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Tax Digest

Volume 8, Series 48

Revenue Regulations
CBA BENEFIT AND PRODUCTIVITY
BONUS NO LONGER TAXABLE
Fare hikes and water rate increase signals the start of the
New Year. While these increase bothers most of us, the
Bureau of Internal Revenue (BIR) issued a regulation that
will somehow increase the amount of take home pays of
each employee.
Revenue Regulation 1-2015 issued last January 5, 2015
added new provisions on the previous issuances regarding
De Minimis Benefits. Under the new regulation, amount
received by an employee by virtue of a Collective
Bargaining Agreement (CBA) and productivity incentive
schemes is not subject to income tax as well as
withholding tax on compensation provided the combined
amount do not exceed Ten Thousand (P10,000) Pesos per
employee per taxable year.
The same, if given to employees holding managerial and
supervisory position, is exempted from Fringe Benefits Tax
as long as it is within the given threshold.
Revenue Regulations No. 1-2015

CWT RULES SUPPLEMENTED

In December 5, 2014, BIR issued RR 11-2014 making
additional provisions to section 2.57.2 of RR 2-98 creating
subsection for the withholding of creditable income tax on
Real Estate Investment Trust (REIT) and reclassifying the
treatment of locally produced raw sugar as a separate
subsection for purposes of creditable withholding tax.
Below are the rates for each item listed in the regulation:
1. Income payments made to suppliers of agricultural
products in excess of the cumulative amount of
P300,000 within the taxable year 1%

2. Income payments to REIT corporate taxpayer

registered with BIR LT Audit Division 3 1%
3. Proprietors or operators of sugar mills/refineries on
their mill share and direct buyers of Quedans or
Molasses Storage Certificates from the sugar planters
on locally produced raw sugar 1% based on the
following based price:
a. P1,000 per 50kg bag, and
b. P4,000 per metric ton
Revenue Regulations No. 11-2014

IMPORTERS, BROKERS REQUIRED TO

USE eFPS
Last December 10, 2014, BIR issued Revenue Regulation
10-2014 expanding the coverage of taxpayers required to
file and pay taxes through the electronic Filing and
Payment System (eFPS) to include taxpayers included in
the Taxpayers Account Management Program (TAMP) and
accredited importers with BIR-ICCs and BIR-BCCs.
Selection of taxpayers to include in the TAMP is basically
based on the existing issuances, the latest of which is the
Revenue Memorandum Order No. 20-2014. These taxpayers
account for at least 80% of tax collection of the District as
such are the Top Taxpayers individual or juridical entity.
All importers and custom brokers (individual, partnership,
corporations, associations or cooperatives, whether
taxable or non-taxable) unless otherwise exempted,
who/which secured accreditation from the BIR following
existing revenue issuances, including prospective
importer required to secure the said BIR-ICC and BIR-BCC
shall likewise be enrolled with the eFPS.
Revenue Regulations No. 10-2014

Tax Digest

Volume 8, Series 48

Revenue Memorandum Circular

BIR PRIORITY PROGRAMS FOR 2015
The revenue collected by the Bureau of Internal Revenue
(BIR) support the national development initiatives of the
Government. For 2015, BIR's priority programs aim to
support the country's effort in the 2015 ASEAN Integration.
This circular has been issued to disseminate the 27 priority
programs that are intended to help the Bureau attain the
Php1.721 trillion collection goal.[1] This year's priority
programs are enumerated below:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.

23.
24.
25.

Online System for Transfer Tax Transactions (OST)

Electronic Certificate Authorizing Registration (eCAR)
Electronic Tax Information System (eTIS)
Rate Program
Oplan Kandado Program
Taxpayer Registration and Information Update (TRIU)
Program
Online System for Accreditation of Importers and
Custom Brokers
Online Application and Processing of Tax Clearance
for Bidding Purposes
Electronic Official Registry Books
Internal Revenue Stamps Integrated System (IRSIS)
for Alcohol Products - Distilled Spirits
Automated Internal Revenue Allotment Computation
(AIRAC) System
Compliance Improvement Strategy
Geographical Information System (GIS)
Asset Information Management Program (AIM-P)
Enhanced Mobile Revenue Collection Officers System
(MRCOS)
E-linkage with the Bureau of Treasury (BTr)
Forfeited Asset Management
Integrity Management Program
Capacity Development and Purblic Awareness
(eLearning)
Workflow Management System (WMS)
Expansion of ISO Certification to Other District Offices
Exchange of Information (EOI) Program and the
Implementation of the Foreign Account Tax
Compliance Act Intergovernmental Agreement Model 1
(FATCA-IGA 1)
Human Resources Information System (HRIS)
Procurement, Payment, Inventory, Distribution and
Monitoring System
Strategic Performance Management System (SPMS)

