DIGEST OF 1998 BIR RULINGS.docx

7/24/2019 DIGEST OF 1998 BIR RULINGS.docx

1/27

DIGEST OF 1998 BIR RULINGS

ESTATE TAX; Extension of time to file retrn- Granting the request for extension of 30 days within which to

file estate tax return of the late Alexander Tan in view of the difficulty of reconstructing the records of asset andliabilities which were destroyed by fire. !BIR Rlin" No# $$1%98 &'te& ('n'r) *+ 1998,

EX-ISE TAX; -ement not s./e0t to 2 ex0ise t'x - Revenue Regulations No. 3-!" dated #uly $0% !!"which govern the taxation of &inerals and &ineral 'roducts includes in its coverage under the ter( )*therNon-&etal)% ce(ent (aterials but not the finished +roduct ce(ent. Accordingly% not being a (ineral +roduct%ce(ent is exe(+t fro( the $, excise tax but subect to the 0, AT i(+osed under /ection 01A2 of the Taxode of !!. !BIR Rlin" No# $$%98 &'te& ('n'r) 8+ 1998,

DO-U3ENTAR4 STA35 TAX - Granting the request of 'hili++ine 4e+osit 5nsurance or+oration 1'452 thatthe ex+anded creditable withholding tax and docu(entary sta(+ tax on the sale of Arcya o((ercialor+oration 1AR6A2 of the three 132 floors of the condo(iniu( building of 7chelor Tower or+oration thenowned by '45 should be based on the dates when the sales were consu((ated as an exce+tion to the

general rule that in cases involving sale% exchange or any dis+osition of real +ro+erty% the tax base for 4/Tshall be sa(e as the tax base used in the co(+utation of ca+ital gains tax% creditable ex+anded withholding taxor cor+orate inco(e tax.!BIR Rlin" No# $$6%98 &'te& ('n'r) 17+ 1998,

R5%ITAL4 TAX TREAT4- 5nterest +ay(ent to be (ade by '84T on loans to be extended by the Re+ublic of5taly through its instru(entality% &ediocredito entrale /.'.A. not subect to inco(e and consequentlywithholding taxes +ursuant to the R'-5taly Tax Treaty. !BIR Rlin" No# $$%98 &'te& ('n'r) 8+ 1998,

DO-U3ENTAR4 STA35 TAX; Inst'llment ')ment of DST - 4enying the +ro+osals of /hoe(art% 5nc. that4/T will we co(+uted at the end of the year when actual sale is finally deter(ined and that 4/T will be +aid onan annual basis over a +eriod of $9 years instead of +aying the 4/T at the ti(e of execution of lease contractfor the years covered because the Tax ode does not authori:e either the install(ent +ay(ent of 4/T or theco(+utation thereof based on so(e (ode or basis other than the consideration a++earing in the contract ordocu(ent itself. !BIR Rlin" No# $$*%98 &'te& Fe.r'r) + 1998,

Exemtion from T'x Li'.ilities of Forei"n%.'se& 0oror'tion :i0 sis "oo&s tro" SBSE


2/27

sa(e right to +ay the tax to either +arty under exce+tional circu(stances. !BIR Rlin" No# $$=%98 &'te&Fe.r'r) + 1998,

->T; S'le or ex0'n"e of re'l roert) .) ' 0oror'tion not '.it'll) en"'"e& in re'l est'te.siness - 'ursuant to RR No. -!0 as a(ended by RR No. $-!" any sale% exchange or transfer of real+ro+erty whether ca+ital or ordinary asset by a cor+oration which is not habitually engaged in the real estatebusiness as certified by R7;A and which is not registered with >8?R; as engaged in sociali:ed housing+roects under RR $! the selling +rice of which is over '$%000%000.00 shall be subect to a creditablewithholding tax of 9, based on the gross selling +rice or total a(ount of consideration or its equivalent +aid tothe seller@owner. RR -!0 as a(ended by RR $-!" covers all ty+es of sales% whether cash sale% sale oninstall(ent basis and sale on a deferred +roect basis. Thus% sales or install(ent basis are subect to thecreditable withholding tax under RR $-!" based on the gross selling +rice.

&oreover% the creditable ex+anded withholding and docu(entary sta(+ tax on sale of real +ro+erty shall bebased on the consideration or gross selling +rice exclusive of the 0, AT. !BIR Rlin" No# $$8%98 &'te&Fe.r'r) *+ 1998,

?AT; Exemtion of 3'rine Sol'r S'lt- 5(+ortation of (arine solar salt is exe(+t fro( AT +ursuant to/ection 031c2 of the Tax ode% as a(ended by RA and RA B$" 1now /ection 01c2 of the Tax ode of!!2. This is based on the certifications by argill Australia 8td. that (achine solar salt is an ordinary salt

since its +roduction is thru the +rocess of solar eva+oration of ordinary sea water 1brine2 over large areas ofenclosed +onds and earthen diCes and does not undergo further +rocessing exce+t washing with highconcentrated brine. !BIR Rlin" No# $$9%98 &'te& Fe.r'r) *+ 1998,

IN-O3E TAX; ?AT- T5'*-;ATAAN GR*?'% 5N.% a do(estic cor+oration which +rovides technical%research% (anage(ent and +ersonnel assistance to its affiliates on a +urely rei(burse(ent-of-cost basiswithout any intention of reali:ing +rofit is still subect to inco(e tax under /ection $" 1a2 of the Tax ode% asa(ended. &oreover% since it receives +ay(ents for such services% it is subect to AT on such servicesrendered. !BIR Rlin" No# $1$%98 &'te& Fe.# *+ 1998,

R5%T@AILAND TAX TREAT4- The re(ittance by &arine olloids 1'hil.2 5nc. of sales co((issions to Danghe(ical o. 8td.% a non-resident foreign cor+oration with +rinci+al office in the Eingdo( of Thailand is notsubect to 'hili++ine inco(e withholding tax +ursuant to R'-Thailand Tax Treaty considering that the

obligations of Dang to develo+% +ro(ote and sell +roducts under the /ales Re+resentative Agree(ent will berendered entirely in Thailand and since Dang has no +er(anent establish(ent in the 'hili++ines% the salesco((issions are not considered as inco(e fro( sources within the 'hili++ines. !BIR Rlin" No# $11%98 &'te&Fe.# *+ 1998,

IN-O3E TAX; DND 0'nnot :itol& t'x from '"ents 0ommissions- /ince the +ay(ent by the 4e+art(entof National 4efense 14N42 through an irrevocable 8etter of redit in the total a(ount of ?/F$"%"0 in favor of*lin ;rass of N. /ha(erocC /t. 7ast Alton% $.$0$"% ?/A for the su++ly of 90 dons ;rass stri+s and tonsco((ercial bron:e% the latter being the one who +ays 4N4=s agent co((issions without co((unicating thea(ount other +aid% 4N4 cannot withhold tax fro( such agent=s co((ission. 5t (ust be noted that the ;5R hasno existing regulations designating a non-resident foreign cor+oration as a withholding agent on behalf of theGovern(ent of the 'hili++ines inco(e +ay(ents (ade to an agent residing in the 'hili++ines. 4N4 cannot berequired to withhold tax fro( the agent=s co((ission since the +ay(ent is settled through a 8etter of reditand that the 'urchase *rder did not (ention that the agent has to be +aid in co((ission nor does 4N4 has

direct (eans of ascertaining the tax base. !BIR Rlin" No# $1%98 &'te& Fe.r'r) *+ 1998,

