal revenue tax liabilities for taxable year 2014.

Vanguard Logistics argues that the subject LOA dated April 1, 2016 is void and has no force and effect because the same was not served upon Vanguard Logistics within 30 days from its issue date as it was served only on June 2, 2016 or sixty (6o) days after its issuance

The CTA citing the ruling of the Supreme Court in AFP General Insurance Corporation v. Commissioner of Internal Revenue (G.R. No. 222133) wherein RAMO No. 1-00 was interpreted as one clearly imposing a 30-day expiration period for service; otherwise, the LOA becomes wholly unenforceable. In this case, the subject LOA was issued on April 1, 2016. Thus, the CIR only had until May 1, 2016 within which to serve the said LOA. However, as testified to by Vanguards Logistics witnesses, Vanguards Logistics received the subject LOA only on June 2, 2016 or sixty-two (62) days after its issuance. Thus, In the absence of revalidation, the subject LOA became void and without effect. Resultantly, any investigation conducted pursuant to the void LOA is unauthorized and therefore, a nullity. (Vanguard Logistics Services Phils., Inc. v. Commissioner of Internal Revenue, CTA Case No. 10155, January 27, 2022)

RR No. 01-2022,
January 27, 2022
This provides for the extension of deadlines of various filings and submissions to the BIR.

This provides for the extension of deadlines of various filings and submissions to the BIR in view of placing various parts of the country under Alert Level 3 or higher.

• COVERAGE – This extends the statutory deadlines for the following activities falling due during the period declared as Alert Level 3 or higher by the IATF this month of January 2022, for thirty (30) calendar days from their due dates :

1. Submission and/or filing of the documents and/or returns, as well as the payment of the corresponding taxes due thereon;
2. Filing of position papers, replies, protests, documents, and other similar letters and correspondences in relation to the on-going BIR audit investigation;
3. Filing of application for tax refund, including VAT refund, and processing of VAT refund claim; and
4. Issuance of service of Assessment Notices, Warrants of Distraint and/or Levy, ad well as Warrants of Garnishment, to enforce collection of deficiency taxes.

• COVERED TAXPAYERS – The extension applies to all taxpayers within the jurisdiction of the Revenue Region (RR) and Revenue District Offices (RDO) of the BIR classified under Alert Level 3 or higher by the IATF.
• EXTENDED DUE DATES FALL ON A HOLIDAY OR NON-WORKING DAY – the submission and/or filing shall be made on the next working day.
• FILING OF TAX RETURNS AND PAYMENT OF TAXES – Affected taxpayers within the RRs and RDOs may file their returns and pay their corresponding taxes due thereon to the nearest AABs or to BIR Revenue Collection Officer, notwithstanding the covered jurisdiction of the RDO.

RMO No. 4-2022,
January 14, 2022
This provides for the modification of ATC of selected revenue source under RA No. 11534 or CREATE Act.

This modifies the existing ATC for BIR Form Nos. 1702Q, 1702-RT, and 1702-MX pursuant to Republic Act No. 11534 (CREATE Act) to facilitate the proper identification and monitoring of tax collection from Corporate Income Tax pursuant to the implementation of Republic Act No. 9505.

RMC No. 3-2022,
January 12, 2022
This clarifies the preparation of assessment notices for compromise penalty.

This clarifies the preparation of assessment notices for compromise penalty.

Under this circular, it is provided that the prescribed formats under RR No. 18-2013 such as PAN and FLD shall now be composed of Part I and Part II, where Part I shall pertain to deficiency basic tax(es) and civil penalties, while Part II shall pertain to the assessed compromise penalty(ies) relative to violations uncovered during the audit.

The preparation of the BIR Form No. 0605 – Payment Form for the settlement/payment of the deficiency basic tax and civil penalties in “Part I” of the assessment notices and BIR Form No. 0605 for compromise penalty(ies) in Part II shall be done separately.

RMC No. 11-2022,
January 24, 2022
This circularizes RA No. 11595 or An Act Amending the Retail Trade Liberalization Act of 2000.

This circularizes RA No. 11595 or An Act Amending the Retail Trade Liberalization Act of 2000 by lowering the required paid-up capital for foreign retail enterprises.

SEC-Memorandum Circular No. 1 Series of 2022 dated January 27, 2022
This provides the adoption of the Philippine Standard on Auditing (PSAs) and Philippine Financial Reporting (PFRs).

The Commission approved the adoption of the following pronouncement as part of SEC’s rules and regulations on financial reporting:

A. PSAs

B. PFRs

BSP Memorandum No. M-2022-003,
January 12, 2022

This provides the Frequently Asked Questions (FAQs) on the Framework for Basic Deposit Accounts.

To provide additional guidance and clarifications on the implementation of Circular No. 992 dated 01 February 2018, or the Framework for Basic Deposit Accounts (BDAs), the BSP is hereby issuing the attached FAQs. Said document covers the following major points in implementing Circular No. 992:

1. Modes of BDA offering;
2. Application of the maximum balance limit;
3. Consequence of deposit limit breach;
4. Ownership of multiple accounts; and
5. Implementation of simplified Know-Your-Customer (KYC) requirements.

IC Circular Letter
CL-2022-03 dated January 18, 2022
This provides the Guidelines in the Renewal of Insurance Agent's License Expiring 31 December 2021.

• All applications for renewal of insurance agent licenses for the Licensing Year 2022-2024 shall be submitted through the Enhanced Licensing System (ELS) by the insurance companies represented by the agents.
• All applications shall be accompanied by:

a. Duly Accomplished, readable, legible, and notarized Application Form signed by the authorized representative of the company with a rank of at least Vice-President. ln case of unavailability of a notary, a notation must be made on the application form indicating that a notary was unavailable at the time of accomplishment or submission;
b. Documentary Stamp Tax affixed to the hard copy which must be reflected in the soft copy to be uploaded;
c. Signature (handwritten/electronic signature) of authorized company representative affixed to the hard copy which must be reflected in the soft copy to be uploaded;
d. List of Names, Type of License, and Commissions Earned of the Agents.