26. Transfer Pricing Program, and

27. Industry Issues Resolutions - Legal
Revenue Memorandum Circular No. 03-2015

SEPARATE PAYMENT FORM ISSUED TO

PAY TAX DEFICIENCIES THROUGH
LETTER NOTICES
BIR prescribed the use of a new payment form BIR Form
0611-A through RMC 88-2014, which is said to be Optical
Character Recognition (OCR) ready, to be used in making
payments of tax deficiencies discovered though RELIEF,
BOC Data Program and TRS.
Revenue Memorandum Circular No. 88-2014

PROPER SUBSTANTIATION OF
DONATION REQUIRED TO CLAIM
AGAINST TAXABLE INCOME
Donors claiming donations and contributions to
accredited non-stock, non-profit corporation/NGO as
deductions from their taxable business income should
submit evidences or proofs to the BIR by showing the
Certificate of Donation and indicating therein the actual
receipt by the accredited organization, date of receipt and
the amount/value of the donated cash/property.
RMC 86-2014 requires donee institutions, as well as donors
to accomplish BIR Form 2322 in triplicate copy, the original
of which shall be given to the donor, the duplicate to the
BIR and the triplicate to be retained by the donee.
If the donation constitutes a donation of property, the
above statement must be accompanied by the deed of
sale/bill of sale to prove the acquisition cost of the
properties.
BIR Form 2322 can be downloaded at the below link:
http://www.bir.gov.ph/images/bir_files/internal_communic
ations_2/BIR%20Form%20No.%202322.pdf
Revenue Memorandum Circular No. 86-2014

[1] Revenue Memorandum Order 2-2015

Tax Digest

Volume 8, Series 48

Revenue Memorandum Circular

TAX TREATMENT OF STOCK OPTION
PLANS
Stock option may be granted to any person, natural or
juridical entitling the said person to purchase shares of
stocks of a corporation at a specific price to be exercised
at a specific date. RMC 79-2014 treats the stock options as
shares of stocks.

Grant of Option
When the option is granted to employees that is those
under an employee-employer relationship, the grantor
cannot claim deductions for the grant of the stock option
when there was no payment/consideration received from
the employee. However, if the option was granted for a
price, the full price of the option shall be considered
capital gains subjected to CGT
The issuance of the option is subject to Documentary
Stamp Tax (DST) of seventy-five centavos (P0.75) on each
two hundred pesos of the par value of the stocks subject
of the option, or 25% of the DST paid upon original
issuance of stock in case of no-par value stocks.

Sale or Transfer of Option Granted

Subsequent sale barter or exchange of options is treated
as sale, barter or exchange of shares of stock not listed on
stock exchange. Transfer of the option for a consideration
shall be subject to capital gains tax however, transfer
without any consideration, capital gains shall be zero.
It should be noted also that transfer of option without any
consideration will treated as donations, thus subject to
donors tax. The basis of which shall be the FMV of the
option at the time of donation.

Exercise of the Option

1. Upon exercise of the option by a rank-and-file
employee, an additional compensation equivalent to
the difference of the book value/FMV of the shares,
whichever is higher, at the time of the exercise of the
stock option and price fixed on the grant date, shall be
recognized and subjected to income tax and
withholding tax on compensation as well.
2. If the employee who exercises the option holds a
supervisory and managerial position, the difference of
the book value/FMV of the shares, whichever is higher,
at the time of the exercise of the stock option and
price fixed on the grant date, shall be treated as fringe
benefits subject to FBT.

3. In the event was granted to supplier of goods or

services, of the book value/FMV of the shares,
whichever is higher, at the time of the exercise of the
stock option and price fixed on the grant date, shall be
recognized as additional consideration for the
services rendered or goods and shall be subject to the
relevant withholding tax at source and other taxes
applicable.

Reportorial Requirements
1.

The issuing corporation must submit a statement

under oath within 30 days from the grant of the option
indicating the following:
a. Terms and conditions of the stock option
b. Names, TINs and position of the grantees
c. Book value and FMV, par value of shares subject of
the option at the grant date
d. Exercise price and exercise date
e. Taxes paid on the grant
f. Amount paid for the grant

2. On the 10th day of month following the date of

exercise period, the issuing corporation shall file a
report stating the following:
a. Exercise date
b. Names, TINs, position who exercise
c. BV, FMV, Par value of shares subject of the option
at the exercise date
d. Mode settlement
e. Taxes withheld on exercise
f. FBT paid
Revenue Memorandum Circular No. 79-2014