-A5ITAL GAINS TAX- A single sale of different shares of stocC of several cor+orations by &arco++er in favorof the bidder% &R >oldings% in the +ublic auction last /e+te(ber 9% !! constitutes only one 12 saletransaction having been done at the sa(e ti(e by the sa(e +arties. Accordingly% only one 12 ca+ital gains taxreturn is required in view of /ection 1a21$2 of Revenue Regulations No. $-B$.!BIR Rlin" No# $16%98 &'te&Fe.r'r) *+ 1998,


3/27

?AT; 5IA s./e0t to ?AT on T? 'irtime- The 'hili++ine 5nfor(ation Agency 1'5A2 being a govern(ent agency%is subect to AT if in the course of trade or business% it sells% barters% exchanges or leases goods or +ro+ertiesor render services and i(+ort goods. &oreover% although T and radio broadcasting station owners are theones +ri(arily liable to the +ay(ent of AT for buying and selling T airline% the a(ount of tax can be +assedon to '5A. inally% '.4. 3$ allowing broadcasting and T station to i(+ort radio and television equi+(entwithout +re+ay(ent of custo( duty and co(+ensating tax 1now AT2 has been re+ealed by 7.*. No. $3.!BIRRlin" No# $1%98 &'te& Fe.r'r) 7+ 1998,

SENIOR -ITIIT@@OLDING TAX; 5')mentCremitt'n0e of :itol&in" t'xes on 0oror'tion .) S3-- RevoCing theauthority +reviously granted to /an &iguel or+oration which decentrali:ed the +ay(ent@re(ittances ofwithholding taxes on co(+ensation inco(e and ex+anded withholding taxes to the nearest revenue districtoffices where the difference /& until relocated for being contrary to /ec. $ of RR No. 30!" a(ending /ec. 31a2 of RR $-!3 i(+le(enting RA ". Taxes deducted and withheld fro( co(+ensation inco(e andwithholding tax of /& as well as its different units shall be re(itted to R4* &andaluyong ity where is

+rinci+al office is located.!BIR Rlin" No# $1=%98 &'te& Fe.# 7+ 1998,

R5%US TAX TREAT4- The issuance by Iue:on 'ower 1'hili++ines2 8i(ited% o. 1I'8 for brevity2 of certaincollateri:ed Notes through a +ublic offering that will require its registration as securities under the ?./.securities act and will be secured by I'8=s rights under the 'ower 'urchase Agree(ent% the +roect contractsand substantially all its fixed assets% shall qualify as a )+ublic issue of bonded indebtedness)H hence% theinterest inco(e to be +aid to the registered holders of the Notes shall be subect to the +referential tax rate of0, +ursuant to R'-?/ Tax Treaty. !BIR Rlin" No# $18%98 &'te& Fe.r'r) 1$+ 1998,

?AT; S'le of re'l roerties rim'ril) el& for s'le or le'se to 0stomers- ?nder /ec. ".00- of RR No.-!9 sale of real +ro+erties held +ri(arily for sale to custo(ers or held for lease in the ordinary course of tradeor business of the seller shall be subect to 0, AT based on the gross selling +rice. ;eing a R7;A (e(berwould only affir( the fact that a +erson is engaged in real estate business and% therefore% would fall within the+urview of those where sale of realty are subect to 0, AT. !BIR Rlin" No# $19%98 &'te& Fe.r'r) 11+

1998,

-'it'l "'ins t'x; Do0ment'r) st'm t'x- A(ending ;5R Ruling No. 4A-$B$-! dated August $0% !!.The R4* of &ariCina has been authori:ed to issue the T8 in favor of s+ouses rancis and ictoriaGatchitorena over the transfer of the +ro+erty of s+ouses esar and


4/27

-'it'l "'ins t'x; Tr'nsfer of l'n& :itot 0onsi&er'tion .) Trstee to ' Trstor- The transfer of one-half1@$2 +ortion of five 192 +arcels of land without consideration by virtue of a 4eed of Transfer executed by andbetween a trustee and a trustor and considering further that the execution of the 4eed of Transfer was inco(+liance with the *rder of the Regional Trial ourt which already beca(e final and executory% is exe(+tfro( the , ca+ital gains tax i(+osed under /ection $" 14212 of the Tax ode of !!. &oreover% the saidtransfer is also exe(+t fro( the donor=s tax i(+osed under /ection !B of the sa(e ode due to lacC ofdonative interest on the +art of the 7state of Roy ;. 'adilla. inally% the 4eed of Transfer is not subect to the

4/T i(+osed under /ection ! also of the Tax ode of !! but only the notarial acCnowledg(entthereof. !BIR Rlin" No# $1%98 &'te& Fe.r'r) 19+ 1998,

Effe0tiit) of RA 8; Assessments isse& rior to ('n'r) 1+ 1998- Re+ublic Act No. B"$" otherwiseCnown as the Tax Refor( Act of !! tooC effect on #anuary % !!BH hence% the sixty 102- day and the onehundred eighty 1B02-day +eriods referred to in /ection $$B of the Tax ode of !! tooC effect and@or coveredonly Assess(ents issued on or after #anuary % !!B. Accordingly% the deficiency ad-valore(% value-added andinco(e taxes assess(ent issued against ortune Tobacco or+oration on August 3% !!3 shall be governedby Revenue Regulations No. $-B9 and other +rior +ertinent issuances. !BIR Rlin" No# $%98 &'te&Fe.r'r) 19+ 1998,

Effe0tiit) of RA 8; 5erson'l 'n& '&&ition'l exemtions- The +rovisions of the N5R of !! beca(eeffective on #anuary % !!B as +rescribed under /ection B of R.A. No. B"$". Accordingly% the +ersonal and

additional exe(+tions +rescribed under /ection 3" 1A2 and 1;2 of the Tax ode of !! cannot be (ade toa++ly to the !! inco(e of individual tax+ayers but to their inco(e which have been earned and@or receivedfor the year !!B and thenceforth. !BIR Rlin" No# $6%98 &'te& Fe.r'r) + 1998,

R3O No# 1%9=; Een retrns- R&* No. "-!% 'rescribed the 'olicies and 'rocedures in thei(+le(entation of )7ven Returns) will not a++ly to the followingJ 12 cor+oration withholding tax for taxable year!!9 and +rior yearsH 1$2 5ndividual inco(e tax returns of ex+atriates voluntarily filing then returns but whosesalaries are credited and received offshoreH 132 7ntities voluntarily re(itting withholding tax on behalf of alienindividuals who are not their e(+loyees and do no have control over the +ay(ent of the co(+ensation of saidalien individualsH and 1"2 5ndividual inco(e tax returns of ex+atriates who are e(+loyed locally by a 'hili++ineentity but who also receive inco(e fro( offshore e(+loyer. !BIR Rlin" No# $*%98 3'r0 7+ 1998,

T'x 0re&it 0ertifi0'tes isse& .) BOI- A Tax redit ertificate 1T2 duly issued by the ;oard of 5nvest(ent1;*52 +ursuant to Article $ of the *(nibus 5nvest(ents ode of !B 17.*. $$2 shall% u+on +ro+era++lication be allowed to be used in +ay(ent of docu(entary sta(+ tax liability. !BIR Rlin" No# $7%98 &'te&3'r0 7+ 1998 0itin" BIR Rlin" No# 11*%97 &'te& O0to.er 61+ 1997,

