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TAX ALERT

March 30, 2007

THE SUPREME COURT (SC) RULES THAT A FOREIGN CONSORTIUM SUBCONTRACTING THE ONSHORE PORTION OF THE WORK TO A LOCAL SUBCONTRACTOR IS CONSIDERED DOING BUSINESS IN THE PHILIPPINES AND, THEREFORE, THE LOCAL SUBCONTRACTOR RENDERING SERVICES TO THE FOREIGN CONSORTIUM IS NOT ENTITLED TO VAT ZERO-RATING. Facts: A foreign consortium entered into a contract with the NAPOCOR for the operation of two of NAPOCORs power barges. One of the parties to the consortium, B&W, was appointed as the consortiums coordination manager. B&W established B&W, Inc., a domestic corporation, which subcontracted the operation and maintenance of NAPOCORs two power barges, as well as the performance of other duties and acts which necessarily have to be done in the Philippines. For its services, the consortium pays the local subcontractor, B&W, Inc., in foreign currency inwardly remitted to the banking system. Claiming that its services were zero-rated, B&W, Inc. filed a claim for refund of erroneously paid VAT on services rendered in favor of the consortium paid for in foreign currency inwardly remitted through the banking system. Held: The SC ruled that the local subcontractor, B&W, Inc., even if paid in acceptable foreign currency for services rendered to the consortium is not entitled to VAT zero-rating because the recipient of the services (i.e., the foreign consortium) is not a person doing business outside the Philippines. While the consortiums principal members are non-resident foreign corporations, the consortium itself is doing business in the Philippines. The consortiums contract with NAPOCOR for the operation and maintenance of power barges spanning a period of 15 years cannot be considered a single and isolated transaction. The SC overturned the long-standing rule enunciated in BIR Ruling No. 2395 dated February 14, 1995 and VAT Ruling 3-99 dated January 7, 1999 that a local subcontractor rendering services for a foreign consortium is entitled to VAT zero-rating. The SC, however, granted the local subcontractors claim for refund of the supposedly erroneously paid output VAT in view of the non-retroactivity rule under Section 246 of the Tax Code. Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., G.R. No. 153205 dated 22 January 2007. DEPARTMENT OF FINANCE (DOF) AMENDS REVENUE REGULATIONS (REV. REGS.) NO. 16-2005, OTHERWISE KNOWN AS THE CONSOLIDATEDVALUE-ADDED TAX (VAT) REGULATIONS OF 2005. Among the pertinent amendments are as follows: (1) Implementing the increase of the rate of VAT from 10% to 12% effective February 1, 2006; (2) The transfer of real property by a real estate dealer to another real estate dealer, in an exchange where the
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transferor gains control of the transferee-corporation, is not subject to output VAT. See Sec. 4.106-8(b)(1) Illustration; (3) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business is exempt from VAT. However, even if the real property is not primarily held for sale to customers or held for lease in the ordinary course of trade or business but the same is used in the trade or business of the seller, the sale thereof shall be subject to VAT being a transaction incidental to the taxpayers main business. See Sec. 4.109-1(B)(1)(p)(1). Revenue Regulations No. 4-2007 dated February 7, 2007. COURT OF TAX APPEALS (CTA) DENIES THE REFUND OF UNUTILIZED INPUT VAT ARISING FROM THE PURCHASE OF CAPITAL GOODS BECAUSE OF THE TAXPAYERS