NO NEED TO REVALIDATE EXPIRED

TCCS DURING PENDENCY OF CASH
CONVERSION REQUEST
On September 15, 2014, the Bureau of Internal Revenue
issued Revenue Memorandum Circular No. 77-2014 (the
RMC) regarding the clarification of certain requirements
on the processing of applications for cash conversion of
tax credit certificates (TCCs).
TCCs are certifications by the Commissioner of Internal
Revenue or his duly authorized representative in BIR
accountable form with monetary value, the amount due to
a taxpayer resulting from an overpayment of a tax liability
or erroneous payment of a tax due, which acknowledges

Tax Digest

Volume 8, Series 48

Revenue Memorandum Circular

the grantee-taxpayer to use for payment or in satisfaction
of any of his internal revenue tax liability (except those
excluded).
It may also be converted as a cash refund, or disposed of
in the manner and in accordance with the limitations, if
any, as may be prescribed by the provisions of these
Regulations.

Who and why

Concerned taxpayers have filed for the conversion and
have encountered issues as the expiration of their
respective TCCs fall during the pendency of the
processing while the said certificates were still in the
possession of the revenue Office where they applied for
the conversion.
The concern of the affected taxpayers is the validity
period where any tax credit certificate which remains
unutilized after five (5) years from date of issue shall,
unless revalidated before the end of the fifth year, be
considered invalid and shall not be allowed for use in
payment of any of the taxpayer's internal revenue tax
liability nor allowed to be transferred and the unutilized
amount thereof shall revert to the General Fund of the
National Government.

Clarifications
The provisions of Section 5 (b) of Revenue Regulations No.
5-2000 dated July 19, 2000 is clear that:
Any request for conversion into cash refund of
unutilized tax credits may be allowed during the
validity period of any TCC. (emphasis supplied).

This circular clarifies that all applications for the cash

conversion of TCCs which have been filed before the
expiration of their validity with the same Office that issued
the said TCC shall no longer be required to be revalidated
for purposes of continuance of the processing of the
respective application and shall proceed accordingly,
whether for verification, approval or for payment.
It was also cleared in the circular that revalidation is still
required for TCC, whose validity is about to expire
application for cash conversion has not been filed yet with
the exception where the certificate has already been
previously revalidated.
Revenue Memorandum Circular No. 77-2014

FDA CERTIFICATION REQUIRED FOR

VAT
EXEMPTION
OF
FEED
INGREDIENTS
As a matter of providing additional clarifications in
relation to RMC 55-2014, BIR issued two (2) circulars to
guide every one of us determining what feed ingredients
require Food and Drug Administration (FDA) certification
and who has the competency to make declaration of
whether or not a feed ingredient has possible utilization
for human consumption.
RMC 66-2014 issued last August 27, 2014 specifically
identified six (6) feed ingredients that requires a FDA
certification that it is unfit for human consumption,
namely;
1.
2.
3.
4.
5.
6.

Whey Powder
Skimmed Milk Powder
Lactose
Buttermilk powder
Whole milk powder, and
Palm Olein

It should be noted that the list of feed ingredients that will

require FDA certification is not limited to the above items.
A competent authority may determine additional
ingredients and additives that may have a possible
utilization for human consumption. RMC 78-2014 cleared
out that the previous circular should not be construed as
giving the Revenue District Officers the discretion to make
declaration of whether or not the feed ingredient subject
to sale or importation is fit for human consumption.
Revenue Memorandum Circular (RMC) No. 55-2014,
RMC 66-2014 and RMC 78-2014

AMENDMENT
TO
DOCUMENTS
REQUIRED IN FILING APPLICATION
FOR CONTRACTORS FINAL PAYMENT
RELEASE
In relation to RMC 63-2014 which circularizes the BIR Form
0217 or the Application for Contractor's Final Payment
Release, BIR released RMC 1-2014 to amend the documents
required to be submitted upon filing of the said form.

Tax Digest

Volume 8, Series 48

Revenue Memorandum Circular

The new circular removes the requirement to submit copy
of the contractors Certificate of Registration (BIR Form
2303) and the contractor's breakdown of receipts or
collection. It was noted also that DPWH's draft of final
biling has been changed to DPWH's draft of final
disbursement voucher.
Revenue Memorandum Circular No. 63-2014

WITHHOLDING TAX RATES ON

DIVIDEND PAYMENTS TO PHILIPPINE
CENTRAL
DEPOSITORY
(PCD)
NOMINEES
The BIR recently issued Revenue Memorandum Circular
(RMC) No. 73-2014 dated September 12, 2014 clarifying the
withholding tax rates on dividend payments to PCD