?AT; Exemtion of ele0tri0 0ooer'ties- The exe(+tion fro( AT of electric coo+eratives duly registeredwith the 4A or N7A under /ection 0 1s2 of the Tax ode of !! covers only their sales of electricity andi(+ortation of (achineries and equi+(ent% including s+are +arts thereof% which shall be used in the generationand distribution of electricity. >owever% local +urchases by electric coo+eratives of (achineries% equi+(ent ands+are +arts shall be subect to AT even if the sa(e are to be used in the generation of electricity% Accordingly%electric coo+eratives should +ay the 0, AT being +assed on by the local su++liers on the for(er=s+urchases of (achineries and equi+(ent. !BIR Rlin" No# $=%98 &'te& 3'r0 7+ 1998,

-'it'l "'ins t'x; Do0ment'r) st'm t'x; S'le of to:nose nit 0oere& .) T-T- or +ur+oses ofco(+uting the ca+ital gains tax and docu(entary sta(+ tax relative to the sale of a townhouse unit covered by

a Transfer ertificate of Title% the land and the i(+rove(ents thereon should be given se+arate values +ursuantto 4e+art(ent *rder No. -! dated A+ril 0% !! relative to the )5(+le(entation of the Revised


5/27

+ro+erty% +lant and equi+(ent of electric utilities is taxable% the general rule is that% (ere increase in the valueof +ro+erty without actual reali:ation% either through sale or other dis+osition% is not taxable. >owever% if byreason of a++raisal% the cost basis of +ro+erty is increased and the resulting basis is used as the new tax basefor +ur+oses of co(+uting the allowable de+reciation ex+ense% the net difference between the original costbasis and new basis due to a++raisal is taxable under the econo(ic benefit +rinci+le.

1b2 ;5R is not following A(erican 8aws on taxation because we have our tax laws% including rules andregulations i(+le(enting our tax laws. >owever% under the doctrine of +recedent% a court (ay a++ly

A(erican 8aws or ourt 4ecisions.

1c2 The a(end(ents introduced by 7* No. 3 to then /ection $1c21$2 of the Tax ode of !!+rovides that dividend received by a citi:en or resident alien fro( a do(estic cor+oration is subect toinco(e tax at the rate of 9, in !B% 0, effective #anuary % !B% 9, effective #anuary % !BBand 0, effective #anuary % !B!. >owever% /ec. $$ 1a2 and 1b2 of the sa(e ode +rovides thatdividends received by a non-resident alien individual% whether engaged or not in trade or business inthe 'hili++ines% fro( a do(estic cor+oration is subect to final withholding tax of 30, of such dividendinco(e.

1d2 or +ur+oses of co(+uting the taxable inco(e of do(estic cor+oration derived for( within andwithout the 'hili++ines% the allowable deductions are li(ited to those +rovided under /ection $! of the

Tax ode of !! for taxable year !! and +rior years but for taxable year !!B% /ection 3" of theTax ode of !! governs.

1e2 'ursuant to then /ection of the Tax ode of !!% as a(ended by RA B$"% the $, franchisetax of electric% gas and water utilities is based on gross recei+ts derived fro( the business covered bythe law granting the franchise. !BIR Rlin" No# $9%98 &'te& 3'r0 19+ 1998,

EX-ISE TAX; Se0i'll) &en'tre& 'l0ool- ;5R Ruling No. 03-! exe(+ting 'hili++ine Asla( or+orationfro( excise tax for its s+ecially denatured alcohol is not in any way affected by the +roviso of /ection 3 of theTax ode of !!. The s+ecially denatured alcohol% although it has undergone fer(entation% dilution%+urification or (ixing +rocess does not (aCe it an alcoholic drinC suitable for oral intaCe. The resultant vinegarafter denaturing% cannot be regarded as re+rocessed s+irit since it no longer contains ethyl alcohol% the sa(ehaving been converted into acetic acid. &oreover% vinegar cannot be taCen orally in volu(es but (erely as

condi(ent or as +reservative. !BIR Rlin" No# $6$%98 &'te& 3'r0 1$+ 1998,

EX-ISE TAX; Den'tre& ine"'r- /+ecially denatured alcohol although it has undergone fer(entation%dilation% +urification or (ixing +rocess does not (aCe it an alcoholic drinC fit for oral intaCe. The resultantvinegar after denaturing cannot be re+orted as re+rocessed s+irit since it no longer contains alcohol% the sa(ehaving been converted into acetic acid. >ence% ethyl alcohol s+ecially denatured for the (anufacture of vinegarand the resultant clear vinegar are exe(+t fro( the excise tax but subect to the 0, AT under /ec. 0 ofthe Tax ode of !!. !BIR Rlin" No# $61%98 &'te& 3'r0 $+ 1998,

EX-ISE TAX; Imort'tion of -eroee (ee- The 'residential &e(orandu( of &ay $3% !!9 which grantedthe request of 'hil(otors or+oration for the classification of heroCee #ee+ as )#ee+) not subect to excisetax was authori:ed for (arCet test +ur+oses only. The fact that the restriction on the (aCer of i(+ortedheroCee #ee+ for (arCet testing +ur+oses has been lifted by the ;*5 does not necessarily (ean that thesubsequent i(+ortation of heroCee #ee+ in excess of the quantity li(it of $9 units is exe(+t fro( the ad

valore( tax. !BIR Rlin" No# $6%98 &'te& Aril 16+ 1998,

?AT; S'le of 0onstr0tion seri0es to 5E


6/27

IN-O3E TAX; S'le of roert) .) 5il# T.er0olosis So0iet)- 5nco(e derived by the 'hili++ineTuberculosis /ociety% 5nc. 1'T/52% a non-stocC% non-+rofit% +rivate charitable organi:ation which o+erates theIue:on 5nstitute and fifty 1902 T; enters nationwide% fro( the sale of its +ro+erty in


7/27

rate of '.3 +er liter2 +ursuant to /ection "B 1b2 and 12 of the Tax ode of !!. &oreover% the sale ori(+ortation of +etroleu( +roducts% which include 8'G% is exe(+t fro( AT under /ection 0!1e2% also of theTax ode of !!. !BIR Rlin" No# $1%98 &'te& Aril 16+ 1998,

-'it'l "'ins t'x; S'le of 'r0el of l'n& .) SSS- /ale by /ocial /ecurity /yste( 1///2 of a +arcel of landto &r. 7verendo &edina is exe(+t fro( ca+ital gains tax and docu(entary sta(+ tax +ursuant to /ection ofRe+ublic Act No. B$B$. >owever% since /// is exe(+t fro( the docu(entary sta(+ tax% the buyer% who is notexe(+t% shall be the one directly liable to the 4/T +ursuant to /ection 3 of the Tax ode of !!. !BIRRlin" No# $%98 &'te& Aril 16+ 1998,

?AT; Ex0'n"e of Notes .et:een Goernment of (''n 'n& 5iliines- ?nder the 7xchange of Notesdated #uly % !! between the Govern(ent of the 'hili++ines and #a+an% the 'hili++ine Govern(ent obligateditself to (aCe the necessary (easures to exe(+t #a+anese nationals who (ay be involved in the constructionof the National ocational Training and 4evelo+(ent enter for Do(en fro( internal revenue taxes withres+ect to the su++ly of +roducts and services. &itsubishi or+oration% which is a cor+oration organi:ed andexisting under the laws of #a+an shall be exe(+t fro( the +ay(ent of AT on the su++ly of goods% such as(aterials and equi+(ent for the construction of the 'roect considering that under +ar. 12121g2 of the7xchange of Notes% the Govern(ent of the 'hili++ines shall )bear all the ex+enses other than those covered bythe Grant necessary for the execution of the 'roect.) &oreover% under /ection $ of R.A. No. B"% otherwiseCnown as the )General A++ro+riations Act of !!)% the 'hili++ine Govern(ent 1thru T7/4A2 will bear the

