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Tax Bulletin
August 2012
2 Tax Bulletin
Highlights
BIR Rulings
Paymentstoaforeigncorporationforservicesperformedentirelyoutsidethe
Philippinesareexemptfromincometaxandvalue-addedtax(VAT).(Page 4)
DividendspaidbyadomesticcorporationtoanAustraliancorporationaresubject
tothe15%fnalwithholdingtax(FWT)underSection28(B)(5)(b)oftheTaxCode.
(Page 4)
IncomederivedfrominvestmentsinthePhilippinesbyforeigngovernmentsis
exemptfromincometaxand,consequently,fromwithholdingtax.(Page 5)
Anupstreammergerwherethesurvivingparentcompanywillnotissuesharesin
exchangefortheassetsoftheabsorbedsubsidiaryisnotconsideredatax-free
mergerunderSection40(C)(2)oftheTaxCode.(Page 5)
Inatransactionwheretwopersonsexchangedsharesofstockintwocompanies
forsharesofstockinathirdcorporationinseparateDeedsofAssignment,asa
resultofwhichthefrstpersongainscontrolof58.15%,andthesecondperson
gainscontrolof24.33%,ofthevotingstockofthetransferee-corporation,only
thetransferofthefrstpersonwillbeconsideredatax-freeexchangeunder
Section40(C)(2)oftheTaxCode.(Page 6)
BIR Issuances
RevenueRegulations(RR)No.11-2012amendsSection3ofRRNo.1-2011
onexemptionfromdocumentarystamptax(DST)ofremittancesofOverseas
ContractWorkers(OCWs)orOverseasFilipinoWorkers(OFWs).(Page 7)
RevenueMemorandumCircular(RMC)No.34-2012clarifesthetaximplications
ofintegratingtheDomesticPassengerServiceCharge(DPSC)atthepointofsale
ofairlinetickets,andprescribesrulesfortheinvoicingandrecordingoftheDPSC
inthebooksofairlinecompaniesandairportauthorities.(Page 8)
RMCNo.35-2012clarifesthetaxabilityofclubsorganizedandoperated
exclusivelyforpleasure,recreation,andothernon-proftpurposes.(Page 9)
RMCNo.36-2012clarifeswhetherdocumentsmentionedinSection199ofthe
TaxCode,asamendedbyRepublicAct(RA)No.9243,aresubjecttotheP15.00
DSTprescribedinSection188oftheTaxCode.(Page 10)
RMCNo.37-2012clarifesSection11ofRRNo.06-08bymakingitclearthata
CertifcateAuthorizingRegistration(CAR)isstillnecessarybeforesharesofstock
nottradedinthestockexchangemaybetransferred.(Page 10)
RMCNo.38-2012furtherclarifesinQuestionandAnswerformattheprovisions
ofRRNo.7-2010,asamendedbyRRNo.8-2010,implementingthetax
privilegesgrantedunderRANo.9994,otherwiseknownastheExpandedSenior
CitizensActof2010.(Page 11)
RMCNo.39-2012mandatesthewithholdingofincometaxonbackwages,
allowances,andbeneftsreceivedbyemployeesthroughgarnishmentofdebtsor
creditspursuanttoalabordisputeaward.(Page 14)
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RMCNo.40-2012prescribesaprescriptiveperiodforrulingsissued
pursuanttoSection40(C)(2)oftheTaxCode.(Page 15)
RMCNo.47-2012prescribestherulesanddeadlinesforthefling
ofapplicationsforenrollmentintheVATTaxCreditCertifcate(TCC)
MonetizationProgram,pursuanttotheDepartmentofFinance(DOF),
DepartmentofBudgetandManagement(DBM)andBIRJointCircularNo.
2-2012datedMay31,2012.(Page 15)
BOC Issuances
CustomsAdministrativeOrder(CAO)No.1-2012establishestheAuthorized
EconomicOperator(AEO)Programforexporters.(Page 16)
CustomsMemorandumOrder(CMO)No.9-2012requirespriorapproval
fromtheCommissionerofCustomsortheDeputyCommissionerforthe
ManagementInformationSystemandTechnologyGroup(MISTG)forthe
manualprocessingofimportentriesinordertoeffecttheclearanceand
releaseofimportedgoods.(Page 18)
PSE Issuance
PhilippineStockExchange(PSE)MemorandumCNNo.2012-0046reminds
theinvestingpublicoftheeffectsofthefailureoflistedcompaniesto
complywiththeminimumpublicownership(MPO)requirementbyDecember
31,2012.(Page 19)
SEC Issuances
SECMemorandumCircular(MC)No.6dispenseswithsomerequirementsin
someregistrationactivities.(Page 19)
Foracorporationtopurchase,acquireorownlandinthePhilippines,atleast
60%ofthetotalcapitalstockofthecorporationmustbewholly-ownedby
Filipinocitizens.(Page 20)
AcorporationneedstoamenditsArticlesofIncorporation(AOI)torefect
thechangeofaddressfromonebuildingtoanother,evenifthesecond
buildingiswithinthesamecityormunicipality.(Page 21)
Indeterminingthecitizenshipofsharesbeingheldintrust,thenationalityof
boththetrusteeandthebenefciaryshouldbeconsidered.(Page 21)
BSP Issuances
CircularNo.762amendstheregulationsonDepositsforStockSubscriptions
ofbanks/quasi-banks.(Page 22)
CircularNo.763providesforregulatoryrelieftobanksunderrehabilitation
program.(Page 25)
CircularNo.764prescribestheRevisedOutsourcingFrameworkforNon-
BankFinancialInstitutions(NBFIs).(Page 25)
CircularNo.765prescribestheRevisedOutsourcingFrameworkforBanks.
(Page 26)
4 Tax Bulletin
CircularNo.766prescribestheGuidelinesinStrengtheningCorporate
GovernanceandRiskManagementPracticesonTrust,OtherFiduciary
Business,andInvestmentManagementActivities.(Page 27)
Court Decision
Afterreceivinganoticeofassessment,ataxpayermayflewithin60days
awrittenprotestwiththelocaltreasurer,whichshalldecideonitwithin60
days.ThetaxpayercanmakeanappealtotheRegionalTimeCourt(RTC)
within30daysfromreceivingthedenialoftheprotest,orfromthelapse
ofthe60-dayperiodtodecideontheprotest.Thereafter,thetaxpayercan
appealthedecisionoftheRTCtotheCourtofTaxAppeals(CTA)within30
daysafterreceivingthedecision.(Page 29)
BIR Rulings
BIR Ruling No. 458-2012 dated July 10, 2012
Facts:
BCo.,anon-residentSingaporeancorporation,renderedservicesforFCo.,
adomesticcorporation.TheseserviceswereperformedbyBCo.entirelyin
Indonesia.FCo.paidservicefeestoBCo.
Issue:
AretheservicefeespaidbyFCo.toBCo.subjecttoPhilippineincometaxand
VAT?
Ruling:
1. No.UnderSection23(F)oftheTaxCode,anon-residentforeigncorporation
istaxableonlyonincomederivedfromsourceswithinthePhilippines,and
underSection42(A)(3),incomefromservicesisconsideredderivedfrom
sourceswithinthePhilippinesonlyiftheservicesareperformedinthe
Philippines.Hence,incomefromservicesperformedbyanon-residentforeign
corporationentirelyoutsidethePhilippinesisexemptfromPhilippineincome
tax.
2. No.UnderSection108(A)oftheTaxCode,paymentsforservicesaresubject
toVATonlyiftheservicesareperformedinthePhilippines.
BIR Ruling No. 465-2012 dated July 17, 2012
Facts:
PCo.declaredcashdividendstoitsstockholderswhichincludeDCo.,anon-
residentAustraliancorporation.UnderAustraliantaxlaws,foreigndividends
receivedinAustraliaareexemptfromincometax.
Issue:
ArethecashdividendspaidbyPCo.toDCo.subjecttothe15%FWTunder
Section28(B)(5)(b)oftheTaxCode?
Paymentstoaforeigncorporationfor
servicesperformedentirelyoutsidethe
Philippinesareexemptfromincometax
andVAT.
Dividendspaidbyadomestic
corporationtoanAustralian
corporationaresubjecttothe15%FWT
underSection28(B)(5)(b)oftheTax
Code.
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Ruling:
Yes.UnderSection28(B)(5)(b)oftheTaxCode,cashand/orpropertydividends
receivedbyanon-residentforeigncorporationfromadomesticcorporationshallbe
subjecttoa15%FWTonthedividendsreceived,subjecttotheconditionthatthe
countryinwhichthenon-residentforeigncorporationisdomiciledshallallowacredit
againstthetaxduefromthenon-residentforeigncorporationtaxesdeemedtohave
beenpaidinthePhilippinesequivalentto15%ofthedividend.Thepreferential15%
FWTrateappliessinceAustralianlawstreatforeigndividendsreceivedinAustraliaas
exemptfromincometax.
However,thefollowingrequirementsmustbecompliedwithwithinareasonabletime
pursuanttoRMCNo.80-91:
a) ShowthatthedividendsreceivedbyDCo.fromPCo.werenotamongtheitems
consideredinarrivingattheincometaxduefromDCo;
b) PresenttheincometaxreturnofDCo.forthetaxableyearwhenthesubject
dividendswerereceived;and
c) SubmitanyauthenticateddocumentsshowingthattheAustralianGovernment
didnotimposeanytaxonthesubjectdividends.
BIR Ruling No. 495-2012 dated July 31, 2012
Facts:
KCo.,anautonomousgovernmentbodyresponsibleforthemanagementand
administrationofsomeofKuwaitsfunds,derivesincomefromitsinvestmentsinthe
Philippinessuchasgovernmentbonds,corporatebondsandbankdeposits.
Issue:
IstheincomederivedbyKCo.frominvestmentsinthePhilippinesexemptfrom
Philippineincometax?
Ruling:
Yes.UnderSection32(B)(7)(a)(i)oftheTaxCode,incomederivedbyforeign
governmentsfrominvestmentsinthePhilippinesisexemptfromincometaxand,
consequently,fromwithholdingtax.
BIR Ruling No. 508-2012 dated August 3, 2012
Facts:
ACo.,adomesticcorporation,effectedamergerwithitswholly-ownedsubsidiary,B
Co.,anotherdomesticcorporation,whereACo.willbethesurvivingcorporation.As
aresultofthemerger,BCo.willtransferitsassetstoACo.However,sinceBCo.is
awholly-ownedsubsidiaryofACo.,ACo.willnolongerissueanysharesofstockin
considerationfortheassetstransferredbyBCo.pursuanttothemerger.
Issue:
IsthemergerbetweenACo.andBCo.consideredatax-freemergerunderSection
40(C)(2)oftheTaxCode?
