TAX ALERT

June 2020

COURT OF TAX APPEALS DECISIONS

AN ASSESSMENT IS A WRITTEN NOTICE AND DEMAND MADE BY THE BUREAU

OF INTERNAL REVENUE (BIR) ON THE TAXPAYER FOR THE SETTLEMENT OF A
TAX LIABILITY THAT IS DUE AND DEFINITELY SET AND FIXED THEREIN. THE
AMOUNT DUE IS INDEFINITE IF THE SAME IS SUBJECT TO FURTHER
ADJUSTMENT AFTER PAYMENT. MOREOVER, A REQUEST TO PAY IS NOT A
DEMAND TO PAY. Panay Electric Company, Inc. v. Commissioner of Internal Revenue, C.T.A.
Case No. 9523 dated June 1, 2020; Clark Water Corporation v. Commissioner of Internal
Revenue, C.T.A. Case No. 9519 dated June 17, 2020.

THE ABSENCE OF DUE DATE IN THE FINAL ASSESSMENT NOTICE NEGATES

DEMAND FOR PAYMENT RENDERING THE SUBJECT TAX ASSESSMENT VOID.
Apo International Marketing Corporation v. Commissioner of Internal Revenue, C.T.A. Case No.
9071 dated June 2, 2020.

TO PROVE THE FACT OF MAILING, IT IS ESSENTIAL TO PRESENT THE

REGISTRY RECEIPT AND THE REGISTRY RETURN CARD ISSUED BY THE
POSTMASTER OF THE BUREAU OF POSTS BEARING THE SIGNATURE OF THE
RECIPIENT TAXPAYER OR ITS DULY AUTHORIZED REPRESENTATIVE
SIGNIFYING RECEIPT OF THE SUBJECT NOTICE OF HEARING. First Far East
Development Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 9678 dated June
4, 2020.

THE CIR MUST PROVE NOT JUST THE FACT OF MAILING OF A PRELIMINARY
ASSESSMENT NOTICE (PAN) BUT ALSO THE FACT OF RECEIPT OF THE PAN BY
THE TAXPAYER. Presentation of a registry receipt number and a memorandum of transmittal
serves to prove the fact of mailing but not the fact of receipt of the PAN. Any assessment that
cannot be proved to have been received by the taxpayer cannot become a final assessment as such
would be a violation of due process requirements under section 228 of the NIRC. Lotte
Confectionery Pilipinas Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 8923
dated June 11, 2020.

PROOF OF SERVICE OF AN ASSESSMENT VIA REGISTERED MAIL CAN BE DONE

BY PRESENTING AN AFFIDAVIT OF THE ACTUAL SERVER OF THE LETTER
ATTESTING TO THE FACT THAT THE ASSESSMENT WAS ACTUALLY RECEIVED
BY THE TAXPAYER. Ruben U. Yu v. Commissioner of Internal Revenue C.T.A. Case No. 9595
dated June 15, 2020.

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A CRIMINAL CASE FOR VIOLATION OF THE PROVISIONS OF THE NATIONAL

INTERNAL REVENUE CODE (NIRC) MUST BE INSTITUTED WITHIN FIVE (5)
YEARS FROM THE DAY OF THE COMMISSION OF THE VIOLATION OF THE LAW.
THE OFFENSE IS COMMITTED NOT UPON FILING OF THE INCOME TAX RETURN
BUT ONLY AFTER THE FINALITY OF THE ASSESSMENT COUPLED WITH
TAXPAYER’S WILLFUL REFUSAL TO PAY THE TAXES WITHIN THE ALLOTTED
PERIOD. People of the Philippines v. GH Resources and Training Services, Inc., Grace H.
Cartago, C.T.A. Crim. Case No. O-818 dated June 1, 2020; People of the Philippines v. Asian
Fuels Inc., Alfred S. Araneta, and Anthony James S. Araneta, C.T.A. Crim. Case No. O-825 dated
June 3, 2020.