+ay(ent of AT on the su++ly of (aterials and equi+(ent by &itsubishi or+oration used for the +roect andthe said taxes are dee(ed auto(atically a++ro+riated. !BIR Rlin" No# $6%98 &'te& Aril 16+ 1998,

DONORS TAX; IT@@OLDING TAX; 5ri'ti'tion of 3'nil' @otel - The &anila >otel or+oration% which isno longer a govern(ent-owned or controlled cor+oration% is no longer constituted as a withholding agent for+ur+oses of deducting and withholding the taxes on (oney +ay(ents to +rivate individuals% cor+orations%+artnershi+s and@or associations as required under R.A. No. 09 but rather% it is now required to withholdcreditable withholding taxes on inco(e +ay(ents to +ersons residing in the 'hili++ines as +rovided for inRevenue Regulations No. -B9% as a(ended. !BIR Rlin" No# $*%98 &'te& Aril 1+ 1998,

ESTATE TAX; Extension of Time to File Retrn - Granting the request of the 7state of ;enigno '. Toda% #r.for the waiver of surcharge considering that the +re+aration of the estate tax return interest with difficulties and+ay(ent cannot be effected due to financial constraints. >owever% interest (ust be +aid to co(+ensate for theconco(itant use of the funds when it is su++osed to those been +aid. !BIR Rlin" No# $7%98 &'te& Aril 1+1998,

-A5ITAL GAINS TAX; Dee& of S'le exe0te& 'n& not'rie& on 3'r0 =+ 19=9 -The sale of +iece of landsubect to a 4eed of /ale executed and notari:ed on &arch $% !! is not subect to the 9, ca+ital gains taxbecause the +rovision of the Tax ode on the 9, ca+ital gains tax under then /ection $ 1e2 of the Tax odewas not yet in existence because the a+ital Gains Tax 8aw 1;' ;lg. 32 tooC effect only on /e+te(ber %

!!. Therefore% ca+ital gains derived fro( the sale or transfer of real +ro+erty classified as ca+ital assets werethen subect to the regular inco(e tax rates. 8iCewise% it is not subect to the .9, 7DT because 7DT on thesales or transfers of real +ro+erty other than ca+ital assets was first introduced by Revenue Regulations No.$-B! on 4ece(ber $% !B! only and the said Regulations +rovides that the sa(e shall a++ly only to sales%exchanges or transfers of real +ro+erties classified as ordinary assets consu((ated after #anuary % !!0.>owever% the 4eed of /ale shall be subect to the docu(entary sta(+ tax based on the considerationsti+ulated in the 4eed of /ale at the rate +revailing on &arch $% !!. !BIR Rlin" No# $=%98 &'te& Aril1+ 1998,


8/27

?AT; >'ier of Sr0'r"e for L'te Filin" 5')ment of ?AT- Granting the request of 4ow #ones Tolerate1Asian 'acific2 for the waiver of the +ay(ent of surcharge and +enalties relative to the late filing and +ay(entof AT for the st quarter of !! and for the (onth of A+ril !! but subect to the interest that have accruedthereon u+ to the +ay(ent of the AT. !BIR Rlin" No# $8%98 &'te& Aril 1+ 1998,

FINAL >IT@@OLDING TAX; Interest in0ome from erson'l &eosits of Unite& N'tions 5ersonnel- Thetax exe(+tion +rivileges extended to ?nited Nations +ersonnel under /ection 1b2% Article and /ections Band ! 1b2 of Article 5 of the onvention on the 'rivileges and 5((unities of the ?nited Nations do not includeexe(+tion fro( the final withholding tax the interest inco(e fro( +ersonal de+osits of the +ersonnel of the?nited Nations residing in the 'hili++ines% whether ili+ino or resident alien% considering that the interestinco(e is derived fro( +assive invest(ents in the 'hili++ines and not fro( their salaries or e(olu(ent as+ersonnel of the united Nations. !BIR Rlin" No# $9%98 &'te& Aril =+ 1998,

Retirement Benefits n&er RA =71- 'ursuant to /ection 3$ 1;2121a2 of the Tax ode of !!% theretire(ent benefits to be +aid the retiring worCers under R.A. No. " are not subect to inco(e tax andconsequently% to withholding tax +rescribed by /ection !% ha+ter K555% Title 55 of the Tax ode of !!. !BIRRlin" No# $*$%98 &'te& Aril =+ 1998,

R5%(A5AN TAX TREAT4- A+allo /hi++ing o.% 8td.% a non-resident #a+anese /hi++ing co(+any o+erating ininternational traffic% shall be subect to the +referential tax rate of -@$, tax on Gross 'hili++ine ;illings%

+ursuant to Art. B12 of the R'-#a+an Tax Treaty.!BIR Rlin" No# $*1%98 &'te& 3') *+ 1998,

DO-U3ENTAR4 STA35 TAX; Notes to .e isse& 'lif) 's .li0 isse of .on&s in&e.te&ness - TheNotes which will be used in a +articular for(% indicating therein the undertaCing of ;en+res >olding or+orationto +ay interest at the rate of .B9, +er annu(% is considered as a bonded indebtedness. &oreover% since theNotes will be offered to interested buyers who (ust be an institutional buyer 1invest(ent houses% securitiesfir(s% banCs% etc.2 and will be de+osited with a custodian for the 4e+ository Trust o(+any% the Notes ustify asa +ublic issue of bonds indebtedness.

The Notes which qualify as bonds or bonded indebtedness shall be subect to the docu(entary sta(+ taxunder /ec. " of the Tax ode.

5nterest inco(e derived fro( the Notes by cor+orate residents of countries which have no tax treaty with the

'hili++ines shall be subect to $0, withholding tax +ursuant to /ec. $91b21921A2 of the Tax ode. 5nterestinco(e derived fro( the Notes by cor+orate residents of countries which have a tax treaty with the 'hili++inesshall be subect to the tax rate +rovided in the treaty. !BIR Rlin" No# $*%98 &'te& 3') *+ 1998,

FINAL >IT@@OLDING TAX; 5il# -entenni'l -ommission- The 'hili++ine entennial o((ission@ulturalenter of the 'hili++ines is authori:ed to forego the withholding of the $0, final tax on the cash +ri:es of thewinners in the entennial 4ecor o(+etition a(ong govern(ent buildings in &anila. >owever% if the winner isan individual% the sa(e would be subect to $0, final withholding tax on +assive inco(e. !BIR Rlin" No# $*6%98 &'te& 3') 8+ 1998,

-A5ITAL GAINS TAX- /ince the heirs of the late Angel and /arah dela 'a: signed the 'roect of 'artition in!B"% they are liable to +ay the final ca+ital gains tax i(+osed under then /ec. 3"1h2 of the Tax ode based onthe )net ca+ital gains) in !B" which shall (ean the ca+ital gains fro( the sale or other dis+osition of real+ro+erty which is equal to the excess of the a(ount reali:ed over the adusted basis of the +ro+erty%undi(inished by any ca+ital loss sustained fro( other ca+ital asset transaction. !BIR Rlin" No# $*%98 &'te&3') 1+ 1998,