Incomederivedfrominvestmentsin
thePhilippinesbyforeigngovernments
isexemptfromincometaxand,
consequently,fromwithholdingtax.
Anupstreammergerwherethe
survivingparentcompanywillnotissue
sharesinexchangefortheassetsofthe
absorbedsubsidiaryisnotconsidereda
tax-freemergerunderSection40(C)(2)
oftheTaxCode.
6 Tax Bulletin
Ruling:
No.Thereorganizationisanupstreammergerbetweenaparentcompanyand
asubsidiary,wheretheparentcompanywillnotbeissuinganysharestothe
subsidiaryinexchangefortheassetstobetransferredasaresultofthemerger.In
effect,thetransferpartakesofthenatureofadonationmadebyasubsidiarytoits
parentcompany,contrarytowhatiscontemplatedinSection40(C)(2)oftheTax
Code.Inthesamemanner,theintendedmergeralsohastheeffectofdissolvingand
liquidatingthesubsidiarywithoutpaymentofcorrespondingtaxes.
[Editors Note: This ruling revokes previous rulings such as BIR Ruling [DA-
(S40M-001) 007-09] dated January 13, 2009, BIR Ruling [DA-(S40-M018) 436-
08] dated November 14, 2008 and BIR Ruling [DA-(S40M-014) 387-08] dated
November 4, 2008. In these rulings, the BIR ruled that the non-issuance of shares
by the surviving corporation to the absorbed corporations does not affect the tax-
free nature of the mergers since the mergers were between or among affliated
companies ultimately owned by the same parent, or between a parent and a
subsidiary (with the parent as the surviving corporation). In these rulings, the BIR
also ruled that the transfer of properties as a consequence of mergers is not subject
to donors tax as there is no intention to donate on the part of any of the parties to
the mergers, and the mergers were undertaken for bona fde business purposes.]
BIR Ruling No. 515-2012 dated August 3, 2012
Facts:
Mr.AownssharesinACo.,whileMr.BownssharesinBCo.Mr.AandMr.B
executedseparateDeedsofAssignmenttotransfertheirrespectivesharesinACo.
andBCo.infavorofXCo.,bothinexchangeforXCo.shares.Asaresultofthe
transfer,Mr.AandMr.BwillgaincontrolofXCo.byowning58.15%and24.33%,
respectively,ofthetotalvotingstockofXCo.
Issues:
1. IsthetransferbyMr.AofhissharesinACo.toXCo.exemptfromCGTand
DST?
2. IsthetransferbyMr.BofhissharesinBCo.toXCo.exemptfromCGTand
DST?
Ruling:
1. Yes.UnderSection40(C)(2)and6(c)oftheTaxCode,nogainorlossshall
berecognizedifpropertyistransferredtoacorporationbyaperson,in
exchangeforstockinsuchcorporation,asaresultofwhichsaidperson,alone
ortogetherwithothers,notexceedingfourpersons,gainscontrolofsaid
corporation.Thetermcontrolshallmeanownershipofatleast51%ofthe
totalvotingsharesinthecorporation.
Indeterminingthe51%stockownership,onlythosepersonswhotransferred
propertyforstockinthesametransactionmaybecounteduptoamaximum
offve.Inshort,combiningallthesharestobereceivedbythetransferors,the
sameshouldtotaltoatleast51%ofthevotingpowerofallclassesentitledto
vote.
WiththeexchangeofsharesofMr.Aalone,healreadygainscontrolofX
Co.byacquiring58.15%ofitsvotingshares.Hence,nogainorlossshall
Inatransactionwheretwopersons
exchangedsharesofstockintwo
companiesforsharesofstockina
thirdcorporationinseparateDeedsof
Assignment,asaresultofwhichthe
frstpersongainscontrolof58.15%,
andthesecondpersongainscontrol
of24.33%,ofthevotingstockof
thetransferee-corporation,onlythe
transferofthefrstpersonwillbe
consideredatax-freeexchangeunder
Section40(C)(2)oftheTaxCode.
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berecognizedwithrespecttothetransferbyMr.AofhisACo.sharesin
exchangeforsharesofstockofXCo.ThereisnoneedtocombineMr.As
shareswiththesharesofMr.BtodetermineMr.Ascompliancewiththe51%
stockownership.
However,thefollowingrequirementsmustbecompliedwith:
A. Mr.Amustflewithhisincometaxreturnforthetaxableyearinwhich
theexchangetransactionwasconsummatedacompletestatementofall
factspertinenttotheexchange,including:
1. Adescriptionofthepropertieshetransferred,orhisinterestin
suchproperties,withastatementoftheoriginalacquisitioncost/
adjustmentcostbasisorotherbasisatthetimeoftransfer;
2. Thekindsofstockreceivedandpreferences,ifany;
3. Thenumberofsharesofeachclassreceived;and
4. Thefairmarketvaluepershareofeachclassatthedateofthe
exchange.
B. XCo.mustflealongwithitsincometaxreturnforthesametaxable
yearthefollowing:
1. Acompletedescriptionofthepropertiesreceivedfromthe
transferor;
2. Astatementoforiginalacquisitioncostorotherbasisofthe
propertiesinthehandsofthetransferorandtheadjustedcostbasis
thereofatthetimeofthetransfer;and
3. Informationwithrespecttothecapitalstockofthecorporation
including:
i. Totalissuedandoutstandingcapitalstockimmediatelypriorto
andimmediatelyaftertheexchange;
ii. Classesofstockandnumberofsharesissuedtothetransferor
intheexchange;and
iii. Thefairmarketvalueasofthedateoftheexchangeofthe
capitalstockissuedtothetransferor.
Lastly,within90daysfromreceiptoftheBIRRuling,thepartiestothe
transactionmustsubmitacertifedtruecopyofthedulyannotated
certifcatesofstockinrespectofthetransferredshares.
2. No.ThetransferbyMr.B,resultinginownershipofonly24.33%ofthetotal
votingsharesinXCo.,shallbetreatedasaseparatetransfersubjecttoCGT
andDST.
[Editors Note: Section 40(C)(2) allows non-recognition of gain or loss on
property-for-share transfers by transferors not exceeding fve, as long as the
51% control requirement is met. Since up to fve transferors are allowed to not
recognize gain or loss on these exchanges, it stands to reason that the shares
of the transferee-corporation received by the transferors not exceeding fve,
would be aggregated to determine compliance with the 51% control requirement.
While this particular ruling did not specifcally say so, it is possible that the BIR
treated the transfer by Mr. B as a transfer separate from the transfer by Mr. A,
and therefore did not add the X Co. shares received by Mr. B to the X Co. shares
received by Mr. A as part of the 51% control requirement, because the transfers
were effected in separate Deeds of Assignment.)
8 Tax Bulletin
BIR Issuances
Revenue Regulations No. 11-2012 dated August 17, 2012
Section3ofRRNo.1-2011isamendedtoreadasfollows:
Section3.TaxTreatment-xxx
C) OtherTaxesandFees:-xxx
TheremittancesofallOCWsorOFWs,uponshowingoftheOverseasExit
Clearance(OEC),validOverseasWorkersWelfareAdministration(OWWA)
MembershipCertifcate,or electronic receipt (e-receipt) issued by POEA,by
theOCWsorOFWbenefciaryorrecipient,shallbeexemptfromthepayment
ofdocumentarystamptax(DST)asimposedunderSection181oftheNational
InternalRevenueCodeof1997,asamended.Forthispurpose,inadditionto
theoriginalcopy,aduplicatecopyoracertifedtruecopyofthevalidproofof
entitlementreferredtoaboveshallbesecuredbytheOCWorOFWfromthe
POEAorOWWA,whichshallbeheldandusedbyhis/herbenefciaryinthe
availmentoftheDSTexemption.
IncaseofOCWsorOFWswhoseremittancesaresentthroughthebanking
system,creditedtobenefciariesorrecipientsaccountinthePhilippinesand
withdrawnthroughanautomatictellermachine(ATM),or sent through non-
bank money transfer agents,itshallbetheresponsibilityoftheOCWorOFW
toshowthevalidproofofentitlementwhenmakingarrangementforhis/her
remittancetransfers.
xxx
Localbanksandnon-bankmoneytransferagentsarerequiredtodocument
remittancesmadebyOCWsorOFWsfollowingtheformatbelow,formonitoring
purposes:
OFW Remittances for the First Quarter of 2012
(ExemptfromDSTimposedunderSec.181oftheNIRC,asamended,perR.A.
No.10022)
Nameof
OCW/OFW
Sender
Nameof
Recipient
Amountin
PesoorPeso
Equivalent
Proofof
Entitlement
toDST
exemption
(i.e.,OEC,
e-receipt,
orOWWA
Membership
Certifcate
DateofTransaction
Remittance
Date
Encashment
Date
1.Juan
delaCruz
Janede
laCruz
20,000 **** Feb1,2012 Feb1,2012
****[IndicateControlNumberprovidedbythePOEA]
Theaboveinformationisrequiredtobefurnished,onaquarterlybasis,tothe
RevenueDistrictOffce(RDO)orAuditDivisionundertheLargeTaxpayers
Service(LTS)wherethebanksandnon-bankmoneytransferagentsare
registered,tobesubmittedonorbeforethe20thdayfollowingthecloseofthe
quarter.
RRNo.11-2012amendsSection3of
RRNo.1-2011onexemptionfromDST
ofremittancesofOCWsorOFWs.
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TheseRegulationsshalltakeeffectafter15daysfromdateofpublicationina
newspaperofgeneralcirculation.
(Editors Note: RR No. 11-2012 was published in the ManilaBulletin on August 24,
2012.)
Revenue Memorandum Circular No. 34-2012 dated July 13, 2012
Background
InaMemorandumofAgreementdatedMay17,2012,theManilaInternational
AirportAuthority(MIAA)andthedomesticairlinecompanieshaveagreedthat
theDPSC,whichusedtobecollectedbyMIAAfromdepartingpassengersthrough
counterslocatedintheairport,shallbeintegratedwiththesaleofairlinetickets.
TheDPSCshallbecollectedfromthepassengersatthetimetheypurchaseairline
ticketsfromairlinecompaniesorgeneralsalesagents/travelagents.
TheDPSCshallthenberemittedtotheMIAAwhichshall,inturn,becharged
servicefeesbytheairlinecompaniesascompensationforcollectingtheDPSCon
behalfoftheMIAA.
Collection of the DPSC from passengers
TheairlinecompanyshallcollecttheDPSCfromthepassengersandshallinclude
theDPSCintheoffcialreceipt(OR)tobeissuedbytheairlinecompanyforthe
airlineticketofthepassenger.
