Atty. Rodel C. Unciano

72 posts
Atty. Rodel C. Unciano is a partner of Du-Baladad and Associates Law Offices (BDB Law), a member-firm of WTS Global.
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Creating an International Tax Law Division of the BIR

With the advancement in transportation, logistics and communications, geographical barriers are no longer a concern in international trade and cross-border transactions even in an archipelagic state like the Philippines. What is probably challenging on the part of the Bureau of Internal Revenue (BIR) is how to efficiently track these international transactions so that correct taxes that are rightfully due to the country are collected accordingly.

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Clarifying VAT on digital transactions

Digital transaction is evidently increasingly popular not only in areas involving trade and business but in the entertainment industry as well. This is noticeable as seen in the rise of content creators all over the world and in every corner of the Philippines, even in the most far-flung areas. Content creation has indeed become a source of living, and in fact, a good source of income too.

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Tax highlights in 2022

To recall, the implementation of the provisions of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) on the taxability of proprietary educational institutions and hospitals created confusion particularly for those in the education sector. This confusion led to the enactment of Republic Act (RA) 11635, which was signed into law in December 2021. This law amended Section 27(B) of the Tax Code, which provides special tax treatment of hospitals that are nonprofit and proprietary educational institutions.  

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Taxing a person’s liberality

Article 725 of the Civil Code of the Philippines defines donation as an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. Based on this definition, a gift or a donation, in order to be considered as one, should be made as an act of liberality or without any consideration or compensation being received in exchange therefor.

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VAT zero-rating on local purchases of registered business enterprises

The entitlement to value-added tax zero-rating on local purchases of registered business enterprises (RBE) remains to be a challenge even as the Bureau of Internal Revenue (BIR) has already issued several administrative issuances implementing and clarifying the VAT zero-rating provisions of the Tax Code, as amended by the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

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PBBM’s tax roadmap

In his first State of the Nation Address (SONA), President Ferdinand “Bongbong” Marcos Jr. identified his administration’s priorities in tax reforms, including the enactment into law of the Real Property Valuation Reform Bill and the Passive Income and Financial Intermediary Taxation Act (PIFITA). The President likewise declared his support for the imposition of value-added tax on digital service providers and simplified tax compliance procedures to promote ease of paying taxes. 

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Taxability of private educational institutions

The educational system is a vital component in the economic development of any country. In the Philippines, no less than our constitution recognizes this role of the education sector. Consistent with this policy, the State does provide special tax treatment to certain class of educational institutions. 

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Due process in collection of taxes

Under the Tax Code, one great power that the Commissioner may exercise in the administration of taxes is the remedy for the collection of internal revenue taxes, fees, or charges resulting from delinquency. Under this provision, the Commissioner may enforce collection of taxes by way of distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property.

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Utilizing unutilized campaign contributions

Even before the campaign period began, campaign expenditures have been flooding the campaign trail, and as most of the candidates would claim, bulk of these expenditures are financial aids from their generous friends and supporters. Well, whether these expenses are sourced from the candidate’s own pocket or financial aids, they are bound to observe the cap that they should spend for an election campaign.

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Clarifying VAT zero-rated transactions

AS you may be aware, Republic Act 10963 or the TRAIN Law mandates that certain transactions under subsections 3, 4 and 5 of Section 106(A)2(a) and Sections 108(B)1 and 108(B)5 of the Tax Code shall be removed from the coverage of Value Added Tax zero-rating upon the satisfaction of two conditions, namely: 1) The successful implementation of an enhanced VAT refund system that grants and pays refunds of creditable input tax within 90 days from the filing of the VAT refund application with the Bureau of Internal Revenue (BIR); and 2) All pending VAT refund claims as of December 31, 2017 shall have been refunded.

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Implementing the tax incentives provisions of the Sagip Saka Act

Despite rapid urbanization and industrialization, agriculture remains to be the backbone of our economy. In recognition of the significant role of agriculture in our economic system, we have a law called the “Sagip Saka Act” [Republic Act (RA) 11321], which aims to strengthen farmers and fisherfolks by extending help to agricultural and fishing communities, including the grant of tax incentives and exemptions to covered activities.