EX-ISE TAX; ?AT; H'rr)in" 'n& sellin" .ol&ers or stones- A AT-registered co(+any engaged inquarrying business and currently selling boulders or stones quarried fro( its land shall be subect to $, excisetax based on the actual (arCet value of the gross out+ut thereof at the ti(e of re(oval +ursuant to /ection 91A21$2 of the Tax ode of !! and to the 0, AT under /ection 01A2 of the sa(e ode. This is so%because boulders or stones cannot be considered as non-food agricultural +roducts and@or +roducts in theiroriginal state. !BIR Rlin" No# $**%98 &'te& 3') + 1998,


9/27

R5%US TAX TREAT4- ash 4ividend No. B9 declared by hina ;anCing or+oration to its stocCholders whoare all residents of the ?nited /tates% is subect to the +referential tax rate of $9, +ursuant to Art. 1$21a2 ofthe R'-?/ Tax Treaty. !BIR Rlin" No# $*7%98 &'te& 3') 1+ 1998,

FRINGE BENEFIT TAX - ringe benefit in the for( of 7ducational Assistance granted by the '84T&anage(ent to the (e(bers of &E'% is in all cases exe(+t fro( the i(+osition of fringe benefits tax i(+osedunder /ection 33 1A2 of the Tax ode of !! since it is one of those enu(erated under /ubsection 1 2132which +rovides for the non-taxability of benefits given to ranC-and-file e(+loyees whether under a ;A or not./uch benefits% regardless of the a(ount% +rovided that the sa(e fall under the definition of ordinary andnecessary business ex+ense% are considered as valid deductible ex+enses of '84T. !BIR Rlin" No# $*=%98&'te& 3') 1+ 1998,

R5%NET@ERLANDS TAX TREAT4- ?nder Article 9 of the R'-Netherlands Tax Treaty% Accessa ;.. does nothave a +er(anent establish(ent in the 'hili++ines for the +ur+ose of +erfor(ing its activities because theconsultancy days for the +roect would last for days only. /uch being the case% the consultancy fees to be+aid to Accessa ;.. is not subect to 'hili++ine inco(e tax and consequently to the withholding tax under/ection $91b212 in relation to /ection 901a2 of the Tax ode 1now /ections $B1;212 and 91A2% res+ectively% ofthe Tax ode of !!2 !BIR Rlin" No# $*8%98 &'te& 3') $+ 1998,

IN-O3E TAX; In0ome &erie& .) E4S Asso0i'tes exemt- 'ursuant to /ection $91b212 of the Tax ode%

as a(ended% to be subect to 'hili++ine inco(e tax% such inco(e of non-resident foreign cor+oration notengaged in trade or business in the 'hili++ines (ust have been derived in the 'hili++ines. 5f the services are+erfor(ed within the 'hili++ines% such inco(e is subect to a withholding tax of 39, on the gross inco(e of thesaid non-resident foreign cor+oration. /ince the services rendered by 76/ L Associates were done outside theterritorial urisdiction of the 'hili++ines% the retainer fee of F%000 +er (onth and override fee of 9, forshi+(ents over F$"0%000 derived therein are considered as inco(e fro( without the 'hili++ines +ursuant to/ec. 31c2132 of the Tax ode% as a(ended. &oreover% under existing treaty between the 'hili++ines and the?nited /tates% a non-resident foreign cor+oration based in the ?/ (ay be taxed and only by the latter if doesnot have a +er(anent establish(ent in the 'hili++ines. /uch being the case% the inco(e earned by 76/ L

Associates fro( o(+any ; is not subect to 'hili++ine inco(e tax.!BIR Rlin" No# $*9%98 &'te& 3') 1+1998,

?AT; S'le of "oo&s 'n& seri0es to BO- s./e0t to ?AT- /ale of goods and services to the ;ureau ofusto( 1;*2 by ?nisys 'ublic /ector /ervices or+oration is subect to 0, AT which (ay be shifted or+assed on to ;*% AT being an indirect tax. ;eing a govern(ent agency% ;* is required to deduct andwithhold the AT due at the rate of 3, on the +urchase of goods and , on the gross recei+ts for servicesrendered by ?'// which shall be creditable against the AT liability of the latter% +ursuant to /ection 0 1c2%now /ection " 12 of the Tax ode of !!.!BIR Rlin" No# $7$%98 &'te& 3') 1+ 1998,

DONORS TAX; Exemtion of DAR on &on'tion of ' 'r0els of l'n&- The request of the 4e+art(ent ofAgrarian Refor( 14AR2 for avail(ent of tax deductions under /ection $! 1h2 of the Tax ode and exe(+tion of/outhern 8u:on oconut *il &ills% 5nc. 1for(erly *RAR2 fro( the donor=s tax on the donation of four 1"2+arcels of land under section !" 1a21$2 Mnow /ecs. 3"1>2 and 01A21$2 of the Tax ode of !! were grantedsince the transfer in favor of the /tate is sanctioned by law% falling under the very +ur+ose of theo(+rehensive Agrarian Refor( 8aw under the +rovision of /ection thereof. !BIR Rlin" No# $71%98 &'te&3') 1+ 1998,

R5%US TAX TREAT4- The interest inco(e which ;auang 'rivate 'ower or+oration 1;''2 will +ay to theregistered holders of the Notes which ;'' will issue is subect to the +referential tax rate of 0, +ursuant tothe R'-?/ Tax Treaty. This is so% because the Notes qualified as a )+ublic issue of bonded indebtedness) sincethey are issued +ri(arily for the continued existence% o+eration and (aintenance of ;auang=s 'lant whichsu++lies electrical energy to the 8u:on 4istribution Grid. The Notes however% are subect to the docu(entarysta(+ tax under /ection " of the Tax ode of !!. !BIR Rlin" No# $7%98 &'te& 3') 1+ 1998,

EX5ANDED >IT@@OLDING TAX; D'0ion en '"o- The delay of the Technology and 8ivelihood Resourceenter to +ay on ti(e the corres+onding ex+anded withholding tax and docu(entary sta(+ tax relative to thedacion en +ago executed with 'ontevedra 'awn 'roducers% 5nc. 1;orrower2 was brought about by the fact that


10/27

the enter was saddled with serious +roble(s% +articularly the unlawful detainer issue at that ti(eH and that theenter is a govern(ent institutionH +roceeds fro( the ulti(ate dis+osal of the +ro+erties will for( +art of thegovern(ent=s +ay(ent to *7% #a+an fro( where the develo+(ent funds were sourced. or being(eritorious% this *ffice grants the request of the enter to +ay the basic ex+anded withholding tax anddocu(entary sta(+ tax% excluding the $9, surcharge but subect to $0, interest +er annu( and +ay(ent ofco(+ro(ise +enalty. !BIR Rlin" No# $76%98 &'te& 3') 1+ 1998,

