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Tax bureau offers fresh amnesty

Friday, 10 September 2010 00:00 [ manilatimes.net ]
BY KATRINA MENNEN A. VALDEZ REPORTER

THE Aquino administration has offered to waive surcharges on deficiencies of erring taxpayers in a fresh amnesty aimed at plugging the government’s budget deficit this year. Bureau of Internal Revenue (BIR) Commissioner Kim Jacinto-Henares said the agency will waive the surcharges against erring individual and corporate taxpayers provided that they would settle on or before October 29.
“We are willing to forgo surcharges when these erring taxpayers would come forward and amend their respective income tax returns [ITR] until October 29,” Jacinto-Henares said.
Under the abatement program, those who would voluntarily surrender and pay their rightful taxes by providing their amended ITRs would no longer be slapped with surcharges, the BIR chief said.
“Without the abatement program, those who would come to us and finally pay the right taxes, which already became due and demandable are being charged with 25 percent surcharges, while those who are caught by the BIR would be slapped with 50 percent surcharges,” she said.
These surcharges are on top of the 20-percent legal interest that the BIR imposes, which will not be waived under the abatement program.
“But in order to avail of the abatement program these erring taxpayers shall pay in lump sum,” the BIR chief said.
Under the program, taxpayers may settle any delinquent account or assessment by paying an amount equal to 100 percent of the basic tax assessed.
The program includes one-time transactions such as estate tax, donor’s tax, capital gains tax, final withholding tax, expanded withholding tax and documentary stamp tax on the transfer, sale, exchange, or disposition of assets.
However, taxpayers may only avail of the program and avoid criminal prosecution if they have yet to receive a letter of authority from the BIR.
Otherwise, they will not be exempt from paying surcharges, penalties and other charges, not to mention facing a criminal case.
The letter of authority is an official document that empowers a revenue officer to examine and scrutinize a taxpayer’s book of accounts and other accounting records to determine the latter’s correct liabilities.
The issuance of a letter of authority to a taxpayer signals the start of the audit process.
Finance Secretary Cesar Purisima said they have yet to publish a notice on the abatement program.
“There are a lot of erring taxpayers who want to finally pay their respective amount of taxes but are hesitant because of the penalties being imposed by the government. Hence, this is one way of meeting them halfway,” he said.
The government, however, will not waive the legal interest since the erring taxpayers already enjoyed their earnings in the past.
The last time the government offered a similar abatement program was in September 2006.
During that period the government raised P3 billion.
“Of course, we would continually file tax evasion cases every week. The only difference is that these people should not wait until they are discovered by the BIR. Otherwise, they would have to bear the civil and criminal consequences,” Purisima said.
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BIR exec sacked for ill-gotten wealth

[ manilastandardtoday.com ] July 24-25, 2010
AN official of the Bureau of Internal Revenue (BIR) was sacked from the service for unexplained wealth.
The Office of the Ombudsman dismissed from the service Amado Navarro, Revenue Officer IV at the BIR Central Office in Quezon City, for dishonesty, grave misconduct and violation of Republic Act 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees.
The Ombudsman also ordered the filing of charges against Navarro before the lower courts for four counts of perjury, and seven counts of violation of Republic Act 3019 or the Anti-Graft and Corrupt Practices Act.
A petition for forfeiture of Navarro’s ill-gotten properties will also be filed before the Regional Trial Court of Baguio City.
Navarro, who started as Revenue Officer I with an annual gross salary of only P11,904 in 1980, was found to have acquired several real properties including various residential lots in Baguio City, agricultural lands, commercial buildings, and a resort in La Union.
The charges stemmed from an investigation conducted by the Department of Finance-Revenue Protection Service (DOF-RIPS), which is tasked to conduct lifestyle checks on officials and employees of the DOF and its attached agencies.
The complaint stated that although the properties were declared in Navarro’s Statement of Assets, Liabilities and Net Worth (SALN) from 1980 to 2002, he failed to detail the acquisition costs of each property.
He also failed to disclose his business interests or financial connections, despite findings from the investigation that indicated he had several properties for lease, bikes for hire, a grocery store, and a gasoline station.
In addition, he also has several vehicles allegedly registered in the name of his relatives.
Meanwhile, in a separate case, the Ombudsman ordered the filing of charges against Victor Cerniaz Barros, Special Agent II of the Bureau of Customs.
Barros was charged with two counts of Falsification of Public Documents under Article 171 of the Revised Penal Code; five counts of violation of Sec. 7 of RA 3019; and one count of violation of Sec. 8 of RA 6713.
Barros reportedly failed to declare a housing loan of P2 million in his 1995 SALN; a property in Laguna in his 1996 SALN; a Cherokee Pioneer V6 in his SALNs from 1989 to 2006; and a Mercedes Benz, a Kawasaki motorcycle, and shares of stock in a general service enterprise in his SALNs for 2003 to 2005.
He was also indicted for failing to file his SALNs for the years 1980, 1982 to 1986, 1990, 1991, and 2006.
In a 53-page joint resolution, the Ombudsman said that “respondent, within a period of 13 years, has amassed wealth which is almost five times greater than the total annual gross compensation he had received from the government.”
The Ombudsman has ordered the forfeiture of unlawfully acquired properties of Barros and his wife.
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SC Upholds Two Tax Measures