FAILURE TO SUBMIT DOCUMENTARY PROOF THAT THE GOODS FOR WHICH INPUT VAT WAS PAID WERE INDEED CAPITALIZED IN THE TAXPAYERS BOOKS OF ACCOUNTS. Such documents may consist of detailed general ledgers and audited financial statements proving that the items were capitalized in the petitioners books of accounts. Silicon Philippines, Inc. (formerly Intel Philippines Manufacturing Inc.) vs. Commissioner of Internal Revenue, CTA Case Nos. 6741, 6800, 6841, February 5, 2007. PAGCOR IS EXEMPT FROM PAYMENT OF DIRECT AND INDIRECT TAXES. HENCE, THE SALE OF GOODS AND SERVICES TO PAGCOR IS SUBJECT TO 0% VAT. P.D. 1869 grants PAGCOR an exemption from the payment of taxes, direct or indirect. By extending the exemption to entities or individuals dealing with PAGCOR, the legislature clearly granted exemption also from indirect taxes. Section 102(b)(3) of the 1977 Tax Code (now Sec. 108(b)(3) of R.A. 8424) subjects to 0% VAT the services rendered to persons or entities whose exemption under special laws subjects the supply of such services to 0% rate. Hence, the lease of property and sale of food and beverages to PAGCOR is subject to 0% VAT. Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation, G.R. No. 147295 dated February 16, 2007. COMMISSIONER OF INTERNAL REVENUE (COMMISSIONER) CLARIFIES COMPUTATIONS OF WITHHOLDING TAXES AND OTHER REQUIREMENTS ON GOVERNMENT MONEY PAYMENTS DUE OR PAYABLE TO SUPPLIERS OF GOODS AND/OR SERVICES IN CONNECTION WITH THE IMPLEMENTATION OF THE VAT LAW. Revenue Memorandum Circular No. 23-2007 dated March 20, 2007. CONGRESS AMENDS R.A. 7227, OTHERWISE KNOWN AS THE BASES CONVERSION AND DEVELOPMENT ACT OF 1992. The significant amendments include granting of fiscal incentives to Poro Point Freeport Zone, John Hay Special Economic Zone, and Morong Special Economic Zone. Republic Act No. 9400, approved on March 20, 2007.

CONGRESS GRANTS ONE-TIME AMNESTY ON TAX AND DUTY LIABILITIES, INCLUSIVE OF FINES, PENALTIES, INTERESTS AND OTHER ADDITIONS THERETO, TO REGISTERED BUSINESS ENTERPRISES OPERATING WITHIN CERTAIN SPECIAL ECONOMIC ZONES AND FREEPORTS. Only registered business enterprises operating within Clark Special Economic Zone, Poro Point Special Economic and Freeport Zone, John Hay Special Economic Zone, and Morong Special Economic Zone may avail of the benefits of remedial tax amnesty on all applicable tax and duty liabilities, inclusive of fines, penalties, interests and other additions thereto, incurred by them or that might have accrued to them due to the rulings of the Supreme Court in the cases of John Hay Peoples Coalition v. Lim, et al., G.R. No. 119755 dated 23 October 2003 and Coconut Oil Refiners Association, Inc. v. Torres, et al., G.R. No. 132527 dated 29 July 2005. Republic Act No. 9399, approved on March 20, 2007. COMMISSIONER CIRCULARIZED THE MEMORANDUM BETWEEN THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA) AND THE BUREAU OF INTERNAL REVENUE (BIR). This memorandum was reached to establish coordination between PEZA and BIR in administering the incentives enjoyed by PEZA-registered enterprises, particularly the income tax holiday (ITH) and the preferential 5% tax on gross income earned. Revenue Memorandum Circular No. 15-2007 dated March 5, 2007. TAXPAYERS REGISTERED WITH THE BOARD OF INVESTMENTS (BOI), THE BOI AUTONOMOUS REGION OF MUSLIM MINDANAO, AND THE PEZA WHO ARE AVAILING OF APPROVED FISCAL INCENTIVES ARE REQUIRED TO ATTACH CERTAIN DOCUMENTS TO THEIR ANNUAL INCOME TAX RETURNS FOR THE TAXABLE YEARS 2006 AND ONWARDS. These requirements