TheDPSCshallconsistoftheShareofAirportAuthority,whichshallbesubjectto
a12%VAT,andtheAviationSecurityFee(ASF),whichshallbeVAT-exempt.
TheVATreceipttobeissuedbytheairlinecompaniesshouldrefecttheVAT-
taxableandVAT-exemptcomponentsoftheDPSC.
TheVATcomponentoftheDPSCshouldbeincludedinthetotalVAT,whichwill
includetheVATontheairlineticket.
TheShareofAirportAuthorityandtheASFmaybereportedinthefnancial
statementsoftheairlinecompanyasotherincome/expense.
Payment of DPSC by airline company to airport authority
TheDPSCcollectedbytheairlinecompanyshallbepaidtotheairportauthority,
whichshallthenissueanORtotheairlinecompany,indicatingthefullamountof
theDPSCanditsVAT-taxableandVAT-exemptcomponents.
TheDPSCshallnotformpartofthegrossreceiptsoftheairportauthorityinits
determinationofcreditablewithholdingtaxesdue.
Payment of Service Fees by airport authority to airline company
Theservicefeespaidbytheairportauthoritytoairlinecompaniesshallbesubject
toa5%withholdingVATand2%expandedwithholdingtaxongrosspayments.
Uponpaymentoftheservicefees,theairlinecompanyshallissueaVATOR.
ThiscircularshalltakeeffectonAugust1,2012.
RMCNo.34-2012clarifesthe
taximplicationsofintegratingthe
DomesticPassengerServiceCharge
(DPSC)atthepointofsaleofairline
tickets,andprescribesrulesforthe
invoicingandrecordingoftheDPSC
inthebooksofairlinecompaniesand
airportauthorities.
10 Tax Bulletin
Revenue Memorandum Circular No. 35-2012 dated August 3, 2012
Incomefromwhateversource,includingbutnotlimitedtomembershipfees,
assessmentdues,rentalincomeandservicefees,ofclubsorganizedand
operatedexclusivelyforpleasure,recreation,andothernon-proftpurposes,
aresubjecttoincometax.
TheprovisionintheTaxCodeof1977,whichgrantedincometaxexemptionto
recreationalclubs,wasomittedinthecurrentlistoftax-exemptcorporations
undertheTaxCodeof1997,asamended.
Grossreceiptsofrecreationalclubs,includingbutnotlimitedtomembership
fees,assessmentdues,rentalincomeandservicefees,aresubjecttoVAT.
Section105oftheTaxCodeprovidesthatanypersonwho,inthecourse
oftradeorbusiness,sells,barters,exchanges,leasesgoodsorproperties,
rendersservices,andanypersonwhoimportsgoods,shallbesubjecttoVAT.
Thephraseinthecourseoftradeorbusinessmeanstheregularconduct
orpursuitofacommercialoraneconomicactivity,includingtransactions
incidentalthereto,byanypersonregardlessofwhetherthepersonengaged
thereinisanon-stock,non-proftprivateorganization.Thus,evenanon-stock,
non-proftorganizationorgovernmententityisliabletopayVATonthesale
ofgoodsorservices.ThisconclusionwasalsoaffrmedbytheSupremeCourt
inCommissioner of Internal Revenue vs. Court of Appeals and Commonwealth
Management and Services Corporation, G. R. No. 125355, March 30, 2000.
Revenue Memorandum Circular No. 36-2012 dated August 3, 2012
Onlyinstruments,documentsandpapersexpresslyenumeratedinSection199
oftheTaxCodeareexemptfromDST.
Thefollowingcertifcatesandothernecessarydocumentsissuedbythe
ConstructionIndustryAuthorityofthePhilippinesaresubjecttotheP15.00
DSTimposedinSection188oftheTaxCode:
1. CertifcateofRegistrationofOverseasContractors;
2. CertifcateofRenewalofRegistrationofOverseasContractors;
3. ContractorsLicense(Original);
4. Certifcateofwhetheracertaincontractorislicensed;
5. Certifedtruecopiesoflicensecertifcates;
6. Certifedtruecopiesofdocuments,suchasAffdavitofUndertakingof
SustainingTechnicalEmployee(STE)andCurriculumVitaeofSTE;
7. CertifcateofAccreditationofArbitrators;and
8. CasedocumentstobeusedtosupportpetitionorappealintheCourtof
Appeals.
Revenue Memorandum Circular No. 37-2012 dated August 3, 2012
Section11ofRRNo.06-08providesthatnosale,exchange,transferorsimilar
transactionintendedtoconveyownershipof,ortitleto,anyshareofstockshall
beregisteredinthebooksofthecorporationunlessthereceiptsofpaymentof
thetaxhereinimposedisfledwith,andrecordedby,thestocktransferagent
orsecretaryofthecorporation.
TheaboveprovisionofRRNo.06-08hascreatedconfusiononwhethera
CertifcateAuthorizingRegistration(CAR)isstillnecessarybeforesharesof
stocknottradedinthestockexchangemaybetransferred.
RMCNo.36-2012clarifeswhether
documentsmentionedinSection199
oftheTaxCode,asamendedbyRANo.
9243,aresubjecttotheP15.00DST
prescribedinSection188oftheTax
Code.
RMCNo.37-2012clarifesSection11
ofRRNo.06-08bymakingitclearthat
aCARisstillnecessarybeforesharesof
stocknottradedinthestockexchange
maybetransferred.
RMCNo.35-2012clarifesthe
taxabilityofclubsorganizedand
operatedexclusivelyforpleasure,
recreation,andothernon-proft
purposes.
11
Inordertotransferownershipofsharesofstocknottradedinthe
stockexchange,itisnecessarytosecureaCARpursuanttoRevenue
MemorandumOrder(RMO)No.15-03.Thereceiptsofpaymentofthe
taxshouldalsobefledandrecordedbythesecretaryofthecorporation
pursuanttoSection11ofRRNo.06-08.
Revenue Memorandum Circular No. 38-2012 dated August 3, 2012
Incomputingthe20%discountandtheexemptionfromVAT,theformula
is:
TotalBillingAmountless12%VATx20% = SeniorCitizen
No.ofCustomers Discount
Theaboveformulawillapplyifnoindividualizedfooditemcanbeordered
orifthetransactionwiththeseniorcitizenisnotprocessedseparately.
Thetotalbillingamountusedinthecomputationofthe20%discountis
theamountexclusiveoftheVAT.
Forrestaurants,thediscountshallbeforthesaleoffood,drinks,dessert
andotherconsumableitemsservedbytheestablishments,including
valuemealsandpromotionalmeals,offeredfortheconsumptionofthe
generalpublic.Condimentsandsideproductsfallwithintheambitof
otherconsumableitemsservedbytheestablishments.
Innocaseshallthediscountgrantedtoseniorcitizensbelessthan20%.
Thereshouldbenofxed,maximumamountorcapwhichwilllimitthe
discountbelowthe20%rate.The20%discountshallbegiventogoods
purchasedbyseniorcitizensbasedonthesellingpriceexclusiveofVAT.
The20%discountandVATexemptionshallalsoapplytosetmeals
purchasedbyseniorcitizens,provided,however,thatthemealshallbe
limitedtoasingle-servingmealwithbeverageforanindividualsenior
citizen.
The20%discountshallapplytodine-in,take-outandtake-homeorders
(excludingbulkorders)aslongasitistheseniorcitizenhimself/herself
whoispresentandpersonallyordersandcanshowavalidseniorcitizen
identifcation(ID)card.Iftheseniorcitizenmerelytakeshomethe
unfnishedorunconsumeddine-inorder,he/sheshallstillbeentitledto
the20%discount,providedtheleftoverisnotpartofbulkorders.
Ifthegroupofdinersiscomposedofseniorcitizenswhoorderedgroup
mealsorfooditemsforsharinginrestaurants,eachseniorcitizenwitha
validseniorcitizensIDcardshallbeentitledtothe20%discountandVAT
exemption.IfnotalltheseniorcitizenshavetheirvalidseniorcitizensID
cards,thevalueofthefoodpurchasedattributabletoseniorcitizenswith
seniorcitizenscardsmaybecomputedusingtheformulaabove.
Bulkordersarenotentitledtothe20%discountandVATexemptionsince
theyarewithinthecontextofpre-contractedorpre-arrangedgroupmeals
orpackages.
Mealsprimarilypreparedandintentionallymarketedforchildrenand
notforseniorcitizenspersonalconsumptionarenotentitledtothe20%
discount.
RMCNo.38-2012furtherclarifes
inQuestionandAnswerformat
theprovisionsofRRNo.7-2010,
asamendedbyRRNo.8-2010,
implementingthetaxprivilegesgranted
underRANo.9994,otherwiseknown
astheExpandedSeniorCitizensAct
of2010.
12 Tax Bulletin
TheMostExpensiveMealCombination(MEMC)isanamountcorrespondingto
thecombinationofthemostexpensiveandbiggestsingle-servingmealwith
beverageservedinaquickservicerestaurant.TheMEMCisdeemedfexibleand
isadjustedaccordinglybyfoodestablishmentstoestimateasinglefoodpurchase
ofanindividualseniorcitizen.MEMCisappliedonlytotake-out,take-home,
drive-thruanddeliveryorders.
Pasalubongfooditemswhicharesingle-serving/solomealsforthepersonaland
exclusiveconsumptionoftheseniorcitizenareentitledtothe20%discountand
VATexemption.Otherpasalubongfooditems(e.g.,boxofbiscocho,bottlesof
ginamos,severalpacketsofmangopreserves)whicharenotforthepersonaland
exclusiveconsumptionoftheseniorcitizenarenotentitledtothe20%discount
andVATexemption.Thislimitationextendstonoveltyitemsornon-consumables
soldinrestaurants.
Called-inorphoned-inordersareentitledto20%discountandVATexemption.
Theyare,likewise,subjecttocertainconditions,i.e.,seniorcitizenIDcard
numbermustbegivenwhilemakingtheorderoverthetelephone;thesenior
citizenIDcardmustalsobepresentedupondeliverytoverifytheidentityofthe
seniorcitizenentitledtothe20%discountandVATexemption.
Incaseofcalled-inorphoned-inordersofgroupmeals,thefoodestablishments
mustdeterminethenumberofseniorcitizenscomprisingthegroup,andthe20%
discountshallbecomputedbasedonthevalueofthefoodattributabletothe
qualifedseniorcitizens.TheseniorcitizenIDcardnumber/smustbegivenwhile
makingthecalled-inorphoned-inorderandtheIDcard/smustbepresented
upondelivery.