By Jay B. Rempillo

The Supreme Court has upheld the validity of the imposition by the Bureau of Internal Revenue (BIR) of minimum corporate income tax (MCIT) on corporations and creditable withholding tax (CWT) on sales of real properties classified as ordinary assets.
In a 48-page unanimous decision penned by Justice Renato C. Corona, the Court held that petitioner Chamber of Real Estate and Builders’ Associations, Inc., an association of real estate developers and builders in the country, “has miserably failed to discharge its burden of convincing the Court that the imposition of MCIT and CWT is unconstitutional.” In particular, the petitioner assailed the constitutionality of sec. 27(e) of RA 8424 (The National Internal Revenue Code of 1997), and the revenue regulations (RRs) issued by the BIR to implement said provision and those involving creditable withholding taxes.
The Court ruled that MCIT did not violate due process. It stressed that an income tax is arbitrary and confiscatory if it taxes capital because capital is not income. MCIT, however, is imposed not on capital but on gross income which is arrived at by deducting the capital spent by a corporation in the sale of its goods, i.e. the cost of goods and other direct expenses from gross sales, the Court explained.
The Court upheld the authority of the Finance Secretary to order the collection of CWT on sales of real property considered as ordinary assets. Section 57(b) of RA 8424 grants the Finance Secretary authority to require the withholding of a tax on items of income payable to any person, national or juridical, residing in the Philippines, it ruled.
The Court also ruled that there was no deprivation of property without due process with the imposition of CWT. It said that “nothing is taken that is not due so there is no confiscation of property repugnant to the constitutional guarantee of due process.” It stressed that CWT “does not impose new taxes nor does it increase taxes” but relates entirely to the method and time of payment. (GR No. 160756, Chamber of Real Estate and Builders’ Associations, Inc. v. Executive Secretary Romulo, March 9, 2010)
[ Source: SC Benchmark Online May 2010 ]
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BIR mulls schemes to ease delinquent estate tax payment

Posted on 10:22 PM, April 28, 2010 [ BusinessWorld Online ]

THE BUREAU of Internal Revenue (BIR) is considering schemes to facilitate the payment of delinquent estate taxes on properties of deceased loved ones.

Internal Revenue Commissioner Joel L. Tan-Torres said in an interview Wednesday night that the agency is mulling reducing penalties for those who would avail of the agency’s Rest in Peace (RIP) project.

"These are long and unpaid taxes so the problem of the heirs is that they don’t have money to pay given penalties. We are looking if we can reduce penalties or allow them to pay on installment basis or even allow them to sell their properties on the condition they will pay taxes," he said.

Project RIP was launched last February as part of the efforts to improve revenue collection. The project was launched as estate tax returns filed for the past years have been low.

BIR statistics showed only 29,198 estate tax returns were filed in 2007 with tax collections amounting to P649.9 million, 29,863 filed in 2008 with tax collections worth P854.9 million and 26,811 estate tax returns filed in 2009 with collections amounting to P876.8 million.

Data from the National Statistics Office, however, showed that there were 415,271 deaths in 2005 and 389,081 in 2006.

Mr. Tan-Torres said with the project in place, the BIR would be able to monitor or determine cases or records of death from sources of information such as civil registry, cemeteries, obituaries, funeral parlors and hospitals.

"Using that information, we will be the one to approach them [heirs] because in our experience in the past, even though there’s a death, the heirs do not file the returns so we will be the one to remind the heirs that they have to do this," he said.