THE BASIC RULE IS THAT IF ANY BIR RULING OR ISSUANCE PROMULGATED

BY THE COMMISSIONER OF INTERNAL REVENUE (CIR) IS SUBSEQUENTLY
REVOKED OR NULLIFIED BY THE CIR HIMSELF OR BY THE COURT, THE
REVOCATION/NULLIFICATION CANNOT BE APPLIED RETROACTIVELY TO THE
PREJUDICE OF THE TAXPAYER. THE EXCEPTIONS TO THIS RULE ARE: (1)
WHERE THE TAXPAYER DELIBERATELY MISSTATES OR OMITS MATERIAL
FACTS FROM HIS RETURN OR IN ANY DOCUMENT REQUIRED OF HIM BY THE
BIR; (2) WHERE THE FACTS SUBSEQUENTLY GATHERED BY THE BIR ARE
MATERIALLY DIFFERENT FROM THE FACTS ON WHICH THE RULING IS BASED;
OR (3) WHERE THE TAXPAYER ACTED IN BAD FAITH. Meridien East Realty &
Development Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 9130 dated June
3, 2020.

THE ISSUANCE OF A LETTER OF AUTHORITY (LOA) HAS NO PRESCRIPTIVE

PERIOD AND IS NOT SUBJECT TO THE PERIODS OF LIMITATION OR
PRESCRIPTIVE PERIODS ENUNCIATED UNDER SECTIONS 203 AND 222 OF THE
NIRC. Hemisphere-Leo Burnett, Inc. v. Commissioner of Internal revenue, Caesar R. Dulay, OIC-
Assistant Commissioner of Large taxpayer Service, Teresita M. Angeles, and the Bureau of
Internal revenue, C.T.A. Case No. 9749 dated June 3, 2020.

THE DEFECT IN THE REVENUE OFFICER’S AUTHORITY TO CONDUCT THE

ASSESSMENT FOR LACK OF LOA IS NOT CURED BY THE ISSUANCE OF A
REVALIDATION NOTICE. People of the Philippines v. Vivetech Corporation/Edwin B.
Lumague and Roedel R. Lumague, C.T.A. Crim. Case No. O-666 dated June 3, 2020.

REASSIGNMENT OF AUTHORITY TO ASSESS A TAXPAYER MUST BE THROUGH

A NEW LOA ISSUED BY THE REGIONAL DIRECTOR. While in this case, the first LOA
stated that "in case of reassignment, a memorandum to that effect shall be issued by the head of
the investigating office to the concerned taxpayer and the concerned Revenue Officer (RO) and/or
Group Supervisor (GS)", this statement doesn't give authority to the head of investigating office
to reassign to another RO the authority to assess a taxpayer. It merely gives the responsibility to
notify the taxpayer and the ROs concerned through a memorandum, should there be a
reassignment. Section 13 of the NIRC vests the power to assign, and consequently, reassign, with
the Revenue Regional Director (RD) of the BIR upon recommendation of the CIR. A subordinate
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officer cannot override the RD's grant of authority to assess and make reassignments of such
orders. Misamis Oriental Rural Electric Service Cooperative I (MORESCI-1), Inc. v.
Commissioner of Internal Revenue, CTA Case No. 9700 dated June 4, 2020.

A MEMORANDUM OF AUTHORITY, LIKE A REFERRAL MEMORANDUM, DOES

NOT OPERATE TO GIVE AUTHORITY TO A RO TO CONDUCT TAX ASSESSMENTS.
ONLY AN LOA VALIDLY ISSUED BY THE CIR OR RD MAY GIVE NEW SET OF
EXAMINERS AUTHORITY TO CONDUCT AN EXAMINATION OF A TAXPAYER'S
RECORDS. Watsons Personal Care Store (Philippines), Inc. v. Commissioner of Internal
Revenue, C.T.A. Case No. 9303 dated June 11, 2020.

THE AUTHORITY GIVEN BY THE REGIONAL DIRECTOR TO THOSE WHO WERE

ORIGINALLY NAMED IN THE LOA, MAY BE REVOKED, TRANSFERRED AND
REASSIGNED TO OTHER RO VIA A MEMORANDUM REFERRAL FOR
CONTINUANCE OF AUDIT. A Memorandum Referral may be deemed sufficient although the
document may not be entitled "Letter of Authority" if it contains all the elements necessary to
establish a contract of agency between the CIR and the new RO and if it is signed by the RD, who
has authority to assign and revoke authorities to examine and assess. NYK Fil-Japan Shipping
Corp. v. Commissioner of Internal Revenue, C.T.A. Case No. 9120 dated June 25, 2020.

REVALIDATION OF AN LOA IS REQUIRED FOR EXPIRED LOAS. Revalidation is done

by issuing a new LOA. Any assessments issued with an expired LOA is a nullity. Tektite Insurance
Brokers, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 9184 dated June 25, 2020.