Apurchaseofawholecakeorpizzamaybeconsideredasapurchaseofagroup
mealormealforsharing.Ifthewholecakeorpizzapurchasedisgoodfor5
personsandthegroupiscomposedof5seniorcitizens,eachwithavalidsenior
citizenIDcard,theyshallbeentitledtothe20%discountortheentirefood
purchaseshallbeentitledtothe20%discount.Ifthegroupiscomposedofsenior
citizens,butnotallhavetheirvalidseniorcitizenIDcard/s,orcomposedof
seniorcitizensandnon-seniorcitizens,thevalueofthecakeorpizzaattributable
tothequalifedseniorcitizen/sshallbecomputedusingtheformulaabove.Ifthe
seniorcitizenpurchasesasliceofcakeorpersonalservingofcake,heshallbe
entitledtothe20%discount.
Thepurchasebyaseniorcitizenofalcoholicbeveragesifservedasasingle
servingdrinkisentitledtothe20%discountandVATexemption.Thediscount
andexemptionshallnotbegiventopurchasesinbulk,inbuckets,orin
cases.However,alcoholicbeveragespurchasedinabar,cluborcabaretare
exemptfromVATbutsubjecttoamusementtaxof18%underSection125of
theTaxCode.Theseniorcitizenmaystillbeentitledtothe20%discountonthe
purchaseofthealcoholicdrink,butshallonlybelimitedtoasingleservingof
alcoholicdrink.
Cigarettes/cigarsarenotfoodoressentialitemsdeemedentitledtothe20%
discount.
The20%discountandVATexemptionprivilegeshallalsoapplytomedicines
purchasedfromdrugstores,hospitalpharmacies,medicalandopticalclinics,and
similarestablishments,includingnon-traditionaloutletsdispensingmedicines.
Adeliveryfee/chargenotbilledseparatelyissubjecttothe20%discount.Ifthe
deliveryfee/chargeisbilledseparately,itisnotentitledtothe20%discountand
issubjecttoVAT.
Tollfeesarenotsubjecttothe20%discount.
13
Taxifaresaresubjecttothe20%discount.
Inthepurchaseofgoodsandserviceswhichareonpromotionaldiscount,
theseniorcitizenshallavailofeitherthepromotionaldiscountorthe20%
discount,whicheverishigher.However,thediscountgiventotheseniorcitizen
shallinnocasebelessthan20%.Thesaleofgoodsonpromotionaldiscountis
stillVAT-exempt.
The20%discountgivenbythebusinessestablishmentsisdeductiblefromtheir
grossincomeduringthesametaxableyearwhenthesaiddiscountsaregiven,
andtheinputtaxattributabletotheVAT-exemptsaleisconsideredascostor
anexpenseaccountofthebusinessestablishments.Boththediscountand
inputVATthataretreatedascostorexpenseaccountsareabsorbedbythe
State.
IncaseofbusinessestablishmentswhicharenotsubjecttoVATbutto
percentagetaxbecausetheirgrossannualsales/receiptsdonotreachthe
P1,919,500.00thresholdamountunderRRNo.16-2005asamendedby
RRNo.16-2011,seniorcitizensarenotexemptfromthepaymentofthe
percentagetax.RANo.9994doesnotincludeexemptionfromthepayment
ofpercentagetax.Theexemptiondoesnotcoverotherindirecttaxesthatmay
bepassed-onbythesellertotheseniorcitizenbuyer,suchaspercentagetax.
Insuchcase,thediscountmustbeonthetotalcostofthegoodsorservices
chargedbytheseller,exclusiveofthetax.
Theamountofsalesthatmustbereportedfortaxpurposesisthe
undiscountedsellingpriceandnottheamountofsalesnetofdiscount.The
grosssellingpriceandthesalesdiscountmustbeseparatelyindicatedinthe
offcialreceiptorsalesinvoiceissuedbytheestablishmentforthesaleof
goodsorservicestotheseniorcitizen.
IfthesellerusesaPointofSaleMachineorCashRegisterMachine,the
machinetapeshouldbeabletosegregatetheexemptsalefromthetaxable
sale.Ifthemachinesareincapableofsegregation,theyshouldbere-
programmedtocomplywiththerequirement.Inthemeantime,amanual
invoice/receiptshallbeissuedbytheseller.
Thesellermayopttoissueaseparateinvoice/receiptonitssaletosenior
citizens.Theseparateinvoice/receiptwillrefecttheamountofthediscount
andthetotalamountpayable.ThewordVAT-ExemptSalemustbewrittenor
printedprominentlyonthefaceoftheinvoice/receipt.
Thesellermayissueoneinvoice/receiptfortheentiretransactionifthe
merchandise/servicewassoldunderasingletransactioncomprisedofasale
toaseniorcitizenandasaletoanon-seniorcitizen,providingforaproper
breakdownoftheexemptsaleandtaxablesale.Theinvoicemustproperly
refectthediscountontheexemptsale.TheVATdueonthetaxablesalemust
beseparatelybilledintheinvoice/receipt.
Theincomestatementofthesellermustrefectthediscount,notasa
reductionofsalestoarriveatnetsales,butasadeductionfromitsgross
income(saleslesscostofsales).Thus,the20%discountshallbetreatedas
anecessaryandordinaryexpensedulydeductiblefromthegrossincome,
providedthatthesellerdoesnotoptfortheOptionalStandardDeduction
duringthetaxablequarter/year.
Theinputtaxattributabletotheexemptsaleshallnotbeallowedasaninput
taxcreditbutmustbetreatedasacostoranexpenseaccountbytheseller.
14 Tax Bulletin
Businessestablishmentsgivingsalesdiscountstoqualifedseniorcitizensare
requiredtokeepaseparateandaccuraterecordofsales,whichshallinclude
thenameoftheseniorcitizen-purchaser,OffceforSeniorCitizensAffairs-
ID,grosssales/receipts,salesdiscountsgranted,datesoftransactionsand
invoice/ORnumberforeverysaleortransactiontoseniorcitizen.Theinvoicing
requirementsinSection4.113-1ofRRNo.16-2005mustalsobecomplied
with.
Aspecialdiscountof5%oftheregularretailpriceofbasicnecessitiesand
primecommoditiesasdefnedundertheJointDepartmentofAgriculture
(DA)andDepartmentofTradeandIndustry(DTI)AdministrativeOrderNo.
10-02,Seriesof2010,shallbegrantedtoseniorcitizensontheirpurchases,
takingintoaccountthatsaidpurchasesshallbeforthepersonalandexclusive
consumptionand/orenjoymentoftheSeniorCitizen.
Purchasesofbasicnecessitiesandprimecommoditiesbyseniorcitizensas
defnedunderSection2ofJointDTI-DAAdministrativeOrderNo.10-02,
Seriesof2010,arenotexemptfromVAT.
Toiletries,suchastoothpaste,bathsoapandtissuepaperarenotentitledto
the5%specialdiscount.OnlytheitemslistedunderRANo.7581orthePrice
Actareidentifedasbasicnecessitiesandprimecommoditiessubjecttothe5%
specialdiscount.However,powdered,liquid,barlaundryanddetergentsoap
areconsideredbasicnecessitiessubjecttothe5%specialdiscount.
Maximumpurchaseperweekmeansthatseniorcitizensshallenjoya
specialdiscountof5%oftheregularretailprice,withoutexceptionfromVAT,
ofbasicnecessitiesandprimecommoditiesprovidedundertheJointDTI-
DAAdministrativeOrderNo.10-02,providedthatthetotalamountofsaid
purchasesshallnotexceedthemaximumamountpercalendarweek.The
maximumamountisP1,300.00percalendarweek,aftercombiningsetlimits
underprimecommoditiesandbasicnecessities,withoutcarryoverofthe
unusedamount.
Revenue Memorandum Circular No. 39-2012 dated August 3, 2012
Backwages,allowances,andbeneftsawardedinalabordisputeconstitute
remunerationforservicesthattheemployeewouldhaveperformedinthe
yearwhenactuallyreceived,orduringtheperiodofhisdismissalfromthe
servicewhichwassubsequentlyruledasillegal.Theemployeeshouldreport
asincomeandpaythecorrespondingincometaxesbyallocatingorspreading
hisbackwages,allowancesandbeneftsthroughtheyearsfromhisseparation
uptothefnaldecisionofthecourtawardingthebackwages.Thebackwages,
allowancesandbeneftsaresubjecttowithholdingtaxonwages(WTW).
Ifthejudgmentawardedinalabordisputeisenforcedthroughgarnishmentof
debtsduetotheemployerorothercreditstowhichtheemployerisentitled,
thepersonowingsuchdebtsorhavingpossessionorcontrolofsuchcredits
(e.g.,banksorotherfnancialinstitutions)wouldnormallyreleaseandpay
theentiregarnishedamounttotheemployee.Asaresult,employerswhoare
mandatedtowithholdtaxesonwagescannotwithholdtheappropriatetaxdue
thereon.
UnderSection78(D)(1)oftheTaxCodeandSection2.78.4(A)ofRRNo.
2-98,asamended,thetermemployerincludespersonshavingcontrolof
thepaymentofwagesorsalaries.Inthiscase,thegarnisheesarethepersons
RMCNo.39-2012mandatesthe
withholdingofincometaxon
backwages,allowances,andbenefts
receivedbyemployeesthrough
garnishmentofdebtsorcredits
pursuanttoalabordisputeaward.
15
owingdebtsduetotheemployerorinpossessionorcontrolofcreditstowhich
theemployerisentitled.Accordingly,theyareincontrolofthepaymentof
backwages,allowancesandbenefts,andtheyareauthorizedtodeductand
withholdtheincometaxduefromthebackwages,allowances,andbeneftsto
bepaidtotheemployees,andare,therefore,liableforsuchdeductions.
Garnisheesofajudgmentawardinalabordisputeareconstitutedas
withholdingagentswiththedutyofdeductingthecorrespondingWTWdue
thereonequivalentto5%oftheportionofthejudgmentawardrepresenting
thetaxablewages,allowances,andbenefts.
Revenue Memorandum Circular No. 40-2012 dated August 3, 2012
Section40(C)(2)oftheTaxCodeprovidesforthenon-recognitionofgainor
lossin(i)casesofmergersorconsolidations,and(ii)property-for-shareswaps
wherethetransferor,aloneortogetherwithothersnotexceedingfour,gains
controlofthetransferee-corporation.
RulingsissuedunderSection40(C)(2)ofTaxCodeshallbevalidonlyfor90
days,countedfromthedateofthereceiptoftherulingbyanyofthepartiesto
theexchangetransaction.Thepropertiesandsharesofstockinvolvedinthe
transfershouldbeconveyedtothetransferee/sandtransferor/s,respectively,
withinthisperiod.
