Securities and Exchange Commission
The Securities and Exchange Commission (SEC) issued SEC Memorandum Circular (MC) No. 27, Series of 2020 dated 25 August 2020, to provide guidelines for the conversion of corporations either to One Person Corporation (OPC) or to Ordinary Stock Corporation (OSC).
A. Conversion of OSC to OPC
B. Conversion of OPC to OSC
In both cases, the Consolidated Schedule of Fees and Charges under SEC MC No. 3, series of 2017 shall apply for these guidelines.
The conversion from OSC to OPC shall be deemed as optional due to the nature of these corporations. On the other hand, the conversion from an OPC to OSC shall be deemed as mandatory, unless when winding-up and dissolution are appropriate
Processing of applications for conversion shall commence only upon receipt by the Corporate Registration and Monitoring Division (CRMD) or by any of the SEC Extension Offices, nationwide, of the complete documentary requirements, including the proof of payment of the applicable fees. This shall be done manually by the SEC until further notice.
In case an opposition or dispute arises from the conversions discussed in these guidelines, the aggrieved party may file before the CRMD of a verified Petition for Cancellation of the certificate issued, on the ground of fraud in the procurement thereof in accordance with the applicable laws and other rules or issuances of the SEC.
Supreme Court / Court of Tax Appeals
The Supreme Court (SC) / Court of Tax Appeals (CTA) issued the following:
Revenue Regulations (RR) No. 12-99, as amended, provides that the Preliminary Assessment Notice (PAN) or the Final Assessment Notice (FAN) may be served to the taxpayer by registered mail. Under Section 3(v), Rule 131 of the Rules of Court, a disputable presumption exists that a letter duly directed and mailed is received in the regular course of the mail. However, in the case of direct denial of the taxpayer of due receipt of the PAN and the FAN, the burden is shifted to the BIR to prove that the mailed assessment notices were indeed received by the taxpayer or by its authorized representative. The mere presentation of the registry receipt will not suffice without presentation of witnesses to identify and authenticate that the signatures appearing on the registry receipts were made by the taxpayer’s authorized representatives.
Also, a FAN without a definite period within which to pay the assessed taxes is void and without any legal consequence. [Commissioner of Internal Revenue (CIR) vs. T Shuttle Services, Inc., G.R. No. 240729, 29 September 2020]
Requisites for supply of services to qualify for Value-Added Tax (VAT) zero-rating: (1) Services must be other than processing, manufacturing, or repacking of goods; (2) Payment for such services must be in acceptable foreign currency accounted for in accordance with the Bangko Sentral ng Pilipinas’ (BSP’s) rules and regulations; and (3) Recipient of such services must be doing business outside the Philippines. [CIR vs. Sabre Travel Network (Philippines), (formerly Abacus Distributions Systems Philippines, Inc.), CTA EB No. 1932, 03 September 2020; Sabre Travel Network (Philippines), (formerly Abacus Distributions Systems Philippines, Inc.) vs. CIR, CTA EB No. 1937, 03 September 2020]
Improperly Accumulated Earnings Tax (IAET) is not applicable when a company retains funds for compliance with a loan covenant or pre-existing obligation. Section 3(d) of RR No. 02-01 shows that “Earnings reserved for compliance with any loan covenant or pre-existing obligation established under a legitimate business agreement” constitutes an accumulation of earnings for the reasonable needs of the business. (Fortune Tobacco Corporation vs. CIR, CTA EB No. 1971, September 22, 2020)
Condominium corporations are not engaged in business when they collect assessments or dues from its unit owners. Thus, they are not subject to Local Business Tax, as well as to business plate/sticker fee/environmental impact fee which are imposable only on entities engaged in business. In Revenue Memorandum Circular No. 65-2012, it was ruled that association dues, membership fees, and other assessments/charges form part of a pool from which a condominium corporation must draw funds in order to bear the costs for maintenance, repair, improvement, reconstruction expenses and other administrative expenses. Without any clear and convincing proof that the condominium corporation had actually engaged in profit-making activities and had derived any income or profit from its collection of dues from its unit owners, the same is not engaged in trade or business. (Taguig City Government, Hon. Ma. Laarni Cayetano vs. Serendra Condominium Corporation, CTA AC No. 229, 10 September 2020; Serendra Condominium Corporation vs. Taguig City Government, Hon. Ma. Laarni Cayetano, CTA AC No. 230, 10 September 2020)
The Letter of Authority (LOA) is valid even if it was issued by a Regional Director who is only an Officer-In-Charge (OIC). A BIR officer holding an OIC-Regional Director position is equally authorized to and responsible as that of a regular Regional Director for issuing eLOA and assessment/demand notices, among others.
Expenses of a non-bank financial intermediary should be determined on a pro-rata basis under Section 50 of the Tax Code, as implemented under Revenue Regulations (RR) No. 4-11. Only costs and expenses attributable to the operations of the financial institution can be claimed as deduction to arrive at the taxable income of the financial institution subject to regular income tax. The Court held that the CIR was justified to apply the method of allocation pursuant to RR No. 4-11 with reference to allocating cost and expenses among the regular tax, final tax and tax-exempt regimes of the income earned by a non-bank financial intermediary. Nonetheless, since the amount of available credits is sufficient to cover the deficiency income taxes, the total deficiency income tax assessment was cancelled.
The surrender of shares does not constitute a sale, assignment or transfer because the liquidating corporation is not taking title to the surrendered shares and the shares are retired and not retained as treasury share. Considering that the shares will be considered retired and no longer issuable upon redemption, no DST is due on the surrender and cancellation of redeemable, preferred shares. (First Philippine Utilities Corporation vs. CIR, CTA Case No. 9431, 29 September 2020)