A LETTER NOTICE (LN) ASKING A TAXPAYER TO RECONCILE THE FINDINGS

OF THE BIR OF UNDER-DECLARATION BETWEEN A TAXPAYER'S TAX RETURNS
AND INFORMATION PROVIDED BY THIRD PARTY SOURCES IS NOT THE SAME
AS AN LOA. Any examination or assessment issued pursuant to the LN is invalid. Indra
Verhomal Menghrajani v. Commissioner of Internal Revenue, C.T.A. Case No. 9269 dated June
26, 2020.

AN ENTITY REGISTERED WITH THE PHILIPPINE ECONOMIC ZONE AUTHORITY

(PEZA) IS EXEMPT FROM VALUE-ADDED TAX (VAT) ON IMPORTATIONS NOT
BECAUSE OF THE 5% PREFERENTIAL INCOME TAX RATE EXTENDED TO PEZA-
REGISTERED ENTITITES BUT BECAUSE IT IS, BY LEGAL FICTION, LOCATED IN
A FOREIGN TERRITORY. Commissioner of Internal Revenue v. Philippine International Air
Terminals Co., Inc., C.T.A. EB No. 1950 (C.T.A. Case No. 8946) dated June 3, 2020.

SPECIAL ECONOMIC ZONES (ECOZONE) ARE ACCORDED THE STATUS OF

SEPARATE CUSTOMS TERRITORY, THUS, WHILE AN ECOZONE IS A
GEOGRAPHICAL TERRITORY OF THE PHILIPPINES, IT IS NEVERTHELESS
REGARDED AS FOREIGN SOIL, BY LEGAL FICTION. AS SUCH, THE CROSS
BORDER DOCTRINE STATING THAT "NO VAT SHALL BE IMPOSED TO FORM
PART OF THE COST OF GOODS DESTINED FOR CONSUMPTION OUTSIDE OF THE
TERRITORIAL BORDER OF THE TAXING AUTHORITY" SHALL ALSO APPLY TO
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ECOZONES. Commissioner of Internal Revenue v. Philippine International Air Terminals Co.,

Inc., C.T.A. EB No. 1918 dated June 3, 2020.

FAILURE TO SUBMIT A BANK-CERTIFIED CREDIT MEMO OR CERTIFICATE OF

INWARD REMITTANCE IS FATAL TO THE CLAIM OF INPUT VAT CREDIT. TO
PROVE THAT FOREIGN CURRENCY PAYMENTS WERE ACTUALLY MADE, IT IS
CRUCIAL THAT THE PROOF OF INWARD REMITTANCE OF THE PAYMENTS IN
FOREIGN CURRENCY CAN BE TRACED TO THE EXPORT SALES TO WHICH IT
RELATES. Orica Philippines, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 9647
dated June 4, 2020.

IT IS NOT THE CONTINUITY OF COMMERCIAL DEALINGS OR WHETHER THE

FOREIGN ENTITY/SERVICE RECIPIENT IS A NON-RESIDENT FOREIGN
CORPORATION, AS DEFINED UNDER THE PROVISIONS OF THE NIRC, THAT
DETERMINES WHETHER THE SERVICES RENDERED BY THE PHILIPPINE
TAXPAYER IN FAVOR OF SUCH FOREIGN ENTITY QUALIFY AS A ZERO-RATED
TRANSACTION, BUT WHETHER SUCH SERVICES ARE RENDERED IN FAVOR OF
A FOREIGN ENTITY CONDUCTING BUSINESS OUTSIDE THE PHILIPPINES.
Commissioner of Internal Revenue v. Citco International Support Services Limited-Philippine
ROHQ, C.T.A. EB No. 2015 dated June 5, 2020.

THE IRREVOCABILITY OF THE OPTION TO CARRY OVER OVERPAYMENTS OF

INCOME TAX UNDER SECTION 76 OF THE NIRC, AS AMENDED, DOES NOT APPLY
TO CASES OF REFUND OF EXCESS AND UNUTILIZED INPUT VAT
ATTRIBUTABLE TO ZERO-RATED SALES. Commissioner of Internal Revenue v. Colt
Commercial, Inc., C.T.A. EB No. 2006; Colt Commercial, Inc. v. Commissioner of internal
Revenue, C.T.A. EB Case No. 2012 dated June 29, 2020.