In some cases, Mr. Tan-Torres said, the estate taxes have not been filed and paid for ten years so the tax due would be costly.

He noted that the nonpayment of estate taxes has a 25% surcharge and 20% interest per year.

"Depending on the feedback from our offices, we will look at how we can do this [scheme]," he said, adding only the penalties could be dropped but the estate taxes due would still have to be paid.
Asked how much the BIR expects to lose from condoning the penalties, he said that the agency has yet to come up with an estimate.
Mr. Tan-Torres earlier said the agency expects to collect P10.7 billion from Project RIP.
The BIR, he added, may issue a memorandum on the subject sometime in April.
The BIR is tasked to collect P830 billion this year. The agency’s collections as of the first quarter totaled P173.9 billion, exceeding its P157.7 billion goal for the period. -- Louella D. Desiderio
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BIR issues guidelines for designation of private appraisers



BIR issues guidelines for designation of 
private appraisers

The BIR has issued the policies and guidelines in the recruitment and designation of private appraiser members to the Regional Executive and Technical Committees on real property valuation.

Under Revenue Memorandum Order No. 40-2010, dated April 23, 2010, the BIR issued the procedures and guidelines on the involvement of private real estate appraisers to the Regional and Technical Committee which also prescribes the responsibilities of the Committee Chairmen to secure a list of  realty service organizations such as, but not limited to, the following:
  1. Philippine Association of Realty Appraisers (PARA);
  2. Institute of Philippine Real Estate Appraisers, Inc. (IPREA);
  3. Philippine Association of Realtor Board, Inc. (PAREB);
  4. Chamber of Real Estate Builders Association, Inc. (CREBA);
  5. Philippine Council of Real Estate Educators, Inc. (PHILCORE); and
  6. Other associations recognized by the Realty Service Council of the Philippines (RESCOP) as the consultative body of the Department of Trade and Industry (DTI).


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BIR Identifies In-House Experts


BIR Identifies In-House Experts

Quezon City, 06 April 2010 – In order to improve the voluntary tax compliance and enhance the taxpayer servicing and enforcement capability of the Bureau of Internal Revenue (BIR), a program called the “Industry Champion Program” has been implemented through the issuance of Revenue Memorandum Order (RMO) No. 24-2010.

Under the program, several task forces were formed to provide BIR Revenue Officers or so-called Industry Champions with in-depth expertise and specialization that will enable them to better identify tax issues affecting the taxability and compliance of said industries.

The Industry Champions are expected to know the taxpayers/stakeholders comprising the industry or sector, and also other relevant factors such as clientele/suppliers/associations of taxpayers in the industry; government offices regulating the taxpayers in the industry/sector; industry developments and its work environment; and industry strengths, weaknesses, opportunities and threats/risks.

The Industry Champions shall be the principal BIR officials who shall be responsible for the development and dissemination of expertise and issues on identified industries and sectors. They shall also be tasked to work with experts from the private sector, other government regulators, and industry players/associations; monitor industry events and developments; establish industry benchmarks and standards to be used in the Bureau's administration and enforcement activities; come up with reports on audit issues/inputs for the communication of tax issues and developments to stakeholders; conduct training of BIR personnel; and organize task forces to conduct selective industry audit and investigations on a need basis as approved by the Commissioner of Internal Revenue.

In the process, Industry Champions will be responsible in addressing outdated revenue issuances and rulings that need modification through issuance of new regulations and guidelines.

The initial list of industries included in the program are Banking and Insurance, Telecommunications, Power, Petroleum, Cement, Shipping, Fishing, Health Maintenance Organizations, Semiconductors, Business Process Outsourcing, Mining, Real Estate, Education/Training Institutions, Show business and Entertainment, Travel and Tourism, Foundations, Enterprises enjoying tax incentives, and Professionals (including lawyers, doctors, Certified Public Accountants and architects).


(original signed)
Please refer to: REYMARIE T. DE LA CRUZ, Chief, TIED, 9243245
(original signed)
Approved for Release: AIDA S. SIMBORIO, OIC-Assistant Commissioner, TAS
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DOF DEVOLVES PROCESSING AND APPROVAL OF ZONAL VALUES

The Department of Finance by virtue of Department Order (DO) 6-2010 dated March 12, 2010 revised the composition of the various Committees involved in the zonal valuation process in the BIR.