are as follows: (1) Photocopy of Certificate of Entitlement (CE) for ITH issued by the BOI/BOI-ARMM stating therein that the concerned entity is a bonafide BOI/BOI-ARMM-registered enterprise entitled to ITH incentives; and (2) Photocopy of the Certification issued by the PEZA stating therein that the entity is a bonafide PEZA-registered enterprise entitled to ITH and/or the 5% Gross Income Tax incentive. Revenue Memorandum Circular No. 21-2007 dated March 5, 2007. AGENCY FEES, TRANSPORTATION EXPENSE (INBOUND), REMUNERATION OF EXPATRIATES DIRECTLY INVOLVED IN PRODUCTION, AND COMMUNICATION COSTS, INCURRED IN THE PRODUCTION PROCESS ARE DEDUCTIBLE FROM GROSS REVENUE FOR PURPOSES OF COMPUTING THE 5% GROSS INCOME TAX (GIT) OF A PEZA-REGISTERED ENTERPRISE. The following expenses incurred by ABC Co., a PEZA-registered enterprise, in the production process and which are included in the costing of inventoriable goods are considered deductible for purposes of computing the 5% GIT: (a) Agency fees, akin to commission and service charges, which are paid to the agency who provide contractual

workers to complement the regular workforce during peak season, are directly related to the production process and thus, deductible expenses; (b) Transportation expense (inbound) such as freight, transfer, handling, brokerage and insurance costs incurred by ABC Co., in importing raw materials from various overseas vendors is considered deductible provided they will be used in ABC Co.s registered activity; (c) Remuneration of expatriates directly involved in production is deductible expense, being a direct labor wage as provided in Rule I, Section 2(vv) and Rule XX, Section 2 of the PEZA IRR, as well as Section 1 of RR No. 11-05; (d) Communication costs such as mobile phone/telephone charges, network/server charges, SAP charges, IT management and consultancy fees and internet connection which are incurred by ABC Co. in the transmission of technical production data to be used to facilitate the production of its products are likewise deductible expenses. BIR Ruling DA-080-2007 dated February 8, 2007. BOI ISSUES REVISED RULES AND REGULATIONS IN THE AVAILMENT OF INCOME TAX HOLIDAY. Revised Rules and Regulations issued by the Board of Investments, published in The Manila Times on March 30, 2007. THE DEADLINE FOR THE PRE-AUDIT OF 2005 TAX RETURNS THAT WERE NOT SELECTED FOR THE ISSUANCE OF LETTER OF AUTHORITY/AUDIT NOTICE/TAX VERIFICATION NOTICE HAS BEEN EXTENDED UNTIL JUNE 29, 2007. Revenue Memorandum Circular No. 22-2007 dated March 15, 2007. COMMISSIONER FURTHER EXTENDS THE DEADLINE FOR AVAILMENT OF THE EXPANDED ONE-TIME ADMINISTRATIVE ABATEMENT UNTIL JUNE 29, 2007. Revenue Memorandum Circular No. 24-2007 dated March 30, 2007. COMMISSIONER FURTHER EXTENDS THE DEADLINE FOR AVAILMENT OF THE IMPROVED VOLUNTARY ASSESSMENT PROGRAM (IVAP) FOR TAXABLE YEAR 2005 AND PRIOR YEARS UNTIL JUNE 29, 2007. Revenue Memorandum Circular No. 25-2007 dated March 30, 2007. THE TAX BASE FOR COMPUTING CAPITAL GANS TAX IN AN INSTALLMENT SALE OF REAL PROPERTY SHOULD BE THE ZONAL VALUE AT THE TIME OF THE EXECUTION OF THE DEED OF CONDITIONAL SALE AND NOT THE ZONAL VALUE AT THE TIME OF THE EXECUTION OF THE DEED OF ABSOLUTE SALE. BIR Ruling No. DA-0982007 dated February 15, 2007. A NON-RESIDENT FOREIGN CORPORATIONS SALE OF REAL PROPERTY USED AS TEMPORARY LODGING FOR EMPLOYEES VISITING THE PHILIPPINES IS SUBJECT TO 35% FINAL WITHHOLDING TAX BASED ON THE GAIN FROM THE SALE OF REAL PROPERTY; THE SALE HOWEVER IS NOT SUBJECT TO VAT.

