BUREAU OF INTERNAL REVENUE

in coordination with the

PICPA-Cebu Chapter

TAX UPDATES SEMINAR

(November 24, 2012 - Sarroza International Hotel Cebu City)

Presented by:

MR. IPHER Q. TABAAG, CPA

Group Supervisor
Large Taxpayers-Regular Audit Division 2
BIR National Office, Diliman, Quezon City
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 This presentation covers:
________________________________

RR 1-2012 Mandatory submission of SLSP by all VAT taxpayers

RR 12-2012 Rules on Deductibility of Depreciation expense
Tax Updates on various industries:
A. RMC 63-2012 Tax treatment of Advertising placements
by Advertising Co/Media Outlets/Advertisers
B. RMC 65-2012 Tax treatment of Condominium dues,
fees and other charges received by Condominium Corp
C. RR 13-2012 Real Estate: VAT treatment of residential
house and lots
Other updates:
- RR 8-2012 Increase in amt of De Minimis Benefits
- Others: Abatement of Penalties; Binding effect of Rulings,
Rmc 67-2012 Tax treatment of proprietary non-profit
Hospitals

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 Revenue Regulations 1-2012
Requires the Mandatory Submission of Quarterly
Summary List of Sales and Purchases (SLSP)
____________________________________________________________

PERSONS REQUIRED TO SUBMIT SLSP

- All persons liable for VAT such as manufacturers, wholesalers,
(retailers), service providers, among others, are required to
submit quarterly Summary List of Sales and Purchases -
> Regardless of the amount of Sales and/or Purchases during
the period/quarter; Amends SEC.4.114-3 (a) of RR 16-2005 (Previous
thresholds: Sales > P2.5M, Purchases > P1M per quarter)

SUBMISSION OF LISTS
- The Quarterly Summary List of Sales and Purchases shall be submitted
through Compact Disk-Recordable (CDR) xxx
- (Amends the use of 3.5-inch floppy diskette).per
diskette). Section 4.114-3(e)(7), RR 16-2005:

EFFECTIVITY
This Revenue Regulations shall take effect on January 1, 2012.

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 REVENUE REGULATIONS NO. 12-2012
(Dated 10.12.12)
______________________________________________________

(Rules on the deductibility of depreciation expense on

Vehicles and other expenses related thereto,and input
taxes allowed therefore)

The following guidelines shall be observed in

determining whether depreciation expense can be
claimed or not on account of Vehicles capitalized
by the taxpayer, or in claiming other expenses and
input taxes on account of said Vehicle.

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 Rules on the deductibility of depreciation expense on vehicles
________________________________________________________

A. No deduction from gross income for depreciation shall be

allowed unless the taxpayer substantiates the purchase
with sufficient evidence, such as official receipts/other
records which contain the following, among others:
i. Specific Motor Vehicle Identification Number,
Chassis Number or other registrable identification
numbers of the vehicle;
ii. The total price of the specific vehicle subject to
depreciation; and
iii. The direct connection or relation of the vehicle to
the development, management, operation and/or
conduct of trade/business/profession of the taxpayers.

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 Rules on the deductibility of depreciation expense on vehicles
____________________________________________________________

B. Only one vehicle for land transport is allowed for the use
of an official or employee, the value of which should not
exceed:
Two Million Four Hundred Thousand Pesos
(Php 2,400,000.00);

C. No depreciation shall be allowed for yachts, helicopters,

airplanes and/or aircrafts and land vehicles which exceed
the above threshold amount unless the taxpayers main
line of business is transport operations or lease of
transportation equipment and the vehicles purchased are
used in said operations;

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 Rules on the deductibility of depreciation expense on vehicles
_________________________________________________________

D. All maintenance expenses on account of non-depreciable

vehicles for taxation purposes are disallowed in its entirety;

E. The input taxes on the purchase of non-depreciable

vehicles and all input taxes on maintenance expenses
incurred thereon are likewise disallowed for taxation
purposes.

EFFECTIVITY:

This Revenue Regulations shall take effect immediately.

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 REVENUE MEMORANDUM CIRCULAR 63-2012
______________________________________________________

Clarify issues on the Invoicing and Recording by Advertising

Agencies, Media Suppliers (Print, Radio, TV, etc) and
Advertisers for media ads placements

I. Contracting for media advertisements

In contracts for media advertisements, the media supplier shall
bill the client for the total cost of production and media
placement. The client/advertiser shall pay the media supplier
directly for the amount billed by it.