Previously, a centralized Committee consisting of senior people in the DOF and the BIR was involved in the zonal valuation process. This structure resulted in a tedious and long processing and approval of real properties zonal valuations, which have not been revised for over 5 years.

With DO 6-2010, the processing and approval has been devolved to the Regional Director (RD) and the Revenue District Officers (RDO). The BIR Committees consist of the Executive Committee on Real Property (ECRPV) chaired by the Regional Director; Technical Committee on Real Property Valuation (TCRPV) chaired by the Assistant Regional Director and the Sub-TechnicalCommittee on Real Property (STCPRV) chaired by the Revenue District Officer (RDO) and co-chaired by the Assistant RDO.

The members of the Executive Committee are officials from various external agencies like the Housing and Land Use Regulatory Board (HILURB), Bureau of Local Government Finance (BLGF) and 2 licensed and competent appraisers from a reputable association/organization of realty appraisers. Consultants are officials from the Land Registration Authority (LRA), National Tax Research Center (NTRC),

National Mapping and Resource Information Authority (NMRIA) and the National Housing Authority (NHA). For the Technical Committee their members are from HLURB, Provincial /City Assessor and 2 licensed and competent appraisers from reputable association/organization or realty appraisers and consultants are representatives from LRA, NTRC, NMRIA and NHA.

The Sub-Technical Committee members are from the Municipal/Assistant City Assessor, Local Development Officer from the Office of the Mayor and 2 licensed and competent appraisers from a reputable association/organization of realty appraisers.

The Executive Committee will study and approve the proposed Schedule of Zonal Values prepared by the Sub-Technical Committee as reviewed by the Technical Committee. They will also deliberate and resolve cases referred by the Technical Committee.

The Technical Committee has a more extensive task of studying and reviewing the proposed Schedule of Zonal Values prepared by the Sub-Technical Committee and recommendation of the same to the Executive Committee; attending of public hearings relative to the establishment/revision of the Schedule of Zonal Values; deliberation and resolution of appealed cases or controversies as to valuation issues in the Regional and RDOs; assignment of zonal values of properties not listed/included in the approved Schedule of Zonal Values and the endorsement to the Executive Committee unresolved appealed cases for resolution.

The Sub-Technical Committee is tasked to study and prepare the schedule of recommended zonal values of real properties under the jurisdiction of the Revenue District Office (RDO) and conduct public hearing on the proposed zonal values.

In addition, for those with no available private appraisers in the locality; and/or if there is failure of any member of the Sub-Technical Committee to attend meetings; and/or there is failure of any of the member/s to submit their recommended values within 10 days from the date of the concluding meeting, the chairman of the said Committee shall execute an Affidavit and proceed with the establishment/revision of the Schedule of Zonal Values.

The establishment or revision of the Schedule of Zonal Values should be based on the average of the 2 highest recommended values or best data/documents available.

All provincial, city and municipal assessors are required to render assistance to the above Committees in the determination of real properties in their in their respective areas of jurisdiction. Likewise, the Committees are authorized to avail of the services of the DOF and the Bureaus and offices under it.

Commissioner Joel L. Tan-Torres said that DO 6-2010 "will now expedite the updating of all zonal valuations of real properties in the country would correspond to increase in taxes collected from transactions of these properties. All Revenue District Offices throughout the Philippines have been mandated to complete their updating of their zonal valuation not later than June 30, 2010".

The zonal value of a real property is the basis for the computation of capital gains tax and transfer taxes for sellers of real properties not used in business.

Please refer to : REYMARIE T. DE LA CRUZ, Chief, TIED

Approved for Release : AIDA S. SIMBORIO, OIC-ACIR, TAS

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Retroactivity of OSD rules to 2009 [ Let's Talk Tax ]

Posted on 09:26 PM, March 15, 2010 [ BusinessWorld Online ]

Let’s Talk Tax -- Roy N. Relato


The deadline for the filing of the annual income tax return (ITR) for taxpayers using the calendar year method for the taxable year 2009 is in less than a month.

As we all know, taxpayers have the option to use either the itemized deduction scheme or the Optional Standard Deduction (OSD) in computing the taxable income in the annual ITR. Whereas there are no limits on the amounts of deductible ordinary and necessary expenses in the itemized deduction scheme, the OSD is limited to 40% of an individual’s gross sales or receipts, or 40% of a corporation’s gross income.

Moreover, unlike in the itemized deduction scheme, a taxpayer under the OSD regime is not required to substantiate the amount of deduction with official receipts and other adequate records.