PursuanttoRRNo.18-2001andRMONo.32-2001,aphotocopyofthe
TransferCertifcateofTitle(TCT)/CondominiumCertifcateofTitle(CCT)/
ShareofStockthatbearstheannotationofsubstitutedbasisofthereal
property/sharesofstocktransferred/receivedinconnectionwiththe
transaction,dulycertifedbytheRegisterofDeeds/CorporateSecretary,
shouldbesubmittedtotheLawDivision,BIR,7/FNationalOffceBuilding,
Diliman,QuezonCity,alsowithinthe90-dayperiodfromdateofreceiptof
therulingorcertifcationbyanyofthepartiestotheexchangetransaction;
otherwise,therulingshallbevoidandtheChiefoftheLawDivisionshallrefer
thecasetotheProsecutionDivisionforappropriateaction.
AnyviolationofthisCircularbyanyofthepartiestotheexchangetransaction,
orbyanypublicoffceroremployee,shallbesubjecttotheappropriate
penaltiesunderSections269and275oftheTaxCode.
RevenueDistrictOffcesaredirectednottohonorsuchrulingsbeyond90
dayscountedfromthedateofreceiptoftherulingbyanyofthepartiesto
theexchangetransaction,unlessanextensionofperiodisgrantedbythe
Commissionerinmeritoriouscases.
Revenue Memorandum Circular No. 47-2012 dated August 14, 2012
ThedeadlineforflingapplicationsforVATTCCMonetizationshallbeas
follows:
Type of TCC Filing Period
ForrevalidatedandunexpiredTCCsoriginally
issuedin2002and2003
July17,2012to
September1,2012
Forrevalidatedand/orunexpiredTCCs
originallyissuedin2004untilApril11,2012
July17,2012to
October17,2012
RMCNo.40-2012prescribesa
prescriptiveperiodforrulingsissued
pursuanttoSection40(C)(2)ofthe
TaxCode.
RMCNo.47-2012prescribesthe
rulesanddeadlinesfortheflingof
applicationsforenrollmentintheVAT
TCCMonetizationProgram,pursuant
totheDOF,DBMandBIRJointCircular
No.2-2012datedMay31,2012.
16 Tax Bulletin
TheapplicationforenrollmentintheVATTCCMonetizationProgramfor
VATTCCsthatweresolelyissuedbytheBIRshallbefledwiththeBIRVAT
TCC-issuingoffce,usingtheapplicationformforenrollmentwhichcanbe
downloadedfromtheBIRwebsiteatwww.bir.gov.ph.
ForVATTCCsthatwerejointlyissuedbytheDOFOne-Stop-ShopInter-Agency
TaxCreditandDutyDrawbackCenterandtheBIR,theapplicationforenrollment
insaidprogramcanbedownloadedfromtheDOFwebsiteathttp://taxcredit.
dof.gov.ph.
VATTCCholderswithpendingapplicationsforcashconversionofoutstanding
VATTCCspursuanttoSection204(C)oftheTaxCodecanstillapplyfor
enrollmentintheMonetizationProgrambywithdrawingthepreviouslyfled
applicationforcashconversionandflinganewapplicationforenrollmentwith
saidprogramwiththeVATTCC-issuingoffcesdesignatedastheReceiving
OffcesfortheProgramsApplicationforEnrollment.
[Editors Note: RMO 47-2012 was amended by RMO 51-2012 dated August 31,
2012 to extend the deadline for fling applications for monetization for revalidated
and unexpired TCCs originally issued in 2002 and 2003, from September 1, 2012 to
September 15, 2012 or the expiration of the TCC, whichever comes frst.]
BOC Issuances
Customs Administrative Order No. 1-2012 dated June 26, 2012
CAONo.1-2012shallinitiallyapplytoexportersinsidetheClarkFreeport
ZonewithinthejurisdictionofthePortofClark.UponthedirectiveoftheBOC
Commissioner,itshallcoverexportersinotherselectedairorseaports.
TheCommissionerofCustomsshallconstituteacommitteeheadedbyaDeputy
CommissionerinchargeofaccreditationofAEOs.Thecommitteeshallperform
otherfunctionsasmaybedeterminedbytheCommissioner.
RequirementsundertheAEOProgram:
1. Dulyflled-upApplicationForm
2. Disclosureofthefollowinginformation:
a. Organizationalcharacteristics;
b. Compliancerecord;
c. Volumeofbusiness;
d. Goods;
e. Internalproceduresrelatedtodeclaration.
3. Companysecurityprofleincluding:
a. Asummaryofthecompanyssecuritymanagementsystem;
b. Asummaryofthecompanysriskassessmentprocess;
c. Measurestoenhancethesecurityofthecompanyssupplychain.
4. Supportingdocumentsincluding:
a. Processmapthatillustratestheflowofgoodsandinformationthrough
thecompanyssupplychain;
b. Siteplanthatshowsthelayoutofthecompanyspremisesandclearly
identifiesallperimeters,accessareas,buildings,structures,security
andaccesscontrols.
CAONo.1-2012establishesthe
AuthorizedEconomicOperator(AEO)
Programforexporters.
17
5. Copyofthecompanysrelevantsecurityaccreditations.
6. Otherrelevantsupportingdocuments.
Thesummaryofthesecuritymanagementsystemshallcontainthefollowing:
1. Companyssecuritypolicy,securityobjectivesandcommitmenttosecurity;
2. Proceduresforensuringthatpertinentsecuritymanagementinformationis
communicatedtoandfromrelevantemployeesandotherstakeholders;
3. Proceduresforthereviewofthecompanyssecurityprofleatplanned
intervals,toensureitscontinuingsustainability,adequacyandeffectiveness;
4. Otherrelevantinformation.
Thesummaryofriskassessmentshallcontainthefollowing:
1. Flowcharttoillustratethecompanysriskassessmentprocess;
2. Risksandvulnerabilitiesidentifed;
3. Countermeasuresputinplacetoreducetheidentifedrisksand
vulnerabilities;
4. Whentheriskassessmentwasconducted;
5. Whoconductedtheriskassessment;
6. Otherrelevantinformation.
Elementsofthesecuritymeasuresthatneedtobeaddressed:
1. Premisessecurityandaccesscontrols;
2. Personnelsecurity;
3. Businesspartnersecurity;
4. Cargosecurity;
5. Conveyancesecurity;
6. InformationandInformationTechnology(IT)security;
7. Incidentmanagementandinvestigations;
8. Crisismanagementandincidentrecovery.
Asidefromincreasedvisibilityofgoodsinthesupplychain,reductionin
pilferages,andgreatereffciencyinsupplychainmanagement,accredited
companiesshallbeentitledtothefollowingbenefts:
1. Dedicatedprocessinglanesresultinginreducedprocessingperiod;
2. Renewalofexporteraccreditationonalongtermbasis;
3. Lastpriorityinpost-entryaudit;
4. Recognitionasalowriskcompany;
5. ReducedinspectionorexpeditedclearancebyotherCustomsauthorities
shouldcertifedstatusbealsorecognizedbyothercountriesundera
mutualrecognitionprogramestablishedunderabilateralormultilateral
arrangement;
6. OthertradefacilitationbeneftsthatmaybeaffordedbytheBOCunder
existinglawsandregulations.
AtrustedpartnerundertheAEOProgramshallhavethefollowing
responsibilities:
1. UpdatetheBOCasandwhentherearesignifcantchangestothecompanys
securityprofleandotherinformationrequiredtobedisclosed;
2. Submitanannualstatementofcommitment;
3. InformtheBOCofanynon-conformitiesbythecompanywithAEO-
PhilippinesGuidelines;
4. Renewitsaccreditationasatrustedpartnereverytwo(2)years.
18 Tax Bulletin
TheaccreditationundertheAEOProgrammayberevokedforthefollowing
grounds:
1. ViolationofthetermsandconditionsoftheAEOcertifcation;
2. Non-compliancebythecompanywithPhilippinecustomslawsand
regulationsorotherlawsandregulations;
3. Supplychainsecurityweaknessesornon-conformitywithCAONo.
1-2012anditsimplementingrulesandregulations;
4. CompanyoptstowithdrawfromtheProgram.
AcompanymayappealtheBOCdecisiondenyingitsapplicationunderthe
AEOProgramwiththeCommissionerofCustomswithin15calendardays
fromreceiptofthedecision.
Alldocumentsorinformationprovidedbycompaniesshallremain
confdential,andshallnotbedisclosedtoathirdpartywithoutthe
companiespriorwrittenconsent.
TheCommissionerofCustoms,uponconsultationwithstakeholders,shall
issuetherulesandregulationsfortheeffectiveimplementationofCAONo.
1-2012.
Allorders,memoranda,circularsorpartsthereofwhichareinconsistentwith
CAONo.1-2012aredeemedrevoked,amended,ormodifedaccordingly.
CAONo.1-2012shalltakeeffectffteen(15)daysafterpublicationina
newspaperofgeneralcirculation.
[Editors Note: CAO No. 1-2012 was published in the ManilaBulletin and the
PhilippineStar on August 15, 2012.]
Customs Memorandum Order No. 9-2012 dated July 26, 2012
ExistingBOCrulesandregulationsallowforthemanualprocessingofimport
entriesinthefollowingcases:
1. Computersystemsbreakdown;
2. Powerfailurewhichrendersthecomputersystemnon-operational;
3. Theauthorizedagentbankisoffine;
4. UponauthorizationbytheBOCDeputyCommissionerforMISTG.
Formanualprocessingofimportentries,priorauthorizationfromthe
CommissionerofCustomsorinhisabsence,theDeputyCommissionerfor
MISTG,shallbeobtained.
TheDistrictorPortCollectorshallbeheldaccountableforimportentries
processedmanuallywithoutpriorapprovaloftheCommissionerofCustoms
ortheDeputyCommissionerforMISTG.ErringBOCoffcialsandemployees
shallbeimposedappropriateadministrative,civil,and/orcriminalsanctions,
subjecttoexistinglawsandCivilServicerulesandregulations.
CMONo.9-2012requiresprior
approvalfromtheCommissionerof
CustomsortheDeputyCommissioner
fortheMISTGforthemanual
processingofimportentriesinorder
toeffecttheclearanceandreleaseof
importedgoods.

19
PSE Issuance
PSE Memorandum CN No. 2012-0046 dated August 22, 2012
UndertheAmendedRuleonminimumpublicownership(MPO),listed
companiesthatarenotcompliantwiththeMPOrequirementaregivena
graceperiodofuptoDecember31,2012withinwhichtocomplywiththe
MPO.
Immediatelyafterthegraceperiod,thePSEwillimposeatradingsuspension
onsaidsharesforaperiodofnotmorethan6months.