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Ease of paying taxes under House Bill 8942

House Bill 8942 or the proposed Ease of Paying Taxes Act has recently been approved on third reading at the House of Representatives. This is certainly good news for all taxpayers as the bill aims to modernize tax administration and improve tax compliance by simplifying compliance procedures and strengthening the taxpayer’s bill of rights.

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Taxability of campaign contributions

AS the 2022 elections draw near, I find it timely to revisit once again the taxability of campaign contributions to candidates, political parties and party-list groups considering that financial aid from supporters for campaign purposes will surely flood the campaign trail, especially this time that the pandemic is making the campaign more difficult to launch than it used to be.

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Donor’s tax on renunciation of inheritance

Under the Civil Code, donation is defined as an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. A gift or a donation, in order to be considered as one, should be made as an act of liberality or without any consideration or compensation being received in exchange therefor. A donation has been said to have the following essential elements: 1) the reduction of the patrimony of the donor; 2) the increase in the patrimony of the donee; and 3) the intent to do an act of liberality or animus donandi.

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Value-added tax refund under CREATE

One question that remains unanswered even with the deferral of the implementation of Revenue Regulations 9-2021 is the viability of claiming tax credit or refund of input taxes attributable to zero-rated sales under Section 112 of the Tax Code, in relation to the amendments introduced by the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

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Successful implementation of enhanced VAT refund system

AS most of us are now aware, Revenue Regulations (RR) 9-2021 implements the imposition of 12 percent value-added tax on certain transactions previously taxed at zero percent rate under Sections 106 and 108 of the Tax Code of 1997, as amended, allegedly after full satisfaction of the conditions set forth in the Tax Reform for Acceleration and Inclusion (TRAIN) Law. This has caused confusion on the VAT zero-rating of covered transactions.

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Implementing the tax incentives provisions of CREATE

PURSUANT to Section 21 of the Corporate Recovery and Tax Incentives for Enterprises Act, the Secretary of Finance and the Secretary of Trade and Industry, after consultations with the Commissioner of Internal Revenue, the Board of Investments (BOI), and other Investment Promotion Agencies (IPAs), have finally issued the Implementing Rules and Regulations (IRR) of the tax incentives provisions of CREATE.

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Impasse on business permit renewals

Under the Local Government Code (LGC) of 1991, a local government unit is authorized to collect local business taxes on any business entity operating within its territorial jurisdiction. The amount of business tax imposed would depend on the amount of gross sales or receipts generated by the business entity during the preceding calendar year. And for most LGUs, payment of the business tax is a condition for the yearly renewal of the business permit of any entity operating within their territorial jurisdictions.

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The BIR’s mental health program

IN its effort of providing excellent services with integrity and professionalism to all taxpayers, the Bureau of Internal Revenue (BIR) has recently issued Revenue Memorandum Order (RMO) 15-2021 prescribing its policies, guidelines and strategies in promoting the mental health of its people and to ensure that employees affected are able to exercise the full range of human rights and participate fully at work, free from stigmatization and discrimination.

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Rationalizing tax incentives under CREATE

Subject to certain conditions, types of incentives that may be granted to registered projects or activities include 1) Income Tax Holiday (ITH), 2) Special Corporate Income Tax (SCIT), 3) Enhanced Deductions (ED), 4) Duty exemption on importation of capital equipment, raw materials, spare parts, or accessories, and 5) Value Added Tax exemption on importation and VAT zero-rating on local purchases.

Rationalizing tax incentives under CREATE

Other than the reduction in corporate income tax, the Corporate Recovery and Tax Incentives for Enterprises Act has likewise reformed the bundle of tax incentives available to corporate taxpayers. For this purpose, CREATE law expanded the function of the Fiscal Incentives Review Board to include policy making and oversight functions on the administration and grant of tax incentives, among others. It is vested with the authority to grant appropriate tax incentives to qualified registered business enterprises, although Investment Promotion Agencies, under a delegated authority from the FIRB, may still grant available incentives under CREATE.

Can CREATE pave its way to April 15 ITR filing?

AS of this writing, the CREATE bill or the Corporate Recovery and Tax Incentives for Enterprises Act is yet to be signed by the President. We have barely a month before the April 15 deadline for filing of Annual Income Tax Return (ITR) for most taxpayers, but affected taxpayers could not as yet finalize their tax calculations as the signing of the CREATE bill into law is certainly a factor that will largely impact on the final determination of their income tax due for the year 2020.