Nominees. Under this circular, a PCD Nominee-Filipino is

deemed to be an individual subject to final withholding tax
of 10% under Section 24(B)2 of the Tax Code, unless it is
satisfactorily shown that the actual equity investor is a
domestic corporation. A PCD Nominee Non Filipino is
deemed to be a non-resident foreign corporation subject
to final withholding tax of 30% under Section 28(B)1 of the
Tax Code, unless it is satisfactorily shown that the actual
equity investor is a resident alien, non-resident alien
engaged or not engaged in trade or business in the
Philippines or resident foreign corporation.
The BIR Regulations did not mention anything about the
applicability of reduced withholding rates under existing
tax treaties. It can however be presumed that if the
non-resident recipient, whether individual or corporate, is
qualified to avail of the reduced treaty rates, then such
should be the rate applicable.
Revenue Memorandum Circular No. 73-2014

Court Decisions
TRANSFER OF REAL PROPERTY BY
MERGER NOT SUBJECT TO DST
In a Supreme Court (SC) decision on the case of Pilipinas
Shell Petroleum Corporation (PSPC) vs. Commissioner of
Internal Revenue (CIR) G.R. No. 192398 dated September 29,
2014, the court upheld that conveyance of real properties
by virtue of a statutory merger is not liable to pay
documentary stamp tax.
In April 1999, PSPC entered into a plan merger with its
affiliate Shell Philippine Petroleum Corporation (SPPC)
wherein all of the assets and liabilities of the latter will be
absorbed by the PSPC including a real property. Believing
that the transfer is subject to DST, PSPC paid to the BIR the
DST but realized later on that it was an erroneous payment
thus, filed a claim for refund.
Due to BIR inaction, the case was lifted up to the CTA where
the claim was granted on the ground that transfer does
not constitute a sale of real property which is subject to
DST.

Finally, the SC decided on the case highlighting the

provision of Section 196 of the NIRC saying that it is
imposed only on the transfer of realty by way of sale and
does not apply to all conveyances of real property. The
decision also finds support in Section 199 of the NIRC
Documents and Papers not Subject to Stamp Tax which
includes transfer of property by virtue of merger or
acquisition.

SC DENIES DFP APPEAL TO REVIEW

CERTIORARI
Duty Free Philippines (DFP) lost its privilege to appeal the
decision made by the Court of Tax Appeals (CTA) First
Division on its case against the Commissioner of Internal
Revenue (CIR) for not following the procedures in making
appeal as prescribed by law.
In a decision made by the Supreme Court (SC) in the case
of DFP vs. CIR, docketed as G.R. No. 197228, dated October 8,

Tax Digest

Volume 8, Series 48

Court Decisions
2014, the higher court ruled based on Rule 45 of the 1997
Rules of Civil Procedure that it has no jurisdiction over a
case filed to them involving decisions made by CTA
division without passing through the CTA en banc.

CWT ENOUGH PROOF OF TAXES

WITHHELD
In the case of Philippine National Bank (PNB) vs. the
Commissioner of Internal Revenue (CIR) dated September
29, 2014, the Supreme Court (SC) upheld the already
established maxim that taxpayer claimants of creditable
withholding tax (CWT) need not prove the actual
remittance of withheld taxes to the BIR.

CONTACT PERSON

In November 11, 2002, PNB filed a claim for refund or the

issuance of a Tax Credit Certificate for the taxable year
200 with the BIR. Due to BIR's inaction, on the
administrative claim, PNB appealed before the Court of Tax
Appeals (CTA) where the claim has been granted. Petition
for motion for reconsideration filed by the CIR was
subsequently denied by the First Division resolution on
May 30, 2007. The same decision was sustained by the CTA
en bancstating the fact there is claimant no longer need to
present testimonies of the various withholding agents who
issued the certificates and made entries therein.

Mr. Donnies T. Alas

Chairman & CEO
E: donniesalas@alasoplascpas.com

On the side note, it is worth reminding ourselves - as

withholding agents, to be mindful in completing any BIR
Forms since these documents are executed under the
penalties of perjury, pursuant to Section 267 of the NIRC.

Ms. Nessa S. Oplas

Branch Manager - Bacolod
E: nessaoplas@alasoplascpas.com

Ms. Marycris S. Oplas

Senior Partner
E: marycrisoplas@alasoplascpas.com
Ms. Glesie R. Martinez
Partner, Audit & Assurance - Cavite
E: glesiemartinez@alasoplascpas.com

Tax Digest by:

Tax Advisory Services / Client Continuity &
Communication Team
For clarification, tax queries or if you need our
assistance in securing BIR ruling, you may call
us at telephone number (632) 759-5090 or
email us at aocheadoffice@alasoplascpas.com
or visit us at our website www.alasoplascpas.com