?AT; Imort'tionCLo0'l r0'ses of 5NR- 't'.le- Reiterating ;5R Ruling No. 0$-! dated ebruary $%!! to the effect that the +rivileges enoyed by the 'hili++ine National Red ross 1'NR2 under /ection " 1b2of '4 No. $" were already withdrawn by 7* No% !3 effective &arch 0% !B before the effectivity of the ATlaw on #anuary % !BBH hence% 'NR can no longer invoCe its exe(+tion fro( AT on its i(+ortation and local+urchases. >owever% local and foreign donations% liCe donations for disaster relief worC and other 'hili++ineRed ross services shall be exe(+t fro( the donor=s tax +rovided that not (ore than 30, of said donationsshall be used by 'NR for ad(inistration +ur+oses. urther(ore% being a non-+rofit and charitableorgani:ation% 'NR is exe(+t fro( inco(e tax on inco(e received by it as such organi:ation. ;ut inco(ereceived by 'NR fro( any of its +ro+erties% real or +ersonal% or fro( any of its activities conducted for +rofitregardless of the dis+osition thereof% shall be subect to inco(e tax.!BIR Rlin" No# $7%98 &'te& 3') 1+1998,

IN-O3E TAX; ?AT; S'stel Intl# exemt rs'nt to Gener'l A"reement on Deeloment -ooer'tion

.et:een R5 'n& -'n'&'- /asCtel 5nternational% the anadian 'ri(e ontractor undertaCing the develo+(entof a teleco((unication syste( +ursuant to a &e(orandu( of understanding 1&*?2 entered into by theGovern(ent of the Re+ublic of the 'hili++ines re+resented by 4*T and the Govern(ent of anada%re+resented by 54A% is not liable to the cor+orate inco(e tax i(+osed under /ec. $9 1a212 of the Tax ode1now /ec. $B 1A212 of the Tax ode of !!2 on resident cor+oration engaged in trade or business in the'hili++inesH and to the 0, AT on its i(+orted equi+(ent as well as its sale of services relative to the'roects% under Article of the General Agree(ent on 4evelo+(ent oo+eration between the Govern(ents ofthe 'hili++ines and anada. !BIR Rlin" No# $7*%98 &'te& 3') 1+ 1998,

ESTATE TAX; Extension of time file retrn- Granting the request of the heirs of the late 'onciano 8. Al(edafor 12 an extension of 30 days within which to file the estate tax returnsH 1$2 an extension of $ years to +ay thecorres+onding estate tax in the a(ount of '$$$%909%"3$.00H and 132 waiver and non-+ay(ent of the $9,surcharge. The basis is /ection !01c2 of the Tax ode of !! authori:ing the o((issioner to grant% in(eritorious cases% a reasonable extension not exceeding 30 days for filing estate tax return. &oreover% the

+ay(ent of the estate tax on date would i(+ose undue hardshi+ for the estate or any of the heirs% thus% therequest for extension to +ay and for a waiver of the $9, surcharge was also granted +ursuant to /ection !1;2of the Tax ode but the estate is liable to the corres+onding interest that have accrued u+ to the ti(e of filing ofthe return and +ay(ent of the estate tax. !BIR Rlin" No# $77%98 &'te& 3') 1+ 1998,

-A5ITAL GAINS TAX; Exemtion .) irte of DARAB &e0ision - The execution of a 4eed of Absolute /aleover a +ortion of an agricultural land falling under the coverage of the agrarian refor( +rogra( by vendee7locia /ales in favor of agricultural lessees-rede(+tioneers% Graciano /olo(on and &axi(ino% in +ursuance tothe decision of the 4e+art(ent of Agrarian Refor( Adudication ;oard 14ARA;2 +ro(ulgated on #anuary %!!9% u+holding the latter=s rights to redee( under R.A. 3B""% is exe(+t fro( ca+ital gains tax and other taxesunder /ection of R.A. 9 since the transfer was (ade during the effectivity of the said o(+rehensive

Agrarian Refor( 8aw. !BIR Rlin" No# $7=%98 &'te& 3') 1+ 1998,

ESTATE TAX- Authori:ing the widow of the late #esus ;. /oli(an to withdraw the a(ount of '$0%000.00 fro(the banC account (aintained by the decedent for the basic needs of the heir +ending the extraudicialsettle(ent of the estate between the deceased=s widow and their only child% +ursuant to /ec. ! of the Taxode.!BIR Rlin" No# $78%98 &'te& 3') 1+ 1998,

FRAN-@ISE TAX; ?AT; Exemtion of Ele0tri0 -ooer'ties- The $, tax i(+osed under /ec. ! of theTax ode of !! is due and +ayable by electric utilities who are holders of electric franchises. An electriccoo+erative is not subect to the said $, franchise tax by reason of the fact that it is not an electric franchisebut is created under RA !3B% otherwise Cnown as the oo+erative ode of the 'hili++ines. &oreover%+ursuant to /ec. 0!1s2 also of the Tax ode% sales by electric coo+eratives duly registered with the 4A or


11/27


12/27

IN-O3E TAX; Lo0'l >'ter Distri0t s./e0t to in0ome t'x - 'ursuant to /ec. $12 of the Tax ode of !!%only the G/5/% ///% '>5% '/* and 'AG*R are exe(+t fro( the regular cor+orate inco(e tax. All othergovern(ent owned or controlled cor+orations% agencies or instru(entalities engaged in si(ilar business%industry or activity as that of an ordinary taxable cor+oration are taxable on their gross inco(e Thus% 8ocalDater 4istricts are subect to the cor+orate inco(e tax i(+osed under /ec. $1A2 of the Tax ode of !!because they are not co(+osite of the National Govern(ent or its +olitical subdivision +erfor(ing essentialgovern(ent function.!BIR Rlin" No# $=%98 &'te& 3') =+ 1998,

FINAL >IT@@OLDING TAX; DO-U3ENTAR4 STA35 TAX; G'insClosses on S>A5 of s'res - The gainsthat will be reali:ed by 7A>45 fro( the transfer of the & L & shares of &> in exchange for the latter=s sharesshall be deter(ined by considering that the selling@transfer +rice of the & L & shares to &> in exchange forthe latter=s shares shall be the fair (arCet value of the shares received and not the fair (arCet value of theshares transferred or exchanged.

onsidering that the &> shares are listed in the '/7.% the fair (arCet value of the &> shares shall be thehighest closing +rice in the stocC exchange on the day of the execution of the 4eed of 7xchange between7A>45 and &>.

onsidering further that the & L & shares is unlisted shares% the gains to be reali:ed by 7A>45 fro( theintended transfer of shares of &> shall be subect to the final tax of 9,@0, ca+ital gains tax under /ec. $

121$2 of the Tax ode of !!.

inally% the original issuance of &> shares gives rise to neither taxable gain nor deductible loss% whether thesubscri+tion +rice of the &> shares is in excess of or less than the +ar value of the &> shares. >owever%the original issuance of &> shares are subect to the docu(entary sta(+ tax under /ection 9 of the Taxode. !BIR Rlin" No# $=*%98 &'te& 3') =+ 1998,

IN-O3E TAX; ?AT; Exemtion of 3? A.oiti (e.sen - The net inco(e derived fro( the o+eration of thevessel is exe(+t fro( inco(e tax because the actual reinvest(ents required by RA " (ay includeex+enditure for the cost of dry docCing for the (aor re+airs and i(+rove(ent of the vessel and the settingaside of any net inco(e to service the loans related to the acquisition of the vessel.