Facts: In 2005, A Intl. Corp., a non-resident foreign corporation licensed to operate a regional area headquarters in the Philippines, acquired condominium units intended to be used as temporary lodging of its employees during their visits to the Philippines for purposes of conducting site inspections, coordination with engineers, local architects and other professionals in relation to the preparation and approval of plans for a specific project in the Philippines the related services for which are actually performed outside the Philippines. Due to a change in business direction, A Intl. Corp. intends to sell the units to third party buyers and sought confirmation from the BIR of the tax consequences of the sale. Ruling: The BIR confirmed that the gross income in relation to the sale of real property located in the Philippines was interpreted in Rev. Regs. No. 7-03 as the gain from the sale thereof, i.e., the difference between the gross selling price and the cost. Consequently only the gain from the sale of the units to the third-party buyer shall be subject to the final withholding tax. With respect to VAT, the BIR ruled that given that the subject units were acquired primarily for the purpose of housing its visiting personnel and not for sale or lease in the ordinary course of its trade or business, the subsequent sale by A Intl. Corp. shall not be subject to 12% VAT. BIR Ruling No. DA-049-2007 dated January 31, 2007. EXCHANGE OF REAL PROPERTY TO CORRECT THE INADVERTENT APPROPRIATION STILL CONSIDERED INVOLUNTARY CONVERSION NOT SUBJECT TO INCOME TAX. Facts: In the course of undertaking one infrastructure project, Philippine Reclamation Authority (PRA) inadvertently appropriated land owned and registered under the name of P Corp. Consequently, PRA and P Corp. entered into a Memorandum of Agreement (MOA) whereby PRA agreed to replace the affected land with PRA-owned lots of equal value to be determined based on the appraisal reports of two independent appraisal companies. Pursuant to the MOA, PRA and P Corp. executed a Deed of Exchange of Real Property implementing the exchange of the subject properties. The parties thereafter paid DST on conveyances of real property for said Deed of Exchange. Upon subsequent examination, it was discovered that an error was committed in the quoted technical description of one of the lands subject of the executed deeds. To correct the mistake, an Amended Deed of Exchange was executed without any additional consideration other than those agreed upon based on the Deed. Ruling: The execution of the Deed of Exchange of Real Property in this case partakes the nature of involuntary conversion. The absence of an actual expropriation does not affect the applicability of the Doctrine of Involuntary Conversion. Consequently, the execution of the Deed of Exchange does not negate the fact that the transaction falls within the purview of the doctrine of involuntary conversion. In view of this, the exchange is not subject to income tax and creditable withholding tax. The Amended Deed of Exchange is no longer subject to DST on conveyances of real property pursuant tot Section 196 of the Tax Code of 1997 as it was executed merely to correct the error in the previously executed deed or instrument. The Amended Deed of Exchange is however subject to the P15.00 DST imposed under Section 188 of the same Code. BIR Ruling No. DA-044-2007 dated January 29, 2007.