NOT ONLY THOSE PURCHASES OF GOODS THAT FORM PART OF THE FINISHED
PRODUCT OF THE TAXPAYER CAN BE SUBJECT OF AN INPUT VAT REFUND.
Section 110 of the NIRC did not limit input taxes only to those purchases that form part of the
finished product of the taxpayer; it includes input tax on lease or use of property from a VAT-
registered person. As such, when section 112(a) refers to creditable input tax due or paid
"attributable" to such sales, it doesn't just mean input tax that is directly and exclusively attributable
to such sales. Rather, it also includes those that are connected to the zero-rated sale, even if not
entirely so, such as when the taxpayer is engaged in both exempt and zero-rated sales. Visayas
Geothermal Power Company v. Commissioner of Internal Revenue, C.T.A. Case No. 7889 dated
June 10, 2020

THE CTA'S JURISDICTION IS NOT LIMITED TO CASES WHICH INVOLVE

DECISIONS OF THE COMMISSIONER ON MATTERS INVOLVING ASSESSMENTS
OR REFUNDS BUT ALSO COVERS OTHER CASES ARISING FROM THE NIRC. WPP
Marketing Communications, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 9704
dated June 5, 2020.
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THE DETERMINATION OF THE VALIDITY OF ADMINISTRATIVE ISSUANCES

ISSUED BY THE BIR FALLS WITHIN THE EXCLUSIVE APPELLATE JURISDICTION
OF THE CTA, NOT THE REGIONAL TRIAL COURTS (RTC). RULINGS OF THE RTC
REGARDING THE VALIDITY OR INVALIDITY OF ANY BIR ISSUANCE ARE NOT
BINDING ON THE CTA. Erwin Casaclang v. Commissioner of Internal Revenue, C.T.A. Case
No. 9386 dated June 8, 2020.

THE DETERMINATION OF WHETHER A PARTICULAR PROTEST IS A REQUEST

FOR RECONSIDERATION OR REQUEST FOR REINVESTIGATION IS CRUCIAL IN
DECIDING WHETHER THE COURT OF TAX APPEALS HAS JURISDICTION TO
TAKE COGNIZANCE OF A PETITION FOR REVIEW APPEALING AN INACTION OF
THE CIR SINCE THE COMMENCEMENT OF CERTAIN PERIODS VARIES
BETWEEN SAID REQUESTS. Getz Pharma (Phils.) Inc. v. Hon. Commissioner Kim S. Jacinto-
Henares, Hon. Alfredo V. Misajon, Regional Director, Revenue Region No. 7, and Hon. Josephine
S. Virtucio, Regional District Officer, Revenue District No. 43-A East Pasig, CTA Case No. 9245,
dated June 9, 2020.

THE CTA HAS JURISDICTION TO DECIDE ON THE EXCESSIVENESS OF A

COMPROMISE PENALTY. MOREOVER, A COMPROMISE PENALTY IN EXCESS OF
THAT PRESCRIBED IN THE SCHEDULE OF PENALTIES, EXCEPT WHEN DULY
APPROVED BY THE CIR OR THE RD IN PROPER CASES, IS VOID. Dunlevy Food
Corporation v. Commissioner of Internal Revenue, C.T.A. Case No. 9361 dated June 16, 2020.

TESTIMONIAL EVIDENCE TO SUPPORT THE ALLEGATION THAT A TAXPAYER

IS ALREADY APPLYING FOR A TAX CLEARANCE IS INSUFFICIENT FOR
PURPOSES OF CLAIMS FOR REFUND OR ISSUANCE OF TAX CREDIT
CERTIFICATE OF UNUSED INPUT VAT ARISING FROM THE CANCELLATION OF
VAT REGISTRATION. Deltek Systems (Philippines) LTD. v. Commissioner of Internal
Revenue, C.T.A. Case No. 9445 dated June 24, 2020.

THE AUTHORITY OF A REPRESENTATIVE TO SIGN A WAIVER OF THE

PRESCRIPTIVE PERIOD FOR ASSESSMENTS MUST BE IN WRITING AND DULY
NOTARIZED EVEN IF THE SIGNATORY IS THE PRESIDENT OF THE TAXPAYER
CORPORATION. Sabre Travel Network (Philippines) Inc. v. Commissioner of Internal Revenue,
C.T.A. Case No. 9532 dated June 26, 2020.