Consequently,thesaleofsaidsharesduringthesuspensionperiodmayonly
beeffectedoutsidethePSEstradingsystem,andshallbesubjecttothe
followingtaxes:
Applicable Tax Tax Rate and Base
CapitalGainsTax Onnetcapitalgainsamountingtonotover
P100,000.005%
OnanyamountinexcessofP100,000.0010%
DocumentaryStampTax P0.75oneachP200.00oftheparvalueofthe
stock
Furthermore,ifthefairmarketvalue(FMV)ofthesharesofstocksoldis
greaterthantheconsiderationorthesellingprice,theamountbywhichthe
FMVofthesharesexceedsthesellingpriceshallbedeemedagiftsubject
todonorstaxunderSection100oftheTaxCode.Intheabsenceofany
issuancebytheBIRtothecontrary,therulesprescribedinRRNo.06-08for
determiningthevalueoflistedsharesofstockwhichweresold,transferred
orexchangedoutsideofthetradingsystemand/orfacilitiesofthePSEshall
apply.
TheforegoingarebasedonthePSEsunderstandingoftheexisting
provisionsoftheTaxCodeandrelevantBIRissuances.Incaseofconfictor
ambiguity,theBIRsinterpretationshallprevail.
SEC Issuances
SEC Memorandum Circular No. 6 dated August 15, 2012
ConsistentwiththeobjectivesoftheAntiRedTapeActof2007(RANo.
9485),theSECresolvedtodispensewiththefollowingrequirementsinthe
registrationactivitiesbelow:
1. BankCertifcateofDepositfortheregistrationoftheArticlesof
Incorporationofnewcorporationswherethesubscriptiontothe
authorizedcapitalstockispaidincash;ifaportionofthesubscription
isotherthancash,thenon-cashsubscriptionshallbeprovenbythe
appropriatesupportingdocuments;
PSEMemorandumCNNo.2012-
0046remindstheinvestingpublic
oftheeffectsofthefailureoflisted
companiestocomplywiththeMPO
requirementbyDecember31,2012.
SECMCNo.6dispenseswithsome
requirementsinsomeregistration
activities.
20 Tax Bulletin
2. SpecialAuditReportforapplicationsforincreaseintheauthorized
capitalstockofcorporationswherethesubscriptiontotheincreaseis
paidincashexcept(a)listedcompanies,(b)publiccompaniesasdefned
intheSecuritiesRegulationCode,(c)companiesthatofferorsell
securitiestothepublic,and(d)wherethepaymentforthesubscription
totheincreaseismorethanP10million;
Inlieuofsuchreport,anotarizedSubscriptionContractbetweenthe
stockholder/sandtreasurerstatingthenumberofadditionalshares
subscribedtoandpaidforshallbesubmittedbythecorporation.
3. PrimaryEntryforDeedofAssignmentintheregistrationofnew
corporationsorincreaseintheauthorizedcapitalstockwhereland
orrealestatepropertyisofferedasconsiderationforsubscriptionto
sharesofstock.
SECMCNo.6shalltakeeffectimmediately.
(Editors Note: SEC MC No. 6 was published in the ManilaTimes on August 23,
2012.)
SEC-OGC Opinion No. 12-11 dated August 8, 2012
Facts:

ACo.isprivatecorporationwhichis99.995%ownedbyforeignindividuals.

Issue:
CanACo.acquirerealpropertyinthePhilippines?
Ruling:
No.ACo.cannotownlandinthePhilippines.Foracorporationtopurchase,
acquireorownlandinthePhilippines,atleast60%ofthetotalcapitalstockof
thecorporationmustbewholly-ownedbyFilipinocitizens.
Astoownershipofrealpropertyotherthanland,foreignerscangenerally
purchasehousesorbuildingsunlessspecifcallyprohibitedbylaw.One
exampleofaprohibitiononownershipofinterestinabuildingisinthecase
ofacondominiumproject.Interestinacondominiummaybeintheformof
ownership,leaseoranyrealrights.Ifthecondominiumprojectissetupon
leasedland,thecorrespondingcondominiumcorporationmaybeestablishedby
acorporation100%foreign-owned.Ifthecondominiumprojectissituatedon
alandownedbythecondominiumcorporation,whichisaFilipinocorporation,
anyinterestinthecondominiumcannotbetransferredtoaliensorforeign
corporationswhosecapitalstockismorethan40%ownedbyaliens.Ifthe
commonareasareheldbyacondominiumcorporation,thetransfertoaliens
ofunitsinaprojectmaybemadeonlyuptothepointwheretheconcomitant
transferofstockholdingsinthecondominiumcorporationwouldnotcausethe
alieninterestinsuchcorporationtoexceed40%ofitsentirestock.
Foracorporationtopurchase,acquire
orownlandinthePhilippines,atleast
60%ofthetotalcapitalstockofthe
corporationmustbewholly-ownedby
Filipinocitizens.
21
SEC-OGC Opinion No. 12-12 dated August 9, 2012
Facts:

CCo.isaholdingcompany.Ittransferreditsprincipaloffcetoanewaddress
situatedinthesamecitywhereitspreviousoffcewaslocated.Ithasapending
applicationforanamendmentofitsArticlesofIncorporation(AOI).

Issue:
DoesCCo.needtoamenditsAOItorefectthechangeinitsoffceaddress?
Ruling:
Yes.CCo.needstoamenditsAOItorefectthechangeofaddressfrom
onebuildingtoanotherevenifthesecondbuildingiswithinthesamecityor
municipality.ItisnotenoughtorefectthechangeintheGeneralInformation
Sheet(GIS).However,ifthetransferismerelytoanotherfoorofthesame
building,thereisnoneedtoamendtheAOI.
Asforanypenaltytobeimposed,sincethereisapendingapplicationfor
amendmentofAOI,nopenaltywillbeimposediftheboardresolutioneffecting
thechangeinaddresshasthesameorearlierdatethantheGIS.However,if
theGISisdatedearlierthantheboardresolution,afneofP5,000.00willbe
imposedonastockcorporation.
SEC-OGC Opinion No. 12-13 dated August 9, 2012
Facts:

XCo.isaholdingcompanythatowns11%shareholdingsinYCo.,anairline
companywhichis40%foreign-owned.
Atpresent,XCo.is100%Filipino-owned.However,itwishestorestructure
itsshareholdingsbyallowing51%ofitssharestobesubscribedbyAtty.Z,
aFilipinocitizen.Atty.ZholdsthesharesintrustforMs.A,a14-year-old
benefciarywhowasbornoutoflawfulwedlockbetweenMr.G,aGerman
national,andhisFilipinawife;hence,Ms.AislikewiseaFilipinocitizen.
Mr.Gholds30%outofthe40%foreignownershipinYCo.Mr.G,Ms.Asfather
andlegalguardian,executedadeedoftrustinfavorofAtty.Ztoconcludethe
shareholdingsofMs.AinXCo.

Issues:
1. IsthetrustagreementbetweenMr.GandAtty.Zvalid?
2. IftheproposedrestructuringisadoptedbyXCo.,isXCo.stillconsidered
100%Filipino-owned?
3. IftheproposedrestructuringisadoptedbyXCo.,willYCo.beinexcessof
the40%foreignownershiplimitation?
AcorporationneedstoamenditsAOI
torefectthechangeofaddressfrom
onebuildingtoanother,evenifthe
secondbuildingiswithinthesamecity
ormunicipality.
Indeterminingthecitizenshipofshares
beingheldintrust,thenationalityof
boththetrusteeandthebenefciary
shouldbeconsidered.
22 Tax Bulletin
Ruling:
1. TheSECcannotrenderanopiniononthevalidityofcontracts,suchasa
trustagreement.
2. Yes.XCo.willstillbeconsidered100%Filipino-ownediftheproposed
structuringisadopted.Forpublicutilitycompaniessuchasanairline
company,atleast60%ofitscapitalmustbeownedbyFilipinocitizens.In
determiningthecitizenshipofsharesbeingheldintrust,thenationalityof
boththetrusteeandthebenefciaryshouldbeconsidered.
Intheproposedrestructure,51%ofthesharesinXCo.willbesubscribed
byAtty.Z,whoisaFilipinotrustee,intrustforMs.A,whoisaFilipino
benefciary.Thus,XCo.willstillbe100%Filipino-owned.
3. No.YCo.willnotbeinexcessofthe40%foreignownershiplimitationif
theproposedstructuringisadopted.
Atpresent,40%ofYCo.isforeign-owned.Iftherestructuringisadopted,
11%,whichisownedbyXCo.willstillbeconsideredFilipino-owned.Asto
theremaining49%,weassumethatthisisownedbyFilipinos.Thus,YCo.
satisfesthe60%Filipinoownershiprequirement.
BSP Issuance
BSP Circular No. 762 dated July 25, 2012
SectionX128/4137QandrelatedsubsectionsoftheManualof
RegulationsforBanks(MORB)/ManualofRegulationsforNon-Bank
FinancialInstitutions(MORNBFI)shallbeaddedtoread,asfollows:
SectionX128/4137QDeposits for stock subscription.Depositsfor
stocksubscriptionrefertopaymentsmadebyexistingstockholders
ornewsubscribersofthebank/quasi-bank(QB)onsubscriptiontothe
increaseintheauthorizedcapital,whichmayberecognizedeitheras
aliabilityorequity.
Depositsforstocksubscriptionshallberecognizedaspartofthe
equityforprudentialreportingpurposeswhenallofthefollowing
conditionsaremet:
1. Thedepositforstocksubscriptionmeetsthedefinitionofan
equityinstrumentunderPhilippineAccountingStandards(PAS)
32Financial Instruments: Presentationsuchthatthedepositfor
stocksubscriptionshallnotbeinterest-bearingnorwithdrawable
bythesubscriber.
2. Thebank/QBsexistingauthorizedcapitalisalreadyfully
subscribed;
3. Thebank/QBsstockholdersandboardofdirectorshaveapproved
theproposedincreaseinauthorizedcapital;
CircularNo.762amendsthe
regulationsonDepositsforStock
Subscriptionsofbanks/quasi-banks.

23
4. Thebank/QBhasfiledanapplicationfortheamendmentofits
ArticlesofIncorporationfortheincreaseinauthorizedcapitalwith
theappropriatedepartmentoftheSES,BSP,dulysupportedby
completedocumentsaslistedinCircularLetterNo.2009-042dated
May14,2009;
ApplicationsfortheamendmentofArticlesofIncorporationfor
theincreaseinauthorizedcapital,whichhavebeenreturneddue
toinsufficiencyofsupportingdocuments,shallnotqualifyfor
recognitionasanequityinstrument;and
5. ThebankmusthaveobtainedapprovaloftheMonetaryBoardon
transactionsinvolvingsignificantownershipofvotingsharesof
stockbyanyperson,naturalorjuridical,orbyonegroupofpersons,
asprovidedinSubsec.X126.2.b,ifapplicable.