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 REVENUE MEMORANDUM CIRCULAR 63-2012
______________________________________________________
A. On the income payment by client/advertiser to the media
supplier (Print, Radio, TV outlet):
The media supplier shall bill the client/advertiser for the total
amount of media placement. Upon payment, Client/advertiser shall
withhold two percent (2%) on the ENTIRE INVOICE AMOUNT of the
media supplier.
- Client/advertisers shall likewise issue Certificate of
Creditable Income Tax Withheld at Source (BIR Form
2307) in the name of the media supplier.
B. On the gross receipts of the media supplier:
- Upon receipt of income payment from the advertiser, the
media supplier shall issue VAT invoice/official receipt to
client/advertiser and shall report the entire amount as
business income for income tax purposes.

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 REVENUE MEMORANDUM CIRCULAR 63-2012
______________________________________________________
II. Commission/Service Fee of Advertising Agency
A. Media suppliers payments to the advertising agency:
- Upon payment by the media supplier to the advertising
agency, it shall withhold 2% from the commission/fees
it shall likewise issue Certificate of Creditable Income
Tax Withheld at Source (BIR Form 2307) in the name
of the advertising agency.

B. On the receipt of commission/service fee by the

advertising agency:
- The advertising agency shall issue its VAT
invoice/OR . The amount of VAT shall be reported
based on the commission/service fee of the
advertising agency.

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 REVENUE MEMORANDUM CIRCULAR 65-2012
_________________________________________________________
Clarifying the Taxability of Association Dues, Membership Fees, and
Other Assessments/Charges collected by Condominium Corporations

The gross receipts of condominium corporations include,

among others:
1. Association dues;
2. Membership fees and
3. Other assessments/charges.

Accordingly these payments received by Condominium

Corporations are subject to the following taxes:

1. Income Tax;
2. VAT, and
3. Withholding Taxes on income payments made to it.

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 Discussions on RMC 65-2012
____________________________________________________________

I. Income Tax -- The amounts paid in as dues or fees by

members and tenants of a condominium corporation form
part of the gross income of the latter subject to income tax.

This is because a condominium corporation furnishes its

members and tenants with benefits, advantages, and

privileges in return for such payments. For tax purposes,
the association dues, membership fees, and other
assessments/charges collected by a condominium corp
constitute income payments or compensation for beneficial
services it provides to its members and tenants. The
previous interpretation that the assessment dues are funds
which are merely held in trust by a condominium corporation
lacks legal basis and is hereby abandoned.

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 Discussions on RMC 65-2012 (cont)
____________________________________________________________

II. Value-Added Tax (VAT) The dues/fees/charges are

subject to VAT since they constitute income payment or
compensation for the beneficial services it provides to its
members and tenants.

Section 105 of the Tax Code provides:

Persons Liable. Any person who, in the course of trade or
business, sells, barters, exchanges, leases goods or properties,
renders services, and any person who imports goods shall be
subject to the value-added tax (VAT) xxx
xxx
The phrase 'in the course of trade or business' means the
regular conduct or pursuit of a commercial or an economic
activity, including transactions incidental thereto, by any person
regardless of whether or not the person engaged therein is a
nonstock, nonprofit private organization (irrespective of the
disposition of its net income and whether or not it sells exclusively
to members or their guests), or government entity.

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 Discussions on RMC 65-2012 (cont)
____________________________________________________________

This conclusion was affirmed by the Supreme Court in

Commissioner of Internal Revenue v. Court of Appeals and
Commonwealth Management and Services Corporation, G.R. No.
125355, March 30, 2000. In this case, the Supreme Court held:

(E)ven a non-stock, non-profit organization or government

entity, is liable to pay VAT on the sale of goods or services. VAT
is a tax on transactions, imposed at every stage of the
distribution process on the sale, barter, exchange of goods or
property, and on the performance of services, even in the
absence of profit attributable thereto. The term "in the course of
trade or business" requires the regular conduct or pursuit of a
commercial or an economic activity, regardless of whether or not
the entity is profit-oriented.

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 REVENUE MEMORANDUM CIRCULAR NO. 35-2012
Clarifying the Taxability of Clubs Organized and Operated Exclusively
for Pleasure, Recreation, and Other Non-Profit Purposes.
____________________________________________________________

The liability for income tax and VAT of recreational clubs:

a. Subject to Income Tax:

Clubs which are organized and operated exclusively for pleasure,
recreation, and other non-profit purposes are subject to income tax
under the National Internal Revenue Code of 1997,as amended.

The provision in the National Internal Revenue Code of 1977 which

granted income tax exemption to such recreational clubs was
omitted in the current list of tax exempt corporations under
National Internal Revenue Code of 1997, as amended. Hence, the
income of recreational clubs from whatever source, including but
not limited to membership fees, assessment dues, rental income,
and service fees are subject to income tax.