DIVIDENDS REMITTED BY A DOMESTIC CORPORATION TO A NONRESIDENT AUSTRALIAN CORPORATION ARE SUBJECT TO INCOME TAX AT THE PREFERENTIAL RATE OF 15% BY VIRTUE OF THE TAX SPARING RULE. Under Section 28(B)(5)(B) of the 1997 Tax Code, as amended by RA No. 9337, dividends received by a non-resident foreign corporation from a domestic corporation shall be taxed at 15% subject to the condition that the country in which the non-resident foreign corporation is domiciled shall allow a credit against the tax due from the nonresident foreign corporation taxes deemed to have been paid in the Philippines equivalent to 20%, which represents the difference between the regular income tax of 35% and the 15% tax on dividends. The fact that Australia will not impose any tax on the dividends received by the non-resident Australian corporation from the domestic corporation, foreign dividends being classified as non-assessable non-exempt income and therefore not subject to income tax, shall be considered full satisfaction of the given condition. However, as provided by RMC No.80-91, entitlement to the 15% preferential tax is subject to the submission of: (1) documents showing that the dividends received by the Australian corporation from the domestic corporation were not among the items considered in arriving at the income tax due from the Australian corporation; (2) income tax return of the Australian corporation for the taxable year the dividends were received; and (3) any authenticated document showing that Australia did not impose any tax on the dividends. BIR Ruling No. DA-ITAD-020-07 dated February 15, 2007. PAYMENTS FOR THE RIGHT TO DISTRIBUTE SOFTWARE ARE NOT BUSINESS PROFITS BUT CONSTITUTE ROYALTIES. RMC No. 44-2005 provides that software payments shall be treated as royalties only: (1) if the transaction does not constitute a sale or exchange; and (2) if not all substantial rights in the software have been transferred but the transaction involves only the transfer of copyright rights in the software. Otherwise, RMC No. 44-2005 treats the software payments as business income, rental income or capital gains depending on the nature of the transaction. A transfer of software is classified as a transfer of copyright rights if, as a result of the transaction, a person acquires any or one or more of the following: (1) right to make copies for distribution to the public by sale or other transfer of ownership, or by rental, lease or lending; (2) right to prepare derivative programs; (3) right to make public performance of the program; (4) right to publicly display the program; or (5) any other rights of the copyright owner, the exercise of which by another without his authority shall constitute infringement. The grant of a right to distribute software by the author or owner of the software pertains to rights which may be subject to infringement and, as such, gives rise to royalties. This is true even if payments to be made by the distributor or reseller to the author or owner are not literally termed as royalties but merely payments of fees in general and even if the contract between the parties are not literally termed license contracts but contracts of sale or the like. What is essential is that copyright rights are granted under such contract and without which, the reseller or distributor may be regarded as infringing the copyright owners rights, based on the provisions of the Intellectual Property Code. BIR Ruling No. DA-ITAD-17-07 dated February 9, 2007.

BRANCH PROFITS REMITTANCE TAX (BPRT) IS NOT IN THE NATURE OF A WITHHOLDING TAX TO BE COLLECTED FROM THE HEAD OFFICE BUT A DIRECT LIABILITY OF THE LATTER, CONSIDERING THAT A BRANCH OF A RESIDENT FOREIGN CORPORATION AND ITS HEAD OFFICE ARE TREATED AS ONE TAXABLE ENTITY. Consequently, the Branch Office may utilize its Tax Credit Certificate to pay for the BPRT on the profits it will remit to its head office. BIR Ruling No. DA-096-2007 dated February 15, 2007. ARTICLE 135 OF THE 1997 NIRC OPERATES TO GRANT EXEMPTION TO PETROLEUM PRODUCT SUPPLIERS WHO ARE UNABLE TO SHIFT THE ECONOMIC BURDEN OF TAXATION TO THE END-USER. Facts: Petitioner is engaged in the business of buying and selling, including importation, of oil and other petroleum products for various customers. In the course of its operations, it entered into a sale transaction with NPC for the supply of diesel fuel to its various power plants in the Philippines by virtue of an Open Purchase Order. Pursuant thereto, petitioner caused the importation of diesel fuel and accordingly paid the corresponding excise taxes and duties. On the strength of NPCs exemption from payment of all forms of taxes, duties, fees and imposts pursuant