The FIST Act

Another piece of legislation crafted in response to the adverse effects of the Covid-19 pandemic is Republic Act (RA) 11523 otherwise known as the Financial Institutions Strategic Transfer (FIST) Act, recently signed by President Duterte into law. This law is set to strengthen the country’s financial sector by addressing the sector’s non-performing asset problems, improve the liquidity of the financial system, and help in the rehabilitation of distressed businesses, among others.

The ease of paying taxes bill

Another tax reform that is set to change the landscape of our tax system is House Bill 7881 otherwise known as “The Ease of Paying Taxes Bill,” which was recently approved by the House Committee on Ways and Means. The bill aims to improve tax compliance by simplifying compliance procedures and enhancing the portability of tax transactions. The bill likewise seeks to strengthen the taxpayer’s bill of rights and create a Taxpayer’s
Advocate Office.

Top withholding agents redefined

Currently, almost all income payments are subject to withholding taxes where income payors are constituted by law or by regulations as withholding agents of the government. As constituted withholding agents, the income payors will have no choice but to comply with their obligations to withhold a portion of the income payments and remit the same to the government. Failure to do so would result in the non-deductibility of the related expenses.

Tax highlights in 2020 and some year-end reminders

IN response to Covid-19 pandemic, two significant laws were enacted providing certain tax reliefs on certain activities. One significant tax relief is the extension of the application of the net operating loss carry over (NOLCO) to five years, as provided under Republic Act (RA) 11494 or the “Bayanihan to Recover as One Act” and as implemented by Revenue Regulations (RR) 25-2020. Thus, a business or enterprise that incurred net operating loss for taxable years 2020 and 2021 shall be allowed to carry over the same as a deduction from its gross income for the next five consecutive taxable years immediately following the year of such loss.

Revisiting taxability of donations

IN times of calamity, donations from our kind-hearted countrymen are certainly a big help not only in giving temporary aid to the victims of calamities but in giving them as well a hope to start a new life and a hope for them to see again the light of day. This, too, is a big help to the government that is primarily responsible in seeing to it that the affected citizens are afforded the full assistance they truly deserve.

Introducing a new document called ‘Notice of Discrepancy’

The 1987 Philippine Constitution guarantees that no person shall be deprived of life, liberty, or property without due process of law. In line with this constitutional mandate, the 1997 Tax Code guarantees due process rights of taxpayers in tax investigation cases. Thus, the Tax Code requires that when the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings, except only in few instances where a pre-assessment notice is not required.

Taxing online business amid the Covid-19 pandemic

Criticisms surfaced on the BIR’s call for registration of business or persons involved in digital transactions through the use of any electronic platforms, as circularized in Revenue Memorandum Circular (RMC) 60-2020. They say it is not timely as it adds burden to the public trying to make ends meet during the pandemic.

Extension of local tax deadlines

Under our present tax laws, the Local Government Code of 1991 provides timeline for the payment of local taxes, fees and charges as well as timeline for payment of real- property taxes.  In accordance with the provisions of the LGC,
Local Government Units (LGUs) in turn have to enact an ordinance governing local taxation in their respective territorial jurisdictions.

Is prescriptive period for tax refund claims extendible?

Our tax laws provide instances where taxpayers are granted the right to apply for the refund of taxes. Among these are the unused input taxes related to zero-rated sales and erroneously or illegally paid taxes or penalties. As regards the refunds of unutilized input taxes incurred by taxpayers whose sales are zero-rated or effectively zero-rated, an application for refund has to be made within two years after the close of the taxable quarter when the sales were made.

Reminders for ITR filings during the ECQ

Had it not been for the Covid-19 pandemic, I could imagine that most taxpayers, by now, would have been so busy doing their last-minute touches on their Annual Income Tax Returns (ITRs) to beat the original April 15 deadline. For those who, by option or some other reason, still have not commenced the preparation, well the pandemic has, ironically, come to your rescue. The deadline has been extended to May 30.

Update on TAD availment

Pursuant to Section 19 of Republic Act 11213 or the Tax Amnesty Act of 2019, taxpayers who have delinquent accounts for taxable year 2017 and prior years may avail themselves of the tax amnesty on delinquencies (TAD) within one year from the effectivity of the implementing rules and regulations of the Act. As Revenue Regulations (RR) 4-2019, the implementing rules and regulations of the law, became effective on April 24, 2019, the availment thereof would therefore be until April 23, 2020, which is barely over two months from today.