Depositsforstocksubscription,whichdonotmeettheabovementioned
conditionsshallbeclassifedasaliability.
Depositsforstocksubscription,whichmeettheconditionstobe
recognizedasequity,shallformpartofabanksqualifyingcapitalfor
purposesofcomputingtherisk-basedcapitaladequacyratiounder
SectionsX115foruniversalandcommercialbanks,aswellastheir
subsidiarybanksandQBs,andX118forstand-alonethriftbanks,rural
banksandcooperativebanks.
PartIIofAppendix63b/AppendixQ-46oftheMORB/MORNBFIonthe
qualifyingcapitalundertherisk-basedcapitaladequacyframeworkforthe
Philippinebankingsystemwereamended,asfollows:
1. DepositforcommonstocksubscriptionandDepositforperpetualand
non-cumulativepreferredstocksubscriptionwereaddedascomponents
ofCoreTier1capitalandremovedfromUpperTier2capital;
2. Depositforperpetualandcumulativepreferredstocksubscriptionand
Depositforlimitedliferedeemablepreferredstocksubscriptionwiththe
replacementrequirementuponredemptionwereaddedascomponents
ofUpperTier2capitalandremovedfromLowerTier2capital;
3. Depositforlimitedliferedeemablepreferredstocksubscription
withoutthereplacementrequirementuponredemptionwasaddedasa
componentofLowerTier2capital;
PartIIofAppendix63coftheMORBonqualifyingcapitalundertherisk-
basedcapitaladequacyframeworkforstand-alonethriftbanks,ruralbanks
andcooperativebankswasamended,asfollows:
1. DepositforcommonstocksubscriptionandDepositforperpetualand
non-cumulativepreferredstocksubscriptionwereaddedascomponents
ofCoreTier1capitalandremovedfromUpperTier2capital;
2. Depositforperpetualandcumulativepreferredstocksubscriptionand
Depositforlimitedliferedeemablepreferredstocksubscriptionwiththe
replacementrequirementuponredemptionwereaddedascomponents
ofUpperTier2capitalandremovedfromLowerTier2capital;
24 Tax Bulletin
3. Depositforlimitedliferedeemablepreferredstocksubscription
withoutthereplacementrequirementuponredemptionwasaddedasa
componentofLowerTier2capital;
PartVIofAppendix63coftheMORBondefnitionsundertherisk-basedcapital
adequacyframeworkforstand-alonethriftbanks,ruralbanksandcooperative
bankswasamended,asfollows:
PartVI.Defnitions
xxx
8. DepositforstocksubscriptionThisreferstothefundsreceivedas
depositsforstocksubscriptionthatmeettheconditionsforrecognitionas
equityprovidedinSec.X128.
xxx
Subsection4116Q.2oftheMORNBFIonqualifyingcapitalwasamendedas
follows:
1. DepositforcommonstocksubscriptionandDepositforperpetualand
non-cumulativepreferredstocksubscriptionwereaddedascomponents
ofTier1(core)capitalandremovedfromUpperTier2capital;
2. Depositforperpetualandcumulativepreferredstocksubscriptionwas
addedasacomponentofUpperTier2capitalandremovedfromLower
Tier2capital;
3. Depositforlimitedliferedeemablepreferredstocksubscriptionwas
addedasacomponentofLowerTier2capital;
TheFinancialReportingPackage(FRP),issuedunderCircularNo.512dated
February3,2006,asamended,wasfurtheramendedasfollows:
1. RevisionofthedefnitionofDepositforstocksubscriptionaccountunder
OtherLiabilitiesoftheManualofAccounts;
2. CreationofDepositforstocksubscriptionaccountunderEquity
AccountsoftheManualofAccounts;and
3. RevisionofthereportingtemplatesoftheBalanceSheetoftheFRP/
SimplifedFRP.
Theguidelinegoverningthemodeandsubmissionofthereportorialtemplates
ofFRP,SimplifedFRPandRisk-BasedCapitalAdequacyFrameworksshallbe
coveredbyaseparateissuance.
ThisCircularshalltakeeffect15daysfollowingitspublicationeitherinthe
OffcialGazetteorinanewspaperofgeneralcirculation.
[Editors Note: Circular No. 762 was published in the MalayaBusinessInsight on July
30, 2012.]
25
BSP Circular No. 763 dated August 3, 2012
SubsectionX302.3isaddedtotheMORB,toreadasfollows:
SubsectionX302.3.RegulatoryReliefforBanksunderRehabilitation
ProgramApprovedbytheBSP-
Banksmaybeallowedtochargetheiroutstandingunbooked
allowanceforprobablelossesdirectlytoretainedearnings,onaone-
timebasis,subjecttothefollowingconditions:
a. Thatthisisinconnectionwithacomprehensiverehabilitation
programapprovedbytheBSP;and
b. Theeffectthereof,ifthesehadbeenchargedtoprofitandloss,
shallbefullydisclosedintheauditedfinancialstatements,
annualreportsandpublishedstatementofcondition.
ThisCircularshalltakeeffect15calendardaysfollowingitspublication
eitherintheOffcialGazetteorinanewspaperofgeneralcirculation.
[Editors Note: Circular No. 763 was published in the ManilaStandardToday on
August 11, 2012.]
BSP Circular No. 764 dated August 3, 2012
ThefollowingsectionsoftheMORNBFIareamendedtoprovidethatthe
rulesonoutsourcingofbankingfunctionsasshowninAppendixQ-37
shallbeadopted:
1. Section4162Q(20084190Q),insofarastheyareapplicableto
quasi-banks(QB);
2. Subsection4406Q.9,insofarastheyareapplicabletotrust
departmentsofQBsperformingtrustandotherfduciarybusiness
andinvestmentmanagementactivities;
3. Subsection4701Q.13,insofarastheyareapplicabletoQBs
outsourcingofinternetandmobileelectronicservices;
4. Section4190S,insofarastheyareapplicabletonon-stocksavings
andloanassociations;
5. Section4190P,insofarastheyareapplicabletopawnshops;and
6. Section4190N,insofarastheyareapplicabletofnancialinstitutions.
Appendix37oftheMORNBFIisamendedandre-titledasRevised
OutsourcingFrameworkforBanks.
CircularNo.763providesfor
regulatoryrelieftobanksunder
rehabilitationprogram.

CircularNo.764prescribestheRevised
OutsourcingFrameworkforNBFIs.

26 Tax Bulletin
ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeither
intheOffcialGazetteorinanewspaperofgeneralcirculation.
[Editors Note: Circular No. 764 was published in the BusinessMirror on August 13,
2012.]
BSP Circular No. 765 dated August 3, 2012
SectionX162oftheMORBisre-titledandamendedtorefectastatementof
principlewhichshallreadasfollows:
Section162Statement of Principle on Outsourcing.Aninstitution
mayoutsourcebankingsupportandmarketingactivitiessubjectto
theprovisionssetforthbelow.Accordingly,aninstitutionisexposedto
operationalrisksasaresultofoutsourcing.Assuch,aninstitutionthat
availsofoutsourcingshouldhaveinplaceappropriatemechanismsto
ensureeffectivemanagementofattendantrisks.
ThepreviousSectionX162oftheMORBshallberenumberedasSubsection
X162.1,Governance in All Cases of Outsourcing of Banking Functions,and
amendedtoprovidetheresponsibilitiesofabankwhenoutsourcingisallowed
bylaw.
ThepreviousSubsectionX162.1oftheMORB(2008X169.1),Prohibition
against outsourcing certain banking functions,isrenumberedasSubsection
X162.2andamendedtoprovideinherentbankfunctionsthatnobankshall
outsource.ThepreviousSubsectionX162.2(2008X169.2)onOutsourcing
of Information Technology Systems/Processesisamendedandtransferredto
theAppendixofSectionX162oftheMORBinrelevantdocumentations.
ThepreviousSubsectionX162.3(2008X169.3),Outsourcing of Other
Banking Functions,isdeleted.ThenewSubsectionX162.3oftheMORBreads
asfollows:
SubsectionX162.3Defnition.Outsourcingshallrefertoanycontractual
agreementbetweenabankandaqualifedserviceproviderforthelatterto
performdesignatedactivitiesonacontinuingbasisonbehalfofthebank.
ThenewSubsectionX162.4,Managing Outsourcing-Related Risks,ofthe
MORBfocusesontheresponsibilityofthebanktomanagetheoperationalrisks
thatarisefromoutsourcing.
ThenewSubsectionX162.5readsasfollows:
SubsectionX162.5Authority to Outsource.Onlythosebankswitha
CAMELScompositeratingofatleast3andaManagementRatingofnot
lowerthan3shallbeallowedtooutsourcedesignatedactivitieswithout
priorBSPapproval.Otherwise,thebankmustsecurepriorapprovalfrom
theappropriatesupervisingdepartmentoftheBSPwhoseevaluationwill
bebasedonthebanksabilitytomanagerisksattendanttooutsourcing.
ThenewSubsectionX162.6,Documentation,requiresbankstokeepthe
necessarydocumentationtoshowthatoutsourcingarrangementsareproperly
reviewedandtheappropriateduediligencehasbeenundertakenpriorto
implementation.
CircularNo.765prescribestheRevised
OutsourcingFrameworkforBanks.

27
SubsectionsX162.11(2008X169.11)andX162.12(2008169.12)ofthe
MORBareconsolidated,re-titledandrenumberedasSubsectionX162.7,Intra-
group Outsourcing,andamendedtoprovidetheconditionsincaseabankis
actingasaserviceproviderwithinitsbusinessgroup.
ThenewSubsectionX162.8,Offshore Outsourcing,providesfortheconditions
incasesofoutsourcingwheretheserviceproviderislocatedoutsidethe
country.
ThepreviousSubsectionX162.4(2008X169.4)isrenumberedasthenew
SubsectionX162.9andamendedtoreadasfollows:
SubsectionX162.9Service Providers.Thebankshallcarryoutdue
diligenceinselectingserviceproviders.Itmustensuretheintegrity,
technicalexpertise,operationalcapability,fnancialcapacityandsuitability
oftheserviceprovidertoperformtheoutsourcedactivity.Incaseswhere
theclientsareprejudicedduetoerrors,omissionsandfraudsbythe
serviceprovider,thebankshallbeliableinprovidingtheappropriate
remediesasmaybeallowedbylawsorregulations,withoutprejudiceto
recoursebythebanktotheserviceprovider.