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 REVENUE MEMORANDUM CIRCULAR NO. 35-2012
Clarifying the Taxability of Clubs Organized and Operated Exclusively
for Pleasure, Recreation, and Other Non-Profit Purposes.
____________________________________________________________

b. Subject to Value Added Tax:

"SECTION 105. Persons Liable. Any person who, in

the course of trade or business, sells,barters, exchanges, leases
goods or properties, renders services, and any person who
Imports goods shall be subject to the value-added tax (VAT)
imposed in Sections 106 to 108 of this Code.

The phrase 'in the course of trade or business' means the regular
conduct or pursuit of a commercial or an economic activity,
including transactions incidental thereto, by any person
regardless of whether or not the person engaged therein
is a nonstock, nonprofit private organization (irrespective
of the disposition of its net income and whether or not it sells
exclusively to members or their guests), or government entity.

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 Revenue Regulations No. 13-2012
VAT Treatment on sale of adjacent residential house and/or lots
____________________________________________________________

SALE OF REAL PROPERTIES subject to the VAT:

transfer or disposal within a 12-month period
of two or more adjacent residential lots, house and lots
or other residential dwellings in favor of one buyer from
the same seller, for the purpose of utilizing the lots,
house and lots or other residential dwellings as one
residential area wherein the aggregate value of the
adjacent properties exceeds P1,919,500.00, for
residential lots and P3,199,200.00 for residential house
and lots or other residential dwellings.

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 Revenue Regulations No. 13-2012
VAT Treatment on sale of adjacent residential house and/or lots
____________________________________________________________

Adjacent residential lots, house and lots or other residential

dwellings although covered by separate titles and/or
separate tax declarations, when sold or disposed to one and
the same buyer, whether covered by one or separate
Deed/s of Conveyance, shall be presumed as a sale of one
residential lot, house and lot or residential dwelling.

This however, does not include the sale of parking lot which
may or may not be included in the sale of condominium
units. The sale of parking lots in a condominium is a
separate and distinct transaction and is not covered by the
rules on threshold amount not being a residential lot, house
& lot or a residential dwelling, thus, should be subject to
VAT regardless of amount of selling price.

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 De Minimis Benefits (as further amended by RR 5-
2008, RR 5-2011 and RR 8-2012)

a) Monetized unused vacation leave credits of private

employees not exceeding ten (10) days during the year;

b) Monetized value of vacation and sick leave credits paid to

government officials and employees;

c) Medical cash allowance to dependents of employees not

exceeding P750.00per employee per semester or P125/mo;

d) Rice subsidy of P1,500 or 1 sack of 50-kg rice per month

amounting to not more than P1,500 (per RR 5-2008)

e) Uniform/clothing allowance not exceeding P5,000 per

annum (Per RR 8-2012)
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 De Minimis Benefits (as further amended by RR 5-
2011 and RR 8-2012)

f) Actual medical assistance, e.g., medical allowance to cover

medical and healthcare needs, annual medical/executive
check-up, maternity assistance, and routine consultations, not
exceeding P10,000 per annum;

g) Laundry Allowance not exceeding P300 per month;

h) Employee achievement awards, e.g. for length of service or

safety achievement, which must be in the form of a tangible
personal property other than cash or gift certificate, with an
annual monetary value not exceeding P10,000 received by
the employee under an established written plan which does
not discriminate in favor of highly paid employees;

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 De Minimis Benefits (as further amended by RR 5-
2011 and RR 8-2012)

i) Gifts given during christmas and major anniversary

celebrations not exceeding P5,000 per employee per
annum;

j) Daily meal allowance for overtime work and night/graveyard shift not
exceeding 25% of basic minimum wage on a per region basis.

All other benefits given by employees which are not included

in the above enumeration shall not be considered as de
minimis benefits, and hence, shall be subject to income tax
as well as withholding tax on compensation income

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 REVENUE REGULATIONS NO. 4-2012

issued on March 28, 2012 amends Revenue Section 2.6

of Revenue Regulations No. 13-2011 by deleting
Section 2.6.1 thereof, which provides that penalties
and/or interest imposed on the taxpayer may be
abated or cancelled on the ground of one day late
filing and remittance due to failure to beat the bank
cut-off time.

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 Revenue Regulations No. 5-2012
Binding effect of rulings issued prior to Tax Reform Act of 1997
____________________________________________________________

All rulings issued prior to January 1, 1998 will no

longer have any binding effect. Consequently, these rulings
cannot beinvoked as basis for any current business
transaction/s. Neither can these rulings be used as basis for
securing legal tax opinions/rulings.

(Pursuant to Section 244, in relation to Section 4 of the Tax Code of 1997)

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