InTAX: December 2023 Issue 1 | Volume 1

Department of Finance

The Department of Finance (DOF) issued Revenue Regulations (RR) No. 14-2023, 10 November 2023, which further amends the pertinent provisions of RR. No. 2-98, as amended, to impose Creditable Withholding Tax (CWT)* on certain income payments by joint ventures/consortiums.

Paragraphs (V) and (W) are now added in Section 2.57.2 of RR No. 2-98, as amended:

• Paragraph (V) provides that income payments made by joint ventures, whether incorporated or not, taxable or non-taxable, to their local supplier of goods and services, shall be subject to 1% and 2% withholding tax rates, respectively.
• Paragraph (W) provides that the share of each co-venturer/member from the net income of the joint venture/consortium not taxable as a corporation prior to actual or constructive distribution shall be subject to 15% withholding tax rate.

The RR shall take effect 15 days following its publication in a newspaper of general circulation in the Philippines.

(R.G. Manabat & Co. Notes: Published in the Malaya Business Insight on 15 November 2023.)

*Expanded Withholding Tax (EWT)

RR No. 13-2023, 10 November 2023, which prescribes the policies and guidelines for the optional VAT-Registration of Registered Business Enterprises (RBEs) classified as Domestic Market Enterprise (DME) under the 5% tax on Gross Income Earned in lieu of all taxes regime (5% GIE incentive) during the 10-year transitory period pursuant to Rule 18, Section 5 of the amended Implementing Rules and Regulations (IRR) of Republic Act No. 11534 or CREATE Law.

Pertinent provisions of the RR are as follows:

• An RBE classified as DME located inside the Economic or Freeport Zone may retain the availment of the 5% GIE incentive during the 10-year transitory period and be allowed to register as a VAT taxpayer. 
• For the optional VAT registration, the RBE must first obtain from the concerned Investment Promotion Agency (IPA) a Certification (that expressly states the 5% GIE incentive shall be in lieu of all taxes except VAT) after submission of the following:

a. A request letter expressing the intention to register as a VAT taxpayer with the Bureau of Internal Revenue (BIR) in accordance with Section 5, Rule 18 of the amended IRR of the CREATE Law.

b. A notarized "Deed of Waiver of Right to Avail of the VAT Exemption Incentive" in the prescribed form provided in Annex "A" of this RR. (Note: The waiver of rights is irrevocable once made and remains binding for the remaining transitory period.)

c. Any other documents that may be required by the concerned IPA.

Once the RBE has been issued the Certification, non-VAT registered RBEs must update their registrations with the relevant Revenue District Office (RDO) to reflect their change from non-VAT to VAT taxpayer status.

• DMEs who opt to register as VAT taxpayers shall not be allowed to claim for VAT refund relating to transactions prior to the effectivity of the amended IRR of the CREATE Law.

These regulations shall take effect immediately and prospectively following its publication in the Official Gazette or in a newspaper of general circulation, whichever comes first.

(R.G. Manabat & Co. Notes: Published in the Malaya Business Insight on 15 November 2023.)

RR No. 12-2023, 02 October 2023, to implement Section 237 of the National Internal Revenue Code of 1997, as amended (Tax Code), on the issuance of receipts or sales or commercial invoices by agricultural producers. 

Pertinent provisions of the RR are as follows:

• Section 2 provides for the relevant definition of terms while Section 3 reiterates the requirement to issue receipts/invoices under Section 237 of the Tax Code at a point of each sale and transfer of merchandise or for services valued at Php100 or more.
• Section 4 provides that Agricultural Producers (regardless if he or she derives income from the sale of goods or services other than Agricultural Food Products as long as the primary activity is still sale of Agricultural Food Products and any non-Agricultural Food Product sales did not exceed 30% of the aggregate annual sales or receipts) are exempt from the issuance of principal and supplementary receipts/invoices as long as the annual gross sales/receipts did not exceed Php1 million. If the annual gross sales/receipts exceed Php 1 million at any time during the year, the Agricultural Producer shall be required to issue official receipts/sales invoices for every subsequent transaction valued at Php100 or more.

While the Agricultural Producers may be exempt from the issuance of receipts/invoices, they are required to record each sale transaction in a simplified sales book containing the following information:

a. date of transaction;

b. description of goods sold or services rendered;

c. registered name, registered address, and Taxpayer Identification Number (TIN) of the purchaser if engaged in business;

d. amount of sales;

e. amount of tax withheld, if any, and the

f. net amount received.

• Section 5 provides that the buyer or purchaser who is engaged in trade of business shall issue for each purchase transaction to the Agricultural Producer, a Certificate of Income Payment Not Subject to Withholding Tax or BIR Form No. 2304 (for income payments not exceeding the cumulative amount of Php300,000.00 within the same taxable year which are exempt from withholding tax) or Certificate of Creditable Tax Withheld at Source or BIR Form No. 2307 (for income payments exceeding the cumulative amount of Php300,000.00 within the same taxable year which are subject to 1% withholding tax rate) in two (2) copies. The issued BIR Form No. 2304 or 2307 shall be constituted and treated as the substituted official receipt/sales invoice for purposes of said Regulations. This shall likewise serve as evidence of purchases made to substantiate claims for deductible expenses of the buyer or purchaser engaged in trade of business for tax purposes.
• Section 6 provides for the Registration Requirements that the Agricultural producers need to comply pursuant to Section 236 of the Tax Code while Sections 7 and 8 provides for the bookkeeping requirement pursuant to Section 232 of the Tax Code and the requirement to file income tax returns, respectively.

The RR shall take effect 15 days following its publication in the Official Gazette or in a newspaper of general circulation, whichever comes first.

(R.G. Manabat & Co. Notes: Published in the Malaya Business Insight on 04 October 2023.)

 

Securities and Exchange Commission

The Securities and Exchange Commission (SEC) issued Memorandum Circular (MC) No. 20 series of 2023, 03 November 2023, providing for the final extension of the Amnesty Applications until 31 December 2023.

The MC provides that corporations only have until 31 December 2023 to signify their intent to apply for amnesty and settle the corresponding amnesty fees. The subsequent period starting from 01 January to 31 January 2024 shall only be dedicated to the submission of amnesty requirements and supporting documents to the Petition to Lift Order (PLO) for all applications. Failure to comply within the submission period shall warrant the forfeiture of the paid amnesty or filing fees in favor the SEC.

Likewise, an updated scale of fines and penalties for the covered reportorial requirements shall be effective on 01 January 2024. 

The MC shall take effect immediately upon completion of its publication in a newspaper of general circulation.

(R.G. Manabat & Co. Notes: Published in the Philippine Daily Inquirer and Philippine Star on 06 November 2023.)

Here are the links to the full text of the issuances: RR No. 12-2023, RR No. 13-2023, RR No. 14-2023 and 2023 MC SEC MC No. 20 of 2023 Final Extension of Amnesty Applications until 31 December 2023.