The Bureau of Internal Revenue (BIR) recently issued Revenue Regulations (RR) No. 02-2010, which amended the rules laid down by RR 16-2008 on the choice to claim the OSD or the itemized deductions. Under RR 16-2008, a taxpayer may use either the itemized deduction or the OSD in the quarterly ITR, and the taxpayer’s choice must be indicated in the annual ITR. Under RR 02-2010, however, the decision to use either the OSD or the itemized deductions must be signified in the ITR filed for the first quarter of the taxable year. Once the choice is made, the same type of deduction must be consistently applied for all the succeeding quarterly ITRs and in the annual ITR. Failure to indicate the choice to avail of the OSD in the first quarter ITR or failure to file the first quarter ITR shall mean that the taxpayer chose to avail of itemized deduction for the taxable year.

Subsequently, the BIR issued Revenue Memorandum Circular (RMC) No. 16-2010, which prescribes the rules for the disclosure of the taxpayer’s decision to avail of the OSD for the taxable year 2009. Under RMC 16-2010, taxpayers choosing to avail of the OSD are required to check the appropriate box in the first quarter ITR (BIR Form No. 1702Q) of the taxable year 2009, regardless of whether such taxpayer is adopting the calendar or fiscal year method of reporting. Failure to indicate the election to avail of the OSD in the first quarter ITR or failure to file such return shall mean that the taxpayer chose to avail of the itemized deduction for the taxable year 2009. The election to avail of the OSD or itemized deduction is irrevocable for the taxable year 2009 and such irrevocability is not affected by any amendment by the taxpayer of his first quarter ITR.

The main issue that needs to be resolved in the issuance of the RMC is whether RR 02-2010 may be given retroactive application for the taxable year 2009. In general, any revocation, modification, or reversal of any of the rules and regulations or any rulings or circulars promulgated by the BIR Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers (Section 246, Tax Code). As previously mentioned, the RMC requires that the decision to use the OSD be made known by the taxpayer in his first quarter ITR for the taxable year 2009. It must be noted, however, that at the time the RMC was issued, most of the taxpayers have already filed their first quarter ITR since under the Tax Code, the deadline for filing the said return is 60 days from the close of the taxable quarter. This means that for taxpayers using the calendar year as accounting period, the last day for filing was last June 1, 2009. Thus, it would be impossible to comply with the RMC since the taxpayers have already filed the first quarter ITR.

Hence, the retroactive application of the RMC to the first quarter ITR of taxable year 2009 should not be allowed because it would be prejudicial to taxpayers.

Moreover, the RMC provides that even if the taxpayers file an amended ITR for the first quarter of taxable year 2009, such amendment will not change the irrevocability of the decision of the taxpayer in the originally filed return. In effect, the RMC does not give the taxpayers a chance to exercise their right to avail of the OSD and instead deprives them of such right by judging their choice of method of deduction on the basis of a return filed prior to the release of the RMC. Such provision runs violates the due process clause of our Constitution. Hence, in addition to being prejudicial to taxpayers, the validity [Windows X1] of the RMC should also be challenged because it violates the taxpayer’s right to due process.

Then, what should the taxpayers do in the meantime? Taxpayers who failed to elect the use of the OSD in the first quarter ITR for 2009 have the option to either question the validity of the RMC before the courts or simply accept the RMC. On the other hand, since the first quarter of the current year is about to end, it would be prudent for taxpayers to evaluate the method of deduction that is beneficial to them and to signify their decision in the 2010 first quarter ITR.

(The author is a tax manager at Punongbayan & Araullo, a member firm within Grant Thornton International Ltd. Readers may e-mail Roy.Relato@pna.ph or call 886-5511 for comments or inquiries.)

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KNOWING YOUR BIR REGULATIONS AND ISSUANCES

Revenue Regulations (RRs)
are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes

Revenue Memorandum Orders (RMOs) are issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other tax laws, as applied to a specific set of facts, with or without established precedents, and which the Commissioner may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations. BIR Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio

Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices.

Revenue Bulletins (RB) refer to periodic issuances, notices and official announcements of the Commissioner of Internal Revenue that consolidate the Bureau of Internal Revenue's position on certain specific issues of law or administration in relation to the provisions of the Tax Code, relevant tax laws and other issuances for the guidance of the public.

BIR Rulings are official position of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.