&oreover% the sale of the vessel is not subect to AT because said sale was entered into% +ursued and

consu((ated outside the 'hili++ines taxing urisdictionH hence can be treated as an ex+ort sale under /ec.01A21$21a212 of the Tax ode of !!.!BIR Rlin" No# $=7%98 &'te& 3') =+ 1998,

IN-O3E TAX; SBF Freeort Re"istere& Enterrises - /; ree+ort Registered 7nter+rises are liable to the+referential tax treat(ent of 9, of the gross inco(e earned which shall be in lieu of local and national taxes+ursuant to /ec. $21c2 of RA $$. >ence% /;4&% 5nc. and 8EN &anage(ent /ervices 'T7 8td. are exe(+tfro( docu(entary sta(+ tax on the original issue of stocC certificates to the res+ective stocCholders. >owever%the stocCholders are the ones directly liable to the tax +ursuant to /ec. 3 of the Tax ode !!. !BIR Rlin"No# $==%98 &'te& 3') 8+ 1998,

>'ier of en'lties- Granting the request of /alesiana 'ublisher 5ncor+orated for waiver of +enalties andsurcharges on late re(ittances of its withholding taxes due to the confusion that arose in the initiali(+le(entation of the new +ay(ent syste( on withholding tax. !BIR Rlin" No# $=8%98 &'te& 3') 8+ 1998,

R5%US TAX TREAT4; 5.li0 isses of Tre'sr) Bills 'n& Notes- 5nterest derived by ;ear /tearns/ecurities or+oration% a ?/ resident% fro( +ublic issues of Treasury ;ills L Treasury Notes shall be subect toa tax of 0, of the gross a(ount of such interest% whereas interest derived fro( +ublic issues of long ter(o((ercial 'a+er% /hort Ter( o((ercial 'a+er and 'ro(issory Notes shall be subect to a tax of 9,+ursuant to Art. $ of the R'-?/ Tax Treaty. !BIR Rlin" No# $=9%98 &'te& 3') 8+ 1998,

EX5ANDED >IT@@OLDING TAX; R'te of t'x if seller is -REBA mem.er- &etrobanC is habitually engagedin the real estate business as shown by its ertificate of Accreditation issued by R7;A. /uch being the case%&/A Grou+% 5nc. which bought a +arcel of land fro( &etrobanC should +ay only 3, 7DT and not .9, which


13/27

is the tax rate i(+osed if the seller-cor+oration is not habitually engaged in real estate business.!BIR Rlin"No# $8$%98 &'te& 3') 8+ 1998,

DONORS TAX; Don'tion 3ortis -'s'- 4onations@gifts (ade which are intended to taCe effect u+on thedeath of the donor +artaCe the nature of testa(entary +rovision and the sa(e shall re(ain +art of the donor-decedent=s gross estate at the ti(e of his@her death even if the sa(e have been donated in favor of the donee.>ence% the +rovision relative to the i(+osition of estate tax on transfers in conte(+lation of death shall a++lybut the donation@gifts are exe(+t fro( donor=s tax.

>owever% since a donation (ortis causa taCes effect only u+on the death of the donor% the real +ro+ertiessubect to the donation cannot be transferred in the na(e of the donee and shall thereby re(ain the +ro+ertiesof the donor. &eanwhile% the 4onation &ortis ausa can be +ro+erly annotated at the bacC of the TT by theconcerned Register of 4eeds to +rotect the right of any +erson who (ay be affected by the said donation. !BIRRlin" No# $81%98 &'te& 3') 8+ 1998,

EX5ANDED >IT@@OLDING TAX; DO-U3ENTAR4 STA35 TAX; ?'l'tion of To:noses- 'ursuant to+ar. 9 of 4e+t. *rder No. -! dated A+ril 30% !!% relative to the i(+le(entation of the Revised 4ev. o. has undertaCenthe full-scale develo+(ent of the leased +ortion of the #ohn >ay /+ecial 7cono(ic 4ev. o.is subect only to the +referential tax rate of 9, of its gross inco(e in lieu of national and local taxes for theright to lease% develo+ and o+erate +art of a(+ #ohn >ay /+ecial 7cono(ic


14/27

o((issioner of 5nternal Revenue vs. onstruction Resources of Asia% 5nc. and TA% 8-B$30% Nov. $9% !B%" /RA 2 that ) the delivery of the certificates of stocC to the x x x stocCholders% whether actual orconstructive% is not essential for the docu(entary sta(+ taxes to attach. Dhat is taxed is the +rivilege of issuingshares of stocC and% therefore% the tax accrue at the ti(e the shares are issued x x x.) !BIR Rlin" No# $87%98&'te& (ne 6+ 1998,

?AT; As'lts- 'ursuant to /ection 0! 1e2 of the Tax ode of !!% the sale or i(+ortation of coal andnatural gas% in whatever for( and state and +etroleu( +roducts shall be exe(+t fro( AT. RevenueRegulations No. 9-! includes as+halts% a(ong others% as +etroleu( +roduct subect to excise tax at the rate of'0.9 +er Cilogra(. /ince the sale of as+halts is exe(+t fro( AT% the withholding of the creditable AT on+ay(ents to 'etro+hil on its +urchases of as+halts has no legal basis. !BIR Rlin" No# $8=%98 &'te& (ne 1$+1998,

DO-U3ENTAR4 STA35 TAX; 3eterin" 3'0ines- R&* No. $-!3 +rescribes the unifor( guidelines and+rocedures to be used for the required (onthly re+ort in the (anage(ent of 4/T (etering (achines used bythe authori:ed tax+ayers +ursuant to Revenue Regulations No. -!$ in relation to Revenue Regulations No. 9-! !BIR Rlin" No# $88%98 &'te& (ne 1$+ 1998,

R5%(A5AN TAX TREAT4- 5nco(e +ay(ents (ade by AT/ onstruction 5nternational% 5nc. to /howa Asteco.%8td.% a non-resident foreign cor+oration organi:ed and existing under the laws of #a+an% for technical

su+ervision rendered during the +eriod #uly $9 to *ctober 3% !! which is equivalent to !B days shall besubect to tax in #a+an +ursuant to Art. " 12 and 1$2 of the R'-#a+an Tax Treaty. >owever% the sale of servicesby /howa Astec o.% 8td. to AT/ onstruction 5nternational% 5nc. is subect to the 0, AT +ursuant to /ec.0$ of the Tax ode% as a(ended RA No. . !BIR Rlin" No# $89%98 &'te& (ne 1*+ 1998,

EX5ANDED >IT@@OLDING TAX; 5')ment of Ret'iner Fees - The +ay(ent of retainer fees and additional+rocessing fees to /& /tocC Transfer or+oration 1/T/2% a do(estic cor+oration engaged in business as astocC transfer agent% by /an &iguel or+oration 1/&2 is not subect to the ex+anded withholding taxconsidering that such +ay(ents are not a(ong those s+ecified in Revenue Regulations No. -B9% as a(ended%i(+le(enting /ec. 90 1b2 of the Tax ode% Mnow /ection 9 1;2 of the Tax ode of !! !BIR Rlin" No# $9$%98 &'te& (ne 1*+ 1998,

>AI?ER OF SUR-@ARGE AND 5ENALT4- 4enying the request of alifornia &anufacturing o(+any% 5nc.

for the waiver of surcharge and +enalty for the delay in the re(ittance of value-added tax on royalties becauseunder /ection $0" of the Tax ode% the o((issioner (ay abate or co(+ro(ise a tax liability only when areasonable doubt as to the validity of the clai( exist. !BIR Rlin" No# $91%98 &'te& (ne 1*+ 1998,