ThepreviousSubsectionX162.5isrenumberedasSubsectionX162.10,re-
titledandamendedtoreadasfollows:
SubsectionX162.10Transitory Provision.Alloutsourcingagreements
mustbealignedwiththeprovisionsofSectionX162oftheMORB.Existing
outsourcingagreementswhicharenotinaccordancewiththiscircularwill
notbeunwound.However,itmustcomplywiththerequirementsprovided
hereinuponrenewaloftheagreements.
ThepreviousSubsectionX162.19,Penalties,isre-numberedasSubsection
X162.11.
SubsectionsX406.9,Outsourcing Services in Trust Departments,andX701.13
(2008X621.13),Outsourcing of interment and Mobile Banking Services,of
theMORBaredeleted.
ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeither
intheOffcialGazetteorinanewspaperofgeneralcirculation.
[Editors Note: Circular No. 765 was published in TheManilaTimes on August 13,
2012.]
BSP Circular No. 766 dated August 17, 2012
SectionX401/4401Q,Statement of Principles,oftheMORB/MORNBFIare
amendedtoprovidethatpoliciespredicateduponthecardinalprincipleof
fdelityshallbedirectedtowardstheobservanceofprudentadministration,
undividedloyaltyandutmostcare,non-delegationofresponsibilities,
preservingandprotectingproperty,andkeepingandrenderingaccounts.
SectionsX403/4403Q,Defnitions,oftheMORB/MORNBFIareamendedbyre-
assigningitemsatouasbtovandaddinganewitemaasfollows:
CircularNo.766prescribesthe
GuidelinesinStrengtheningCorporate
GovernanceandRiskManagement
PracticesonTrust,OtherFiduciary
Business,andInvestmentManagement
Activities.

28 Tax Bulletin
A.TrustEntityshallrefertoa(a)bankornon-bankfnancialinstitution,
throughitsspecifcallydesignatedbusinessunittoperformtrustfunctions,
or(b)trustcorporation,authorizedbytheBangkoSentralngPilipinas
(BSP)toengageintrustandotherfduciarybusinessunderSection79
ofR.A.No.8791(TheGeneralBankingLawof2000)ortoperform
investmentmanagementservicesunderSection53ofR.A.No.8791.
SubsectionsX406.2/4406Q.2,Composition of trust committee,oftheMORB/
MORNBFIareamendedtoprovidethattheTrustCommitteeshallhaveatleast
fvemembersasfollows:
1. Thepresidentoranysenioroffcerofthebank/non-bankfnancial
institution(NBFI);
2. Thetrustoffcer;
3. Theremainingmembers,includingthechairperson,maybeanyofthe
following:
i. Non-executivedirectorsorindependentdirectorswhoarebothnot
partoftheauditcommittee;or
ii. ThoseconsideredasqualifiedIndependentProfessionals.
Iftherearemorethan5members,amajorityshallbecomposedofqualifed
non-executivemembers.
SubsectionX406.3/4406Q.3,Qualifcations of committee members, offcers
and staff,oftheMORB/MORNBFIareamendedtoprovidethatdirectors,
committeemembersandoffcerschargedwiththeadministrationoftrustand
otherfduciaryactivitiesshallhavetheadditionalrequirementofrelevant
experienceinsuchbusiness.
Atrustoffcer,inadditiontopossessingatleast3yearsofactualexperiencein
trustoperationsoratleast5yearsofactualexperienceasanoffcerofabank/
NBFI,musthave:
1. Completedatleast90traininghoursintrust,otherfduciarybusinessor
investmentmanagementactivitiesacceptabletotheBSP;or
2. Completedarelevantglobalorlocalprofessionalcertifcationprogram.
ItemfofSections2404/3404oftheMORBontheauthoritytoengagein
limitedtrustbusinesstothriftbanksandruralbanks,respectively,shallbe
revisedtoprovidethatatrustoffcer,inadditiontopossessingatleast1yearof
29
actualexperienceintrustoperationsoratleast2yearsofactualexperienceas
anoffcerofabank/NBFI,musthave:
1. Completedatrainingprogramintrust,otherfduciarybusinessor
investmentmanagementactivitiesacceptabletotheBSP;or
2. Completedarelevantglobalorlocalprofessionalcertifcationprogram.
SubsectionsX406.a/4406Q.4,Responsibilities of Administration,ofthe
MORB/MORNBFIareamendedtoprovidethespecifcresponsibilitiesofthe
following:
1. TheBoardofDirectors(BOD)inrelationtotrustactivitiesofabank/NBFI;
2. TheTrustCommittee,whichisaspecialcommitteethatreportsdirectlyto
theBODandisprimarilyresponsibleforoverseeingthefduciaryactivities
ofthebank/NBFI;and
3. TheTrustOffcer,whoisvestedwiththemanagementoftheday-to-day
fduciaryoffcer.
SubsectionsX406.10/4406Q.10,Confrmation of the appointment/
designation of trust offcer and independent professional,oftheMORB/
MORNBFIareamendedtoprovidethatanindependentprofessionalandtrust
offcermustbeftandpropertodischargetheirrespectivefunctions.Their
appointment/designationshallbesubjecttoconfrmationbytheMonetary
Boardwhichshallinformtheconcernedbank/NBFIif,afterevaluation,itfnds
groundsforthedisqualifcationoftheindependentprofessionalandtrust
offcer.
Trustentitiesofbanks/NFBIsthatdonotmeettherequirementsofthis
Circularshallbegiventwelve(12)monthsfromthedateofeffectivityto
comply.
Non-compliancewiththeprovisionsofthisCircularshallsubjectthebank/
NBFIanditsBODtosanctionsprovidedunderSections36and37ofR.A.
7653withoutprejudicetotheimpositionofothersanctionsastheMonetary
Boardmayconsiderwarrantedunderthecircumstancesthatmayincludebut
notlimitedtocurtailmentoffduciaryactivities,and/orintroductionofnew
business,andsuchothersanctionsasmaybeprovidedbylaw.
ThisCircularshalltakeeffect15calendardaysfollowingitspublicationeither
intheOffcialGazetteorinanewspaperofgeneralcirculation.
[Editors Note: Circular No. 766 was published in the ManilaBulletin on August 24,
2012.]
30 Tax Bulletin
Court Decision
Team Pacifc Corporation vs. Josephine Daza,
in her capacity as Municipal Treasurer of Taguig
SecondDivision,G.R.No.167732,promulgatedJuly11,2012
Facts:
PetitionerTeamPacifcCorporation(TPC),adomesticcorporationengagedinthe
businessofassemblingandexportingsemiconductordevices,conductsitsbusiness
attheFTIComplexinTaguig.

Sincethestartofitsoperations,TPChadbeenpayinglocalbusinesstaxes(LBT)at
1/2oftheratesimposedonexportersandonmanufacturers,millers,producers,
wholesalers,distributors,dealersorretailersofessentialcommoditiespursuantto
theTaguigRevenueCode.
WhenTPCreneweditsbusinesslicensein2004,however,RespondentJosephine
Daza,thenMunicipalTreasurerofTaguig,assessedLBTatthefullrateonthe
groundthatTPCisnotanexporterofessentialcommodities.
TPCpaidtheassessedLBTandfledawrittenprotestonJanuary19,2004.On
April15,2004,TPCfledapetitionforcertiorariunderRule65ofthe1997Rules
ofCivilProcedurebeforetheRegionalTrialCourt(RTC).TPCallegedthatDazadid
notactonitsprotestwithin60days,asprescribedunderArticle195oftheLocal
GovernmentCode(LGC),andthatDazaactedwithgraveabuseofdiscretioninnot
applyingthe1/2rateprovidedundertheTaguigRevenueCode.
DazaarguedthatTPCerredinflingapetitionforcertiorariandthatTPCshould
have,instead,fledanappealincourtwithin30daysfromreceiptofthedenial.
TheRTCdismissedthepetition.ItfoundthattherewasnoproofofdenialofTPCs
protest.Hence,TPChad30daysfromthelapseofthe60daysallowedforthe
treasurertomakeitsdecision,withinwhichtoperfectanordinaryappeal.TheRTC
ruledthatthespecialcivilactionofcertiorariisnottheproperremedyofTPC.
TPCappealedtotheSupremeCourtandarguedthattheremedyofappealis
notspecifedunderArticle195oftheLGC,andtherefore,aRule65petitionfor
certiorariistheproperandlogicalremedy,giventhatDazaactedwithgraveabuse
ofdiscretioninassessingitsLBTatthefullrate.
Afterreceivinganoticeofassessment,
ataxpayermayflewithin60daysa
writtenprotestwiththelocaltreasurer,
whichshalldecideonitwithin60days.
Thetaxpayercanmakeanappealto
theRegionalTimeCourt(RTC)within
30daysfromreceivingthedenialof
theprotest,orfromthelapseofthe
60-dayperiodtodecideontheprotest.
Thereafter,thetaxpayercanappeal
thedecisionoftheRTCtotheCourtof
TaxAppeals(CTA)within30daysafter
receivingthedecision.
31
Issue:
DidTPCavailofthecorrectremedyagainsttheassessmentwhenitfledapetition
forcertioraribeforetheRTC?
Ruling:
No.TPCdidnotavailofthecorrectremedy.TPCshouldhavefledanordinary
appealwiththeRTC.
Within60daysfromreceiptofanoticeofassessment,ataxpayermayfleawritten
protestwiththelocaltreasurer,whichshalldecidethesamewithin60days.The
taxpayershallhave30daysfromreceiptofthedenialoftheprotest,orfromthe
lapseofthe60-dayperiodgiventothelocaltreasurertodecidetheprotest,within
whichtoappealtotheRTC.
Withoutanyformaldenialoftheprotest,TPCsflingofitspetitionbeforetheRTC
onApril19,2004wasdoneinatimelymanner.Reckonedfromtheflingofthe
protestonJanuary19,2004,Dazahad60daysoruntilMarch19,2004within
whichtoresolvetheprotest.
Fromthelapseofthis60-dayperiod,TPChad30daysoruntilApril18,2004
withinwhichtofleitsappealtotheRTC.SincethelatterdatefellonaSunday,the
RTCcorrectlyruledthatTPCsflingofitspetitiononApril19,2004wasstillwithin
theprescribedperiod.
However,aRule65petitionforcertiorariisnottheappropriateremedyfromDazas
inactiononTPCsprotest.Instead,TPCshouldhavefledanordinaryappealwith
theRTC.Thereafter,anappealfromthejudgment,resolutionororderoftheRTC
shallbemadewithin30daysafterreceiptofthedecision,byflingapetitionfor
reviewwiththeCTA.
Theperfectionofanappealinthemannerandwithintheperiodfxedbylaw
isnotonlymandatorybutjurisdictional,andnon-compliancewiththeselegal
requirementsisfataltoapartyscause.
32 Tax Bulletin
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