Update on creditable withholding taxes

The creditable withholding tax (CWT) system has proven to be an effective tool in tax collections through the cooperation of the payors, who are constituted by law as withholding agents. The income payors act as agent of both the taxpayer and the government. The income payors have no choice but to faithfully comply with their obligations as withholding agents, because failure to do so would mean nondeductibility of their income payments.

Strengthening the Taxpayers’ Bill of Rights

IN tax investigation cases, it is undisputed that our existing tax laws and regulations provide taxpayers some sort of remedies in contesting such assessment cases. Taxpayers may avail themselves of the bundle of rights and remedies primarily provided under the National Internal Revenue Code (NIRC) of 1997, as amended, for internal revenue tax investigation cases; the Customs Modernization and Tariff Act (CMTA) for customs cases; and the Local Government Code of 1991 for real property and local tax cases. Of course, taxpayers may, likewise, invoke the Bill of Rights guaranteed under Article III of the Philippine Constitution.

Special levies on real properties

IN Metro Manila, where real-property values are skyrocketing, it is ironical that we still see undeveloped lots and uninhabited houses that seem to have been abandoned for years. In many parts of the metropolis, we likewise see construction projects left unfinished, serving no purpose other than destruction to the city’s skyline and giving eyesore to the sightline of anyone.

RPT exemption

Another good source of revenue among local government units is the real property tax imposed on lands, buildings, machineries and other improvements located within the territorial jurisdiction of an LGU. Under the Local Government Code of 1991 though, there are real properties that are exempt from the imposition of RPT, among which are those real properties owned by duly registered cooperatives, machineries used for pollution control and environmental protection, properties actually, directly, and exclusively used for religious, charitable, or educational purposes, and those properties owned by the government and government instrumentalities, pursuant to Sections 205 and 234 of the LGC.

Revisiting local taxation

With the able leadership of Senate President Vicente Sotto III and newly installed House Speaker Alan Peter Cayetano, the 18th Congress is expected to work overtime to fast-track the passage of the remaining packages of the Tax Reform for Acceleration and Inclusion.

Deficiency and delinquency interest, clarified

Before the amendment introduced by the Tax Reform for Acceleration and Inclusion (TRAIN) law, the imposition of deficiency and delinquency interest on late payment of tax under the Tax Code had become too burdensome to taxpayers. In interpreting of the Tax Code on interest prior to its amendment, the Court of Tax Appeals issued a number of decisions where the imposition of the deficiency interest at a rate of 20 percent per annum is imposed simultaneously with the imposition of a delinquency interest, also at a rate of 20 percent per annum. So, following previous CTA decisions, the imposition of the 20-percent delinquency interest on top of the 20-percent deficiency interest created a situation where a 40-percent interest per annum was imposed.

Amusement tax

With the Filipinos’s penchant for singing, dancing and entertaining, it is no wonder that karaoke bars have sprouted like mushrooms all over the country. And the Bureau of Internal Revenue (BIR) has not lost sight on this, as it started chasing some taxpayers seemingly or likely engaged in these activities for a profit, in light of the provisions of Revenue Memorandum Circular (RMC) 18-2010, in relation to Section 125(b) of the 1997 Tax Code, as amended.

Validity period of LOA

SECTION 6 of the Tax Code, as amended, authorizes the commissioner of Internal Revenue or his duly authorized representative to delegate the examination of any taxpayer for the assessment of the correct amount of tax. On the other hand, Section 13 of the same code explicitly provides that a revenue officer assigned to perform assessment functions in any district must be duly armed with a letter of authority (LOA).

Shift in VAT treatment through the successful implementation of the VAT refund system

Among the long list of transactions enumerated as subject to the zero-percent value-added tax (VAT) rate under the Tax Reformation for Acceleration and Inclusion law, there are about five items that may eventually become subject to the 12-percent VAT rate. The law did not state the specific commencement date for the shift. The change in the vatability of the transactions is dependent upon the fulfillment of certain conditions provided under the law.

Tax reform highlights

AS of today, phase 1 of the proposed tax reform is yet to be signed into law.  However, with the approval of the bicameral conference committee on the Tax Reform for Acceleration and Inclusion Act, it is almost certain that, by the start of next year, changes in the tax law will be in place.