SURET4 BOND- Granting the request of Trans+acific Towage% 5nc. to +ay its AT liability% including interestwithout surcharge in eight 1B2 quarterly install(ents co((encing &ay 3% !!B u+ to ebruary $B% $000 on theground that tax+ayer was burdened with overhead +lus banCing charges on financial obligations but required to+ost /urety ;ond.!BIR Rlin" No# $9%98 &'te& (ne 1*+ 1998,

REGISTRATION OF RE-EI5TS- All recei+ts and invoices (ust be duly registered with the R4* where the+lace of business is located. The registration of the sa(e is evidenced by a++ro+riate sta(+ on the face of thetax+ayer=s co+y of the authority to +rint as well as on the front cover% on the bacC of the (iddle invoice orrecei+t and on the bacC of the last invoice or recei+t. Absence of the required a++ro+riate sta(+ is +ri(a facieevidence that the recei+ts or invoices are not registeredH hence% they cannot validly su++ort the clai( for

legiti(ate ex+enses or in+ut AT relating to +urchases (ade. !BIR Rlin" No# $96%98 &'te& (ne 1*+ 1998,

IN-O3E TAX; Non%resi&ent rofession'ls 'n& entert'iners - 'rofessionals and entertainers who havegone to worC in >ongCong and are considered residents of >ongCong on account of their e(+loy(ent in>ongCong registered-co(+anies with their residency being co-ter(inus with their e(+loy(ent% as well as+rofessionals and entertainers who have gone to worC in >ongCong for (ore than seven 12 years and hadbeen granted +er(anent residency +ursuant to >ongCong 5((igration *rdinance on the right of abode areconsidered as non-resident citi:ens +ursuant to /ection $$ 172 1$2 of the Tax ode of !!. >ence% inco(e ofsaid non-resident derived fro( >ongCong for taxable year !!B is exe(+t fro( the +ay(ent of inco(e tax


15/27


16/27

5ncentives Act of the 'hili++ines. The exe(+tion shall be for the first ten 102 years fro( the date of the firstsale of the invention on co((ercial scale% +rovided that the invention shall be extended to the legal heir orassignee% u+on the death of the inventor. >owever% the cor+oration selling the invention shall not be entitled tothe tax incentives +reviously granted to individual inventor. !BIR Rlin" No# 1$1%98 &'te& (ne 19+ 1998,

-A5ITAL GAINS TAX; Fore0losre S'le- 5n a foreclosure sale at +ublic auction or a forced sale which hasbeen the subect of 7xa(iner=s erification on ca+ital gains% the date of execution or signing of the docu(entsshould be recConed on the date of issuance of the ertificate of /ale and not on the date of the Notice of /ale.>ence% the assess(ent for surcharges and interests against rown /avings and 8oan Associations% 5nc. on its+ay(ent of docu(entary sta(+ tax and ca+ital gains tax on the foreclosure sale of its (ortgaged +ro+ertyshould be reconsidered. !BIR Rlin" No# 1$%98 &'te& (ne 9+ 1998,

-A5ITAL GAINS TAX; Definition of -'it'l Assets; Exemtion of RO5OA- /ection 3! of Re+ublic Act No.B"$" defines ca+ital assets as +ro+erty held by the tax+ayer 1whether or not connected with his trade orbusiness2% but does not include stocC in trade of the tax+ayer or other +ro+erty of a Cind which would +ro+erlybe included in the inventory of the tax+ayer if on hand at the close of the taxable year and +ro+erty held by thetax+ayer +ri(arily for sale to custo(ers in the ordinary course of his trade or business. ;ased on the saiddefinition% real or other +ro+erties owned or acquired 1R*'*A2 by the 'hili++ine National ;anC whichre+resents real or other +ro+erties% other than those used for banCing +ur+oses or held in the invest(ent+ortfolio% acquired in state(ents of loan and@or for other reasons% (ost of which were acquired through

foreclosure of collaterals of client borrowers who were unable to +ay their warrants with 'N;% should be treatedas )ordinary asset%) which sale% exchange or other dis+osition will not be subect to the ca+ital gains taxi(+osed under /ection $142192 of the Tax ode of !!. !BIR Rlin" No# 1$6%98 &'te& (ne 9+ 1998,

RA =91=; E-O


17/27

-A5ITAL GAINS TAX; DO-U3ENTAR4 STA35 TAX; Tr'nsfer :itot 0onsi&er'tion- There is no sale%exchange or dis+osition of real +ro+erty in the transfer of +ro+erties fro( Gri(( and 'arsons to G-' Lo(+any% since G-' L o(+any is the real owner of the aforesaid real +ro+erties while Gri( and 'arsonsacted (erely as trustees. /ince there is no (onetary consideration% the sa(e is not subect to ca+ital gains taxand docu(entary sta(+ tax i(+osed by /ection ! of the Tax ode of !!% but only to the docu(entarysta(+ tax on certificates of sale under /ection BB of the sa(e Tax ode. !BIR Rlin" No# 1$8%98 &'te& (ne9+ 1998,

FRAN-@ISE TAX; Exemtion of 5AG-OR+ -entenni'l G'min" -oror'tion- The exe(+tion fro( +ay(entof all taxes in lieu of the 9, franchise tax for earnings derived fro( o+erations conducted under the franchiseshall inure to the benefit of and extend to cor+orations% associations% agencies or individuals with who( theor+oration or o+erator has any contractual relationshi+ in connection with the o+eration of casinos. Dhen'AG*R granted National entennial o((ission=s request to conduct bingo ga(es for fund-raising +ur+osesof the entennial elebration% the requisite authority necessary to o+erate bingo ga(es has been effectivelya++roved. /uch being the case% the exe(+tion fro( taxes% fees and charges in lieu of +aying the 9, franchisetax of the gross recei+t being enoyed by 'AG*R was effectively extended to entennial Ga(ingor+oration% it being an agent@o+erator of N. !BIR Rlin" No# 1$9%98 &'te& (l) 7+ 1998,

?AT; S'le of @ose 'n& Lot 'le& 't 51+$$$+$$$#$$ .elo:- The sale by real estate dealers and@or lessorsof house and lot and other residential dwellings valued at *ne &illion 'esos 1'%000%000.002 and below shall

be exe(+t fro( alue Added Tax +ursuant to /ection ".03-1;21w21"2 of Revenue Regulations No. -!9 and/ection 0!1w2 of the Tax ode of !!. &oreover% since AlaCor or+oration is a non-AT tax+ayer% it shall +aya tax equivalent to three +ercent 13,2 of its quarterly gross sales or recei+ts +ursuant to /ection of thesa(e ode.!BIR Rlin" No# 11$%98 &'te& (l) =+ 1998,

-A5ITAL GAINS TAX; S'le of 5rin0i'l Resi&en0e- The sale or dis+osition of a +rinci+al residence% which+roceeds shall be fully utili:ed in acquiring or constructing a new +rinci+al residence within eighteen calendar(onths fro( the date of sale or dis+osition shall be exe(+t fro( the ca+ital gains tax i(+osed under /ection$"1421$2 of the Tax ode of !!% +rovided that the o((issioner shall have been duly notified by thetax+ayer within thirty days fro( the date of sale or dis+osition of his intention to avail of the said tax exe(+tion%which exe(+tion can only be availed of once every Ten 102 years. &oreover% if there is no full utili:ation of the+roceeds of sale or dis+osition% the +ortion of the gain +resu(ed to have been reali:