THE NIRC DOES NOT REQUIRE SUBMISSION OF INDIVIUAL PEZA

CERTIFICATIONS OF PEZA-REGISTERED ENTITIES IN SUPPORT OF VAT
ZERO-RATING. The law simply mandates convincing proof showing that the entities to whom
the refund-claimant sold its goods are PEZA-registered entities. The Certification issued by PEZA
that the entities listed therein are PEZA-registered corporations is sufficient to justify the
conclusion that sales are subject to 0% VAT on the strength of Section 106(A)(2)(a)(5) of the
NIRC, as amended, as implemented by Section 4.106-5 (c) of RR No. 16-2005. Commissioner of
Internal Revenue v. Colt Commercial, Inc., C.T.A. EB No. 2006; Colt Commercial, Inc. v.
Commissioner of internal Revenue, C.T.A. EB Case No. 2012 dated June 29, 2020.
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BIR ISSUANCES

BIR EXTENDS THE PERIOD TO AVAIL TAX AMNESTY ON DELINQUENCIES

UNTIL DECEMBER 31, 2020. Revenue Regulations No. 15-2020 dated June 19, 2020.

DEADLINE TO FILE TAX AMNESTY UNDER THE TAX AMNESTY ACT IS

EXTENDED FROM JUNE 22, 2020 TO DECEMBER 31, 2020. Revenue Memorandum
Circular No. 61-2020 dated June 15, 2020.

DUE DATES FOR PROCESSING OF VAT REFUNDS/CLAIMS HAS BEEN SUSPENDED

FOR TAXABLE QUARTERS AFFECTED BY THE DECLARATION OF THE
NATIONAL STATE OF EMERGENCY. To ease the burden for both the taxpayers as well as
the BIR, who will be met with numerous requests, the following due dates for the taxable quarters
are as follows:

Calendar Quarter ending March 31, 2018 July 15, 2020

Fiscal Quarter Ending April 30, 2018 July 31, 2020
Fiscal Quarter Ending May 31, 2018 August 15, 2020
Calendar Quarter ending June 30, 2018 August 31, 2020

For areas where the enhanced community quarantine (ECQ) or Modified ECQ is still in force,
processing of VAT refunds will remain suspended. The deadline for the filing for such areas will
be 30 days upon lifting of the ECQ/MECQ. Revenue Regulations No. 16-2020, June 19, 2020.

BIR STREAMLINED BUSINESS REGISTRATION REQUIREMENTS AND ISSUED A

REVISED CHECKLIST OF DOCUMENTARY REQUIREMENTS. The requirements for
registering a new business have been streamlined by removing the Mayor’s Permit as one of the
mandatory requirements. Revenue Memorandum Circular No. 57-2020 dated June 9, 2020.

NOTICE TO PERSONS DOING BUSINESS THROUGH ELECTRONIC PLATFORMS

TO ENSURE THAT THEY ARE REGISTERED WITH THE BIR, AS PER SECTION 236
OF THE TAX CODE, AND TO PAY THEIR TAXES BY JULY 31, 2020 TO AVOID
PENALTIES. Payment gateways, delivery channels, internet service providers, and other
facilitators are likewise reminded. Unregistered businesses that register no later than July 31, 2020
shall not be penalized for late registration. Registrants are encouraged to declare and pay the taxes
on past transactions. There will be no penalty for those who comply with the guidelines. New
registrants are reminded to issue ORs/sales invoices, keep registered books of account and other
records, withhold taxes where applicable, file tax returns, and pay their correct taxes on time.
Guidelines for registration is attached to the circular. Revenue Memorandum Circular No. 60-2020
dated June 10, 2020.

PUBLICATION OF THE REVISED GUIDELINES & REQUIREMENTS FOR THE

APPLICATION OF BIR CLEARANCE BY POGO LICENSEES IN CONNECTION WITH
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THE RESUMPTION OF THEIR OPERATIONS. Revenue Memorandum Circular No. 64-

2020 dated June 24, 2020.

Note: The information provided herein is general and may not be applicable in all situations. It
should not be acted upon without specific legal advice based on particular situations. If you have
any questions, please feel free to contact us at any of the indicated e-mail addresses below:

Carlos G. Baniqued cgbaniqued@baniquedlaw.com

Terence Conrad H. Bello thbello@baniquedlaw.com
Emma Malou L. Gan eulim@baniquedlaw.com
Agnes Bianca Mendoza almendoza@baniquedlaw.com
Casiano V. Flores cvflores@baniquedlaw.com
Mark Roland C. Domingo mcdomingo@baniquedlaw.com
John Marti C. Duya jcduya@baniquedlaw.com
Ana Margaret T. Dahilig atdahilig@baniquedlaw.com
Carla S. Cucueco cscucueco@baniquedlaw.com
Margaret P. Gan mpgan@baniquedlaw.com
Patricia D. Ibañez pdibanez@baniquedlaw.com

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