VAT zero rating of sale of services under the Peza law

Section 108(B)3 of the 1997 Tax Code, as amended, provides for the value-added tax (VAT) zero rating on supply of services performed in the Philippines by VAT-registered persons to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory. Following this provision, the supply of services to entities registered under the Philippine Economic Zone Authority (Peza) law, or Republic Act (RA) 7916, shall be subject to VAT zerorating.

Tax incentives for socialized housing

IN 1992 Republic Act (RA) 7279, or the Urban Development and Housing Act of 1992, became a law. Among the salient features of the law are the provisions of incentives for private sector participating in socialized housing, including provisions for tax incentives. Among the tax incentives provided under the said law are the exemption from the payment of project-related corporate or individual income taxes, capital gains tax on sale of raw lands, value-added tax for the project contractor, and donor’s tax for lands donated for socialized housing purposes. These incentives were provided to encourage greater private-sector participation in socialized housing and reduce the cost of housing units for the underprivileged and homeless citizens.

Tax treaty relief application

The recent issuance of Revenue Memorandum Circular (RMC) 8-2017 dispensing with the requirement for filing a tax treaty relief application (TTRA) with the Bureau of Internal Revenue (BIR) as a condition for availing preferential tax rates under existing tax treaties is certainly a great relief among taxpayers making dividend, royalty and interest payments to nonresidents.

Creating the National Revenue Authority

Another proposed tax-reform bill being pursued in the 17th Congress is House Bill (HB) 695, which seeks to create a new internal-revenue agency. Introduced by Rep. Gloria Macapagal-Arroyo, the bill does not only seek to overhaul the present structure of the Bureau of Internal Revenue (BIR), but to replace it with a new organization to be known as the National Revenue Authority (NRA).

Right to remain silent?

Atty. Rodel C. UncianoAny form of business visitation in execution of letters of authority/electronic letters of authority/audit notices, letter notices, or mission orders, including activities connected directly in the implementation of letters of authority pertaining to Run After Tax Evader (RATE) Program is now resumed, following the issuance of Revenue Memorandum Circulars (RMCs) 91-2016 and 89-2016, which both lifted the suspension of field audit and other field operations of the Bureau of Internal Revenue (BIR) under RMC 70-2016.

Taxing a goodwill

Atty. Rodel C. UncianoThe value of a company’s brand name, solid customer base, good customer relations, good employee relations and a good reputation of the business as a whole, is usually referred to as a goodwill. It is something that cannot be seen but adds value to the company’s assets. Being an intangible asset, a goodwill may or may not be given corresponding financial values in financial statements (GR 125508). It is not separately identifiable from the rest of the assets of the company and is usually recognized only upon sale or disposition of the company.

Last-minute local tax reminders

Atty. Rodel C. UncianoSECTION 167 of the Local Government Code (LGC) of 1991 mandates the payment of all local taxes, fees and charges within the first 20 days of January or of each subsequent quarter, as the case may be. The sanggunian concerned may, for a justifiable reason or cause, extend the time for payment of such taxes, fees, or charges without surcharges or penalties, but only for a period not exceeding six months.  So, by this time, all business enterprises must have been able to pay at least a quarter of their business taxes due for the year, otherwise, an interest and surcharge for late payment must have begun to accrue.

Improperly accumulated earnings tax

Atty. Rodel C. UncianoSection 29 of the National Internal Revenue Code (NIRC) of 1997, as amended, imposes Improperly Accumulated Earnings Tax (IAET) on corporations for each taxable year on the improperly accumulated taxable income of such corporations. It is equal to 10 percent of the improperly accumulated taxable income.

Bad debts

Atty. Rodel C. UncianoFOR the purpose of determining the taxable income of a taxpayer engaged in trade or business or engaged in the practice of a profession, Section 34(E) of the Tax Code of 1997 allows the deductibility of debts actually ascertained to be worthless.

Certificate of tax exemption is not mandatory

Atty. Rodel C. UncianoMUCH has been said about nonstock, nonprofit entities, but because of the apparent instability of the rules governing their taxability, the time has come for us to revisit the subject. This time, however, we do so with the optimism that the long-standing issue of these entities’ taxability will now be put to rest, thanks to the promulgation of Court of Tax Appeals (CTA) Case 8377 on November 4.