to its charter, Republic Act No. 6395, as well as on Article 135 of the 1997 Tax Code exempting petroleum products from excise taxes under certain circumstances, petitioner sought to refund the excise taxes it paid for the diesel fuel sold to NPC. Held: Petition is granted and respondent is ordered to refund or issue a tax credit certificate in favor of petitioner. While petitioner is the one directly liable for the payment of excise taxes on the importation of petroleum products it sold to NPC, by the nature of indirect taxation, it may shift the burden of such taxation to the end-user. But since NPC is exempt from both direct and indirect taxation, Article 135 of the 1997 Tax Code comes to play and operates to grant exemption to petroleum product suppliers who are unable to shift the economic burden of taxation to the end-user. Filpride Resources, Incorporated vs. Bureau of Internal Revenue and/or Commissioner of Internal Revenue, CTA Case No. 6830, February 20, 2007. THE ASSIGNMENT OF A CREDIT FACILITY AGREEMENT DOES NOT RESULT TO AN IMPOSITION OF DOCUMENTARY STAMP TAX (DST) ON LOAN AGREEMENTS. This is because the credit facility agreement, in itself, is not subject to DST. A credit facility is merely a line for making a specific amount available for the use of the borrower. It is not tantamount to the delivery of money to the borrower. The delivery of money giving rise to a loan takes place only when the borrower makes use of the available amount by drawing on the facility. Once a drawdown is made, the DST is due on the amount of the actual drawdown (not on the entire amount of the credit facility) pursuant to Section 179 of the Tax Code, as amended by R.A. No. 9243. BIR Ruling No. DA-036-2007 dated January 24, 2007.

POWER BARGES ARE IMMOVABLE PROPERTIES BY DESTINATION AND ARE, THEREFORE, SUBJECT TO REAL PROPERTY TAX. A PARTYS EXEMPTION FROM REAL PROPERTY TAX CANNOT BE EXTENDED TO ANOTHER BY MERE AGREEMENT BETWEEN THE PARTIES SINCE THE COVENANT IS ONLY BETWEEN THEM AND NOT BINDING ON THIRD PARTIES. Facts: NPC entered into a five-year lease contract (Energy Conversion Agreement) with PE Inc. over 3x30 MW diesel engine power barges moored at Balayan Bay, Calaca, Batangas. The Agreement provides that NPC shall be responsible for the payment of: (a) all taxes, import duties, fees, charges and other levies imposed by the National Government or any agency or instrumentality thereof to which PE Inc. may be subject to in relation to the performance of the obligations under the Agreement, except for income taxes, construction permit fees, environmental permit fees and similar fees and charges; and (b) any and all real estate taxes and assessments in respect of the power barges. Subsequently, PE Inc. assigned its rights under the Agreement to FELS. The Provincial Assessor assessed FELS of real property taxes on the power barges. Held: Power barges are real properties and thus subject to real property tax. [Consolidated Edison Company of New York, Inc., et al. vs. The City of New York, et al., 80 Misc.2d 1065 (1975)]. Under Art. 415(9) of the New Civil Code, power barges are considered immovable property by destination. FELS cannot claim exemption from real property taxes over the power barges by virtue of NPCs tax exemption as the ownership and the power to operate, manage and maintain the barges are still vested with FELS. The undertaking of NPC that it will be responsible for the payment of taxes does not justify the exemption since the covenant is only between NPC and FELS and does not bind a third person not privy thereto, in this case the Province of Batangas. Fels Energy, Inc. vs. The Province of Batangas, et al., G.R. No. 168557, February 16, 2007; NPC v. LBAA of Batangas , et. al., G.R. No. 170628, February 16, 2007. THE CTA DECLARES AN ASSESSMENT INVALID AFTER THE BIR FAILED TO PRESENT DUPLICATE ORIGINALS OR CERTIFIED TRUE COPIES OF THE DOCUMENTS IT USED AS BASES IN THE ISSUANCE OF A FINAL ASSESSMENT AGAINST A TAXPAYER. The best evidence obtainable provision under the Tax Code, which authorizes the Commissioner to assess taxes on the basis of the best evidence obtainable in case of the taxpayers failure to submit the required returns, statements, records, and other documents, does not include mere photocopies of the records or documents. For tax assessments to be presumed correct, they must be based on sufficient evidence. Hantex Trading Co., Inc. v. Commissioner of Internal Revenue, CTA Case No. 5126 dated February 7, 2007. THE CTA HELD THAT AS LONG AS THE DONEE INSTITUTION MAKES INITIAL DISBURSEMENTS OF ANY AMOUNT FORMING PART OF THE DONATION, SUCH DONEE IS DEEMED TO HAVE MADE UTILIZATION OF SAID DONATION.

Facts: In 1997, petitioner made a series of donations in cash and property totaling P4.5 Million to M Foundation, a qualified donee institution. The BIR disallowed the amount donated as deduction from gross income of petitioner, which gave rise to a deficiency income tax assessment. Ruling: The CTA confirmed petitioners position that the term make utilization contemplated under Section 29(h)(2)(C)(ii) of the Tax Code does not require that the entire amount of donation be fully disbursed by the Foundation not later than the 15th day of the 3rd month after the close of its taxable year in which contributions are received in order for the donation to be deductible in full from the donors gross income. As long as a portion of such donations was proven to be utilized in the manner provided in the Tax Code and BIR-NEDA Regulations No. 1-81, it may be deducted in full from the donors gross income. Mariposa Properties, Inc. v. Commissioner of Internal Revenue, CTA Case No. 6402 dated February 13, 2007. TO SUBSTANTIATE THE DEDUCTION OF A DONATION FROM THE DONORS GROSS INCOME, IT MUST BE PROVEN THAT THE DONEE COMPLIED WITH THE SUBSTANTIATION REQUIREMENTS FOR DONEES. A careful review of the records reveals that neither the Foundations income tax return and audited financial statements, nor the annual information report containing certain information about the donee as required by BIR-NEDA Regulations No. 1-81, was ever presented by petitioner before the court. Although petitioner may have substantially complied with the substantiation requirements for the donors, it failed to establish that the Foundation has been complying with the substantiation requirements for donees. In view of the foregoing, the court denied petitioners claim for deduction of its series of donations to the Foundation. In addition, the court noted that the petitioner failed to establish that the Foundations level of administrative expenses on an annual basis did not exceed 30% of its total utilization during the subject taxable year. Again, said information should have been included in the Foundations Annual Income Tax Return/Annual Information Report for purposes of the donors full deduction and the donees exemption from donors tax. Mariposa Properties, Inc. v. Commissioner of Internal Revenue, CTA Case No. 6402 dated February 13, 2007. ALL JUDGES AND CLERKS OF COURTS OF THE REGIONAL TRIAL COURTS ARE REQUIRED TO NOTIFY THE BIR OF THE FILING OF CASES OF REHABILITATION, INVOLVENCY, CORPORATE DISSOLUTIONS BY JUDICIAL MEANS AND JUDICIAL SETTLEMENTS OF ESTATES OF DECEASED PERSONS. Revenue Memorandum Circular No. 16-2007 dated March 9, 2007 publishing the full text of OCA Circular No. 05-2007 issued by the Office of the Court Administrator of the Supreme Court.

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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 any of the following at telephone number (632) 633-9418, facsimile number (632) 633-1911, or at the indicated e-mail address: Atty. Carlos G. Baniqued Atty. Laura Victoria A.S. Yuson-Layug Atty. Terence Conrad H. Bello Atty. Ma. Carlota Christina G. Laio-Santiago Atty. Suzette A. Celicious-Sy Atty. Madeline L. Zialcita-Villapando Atty. Kathleen L. Saga Atty. Excelsis V. Antolin cgbaniqued@baniquedlaw.com lvyusonlayug@baniquedlaw.com thbello@baniquedlaw.com cglaino@baniquedlaw.com sacelicious@baniquedlaw.com mlzvillapando@baniquedlaw.com klsaga@baniquedlaw.com evantolin@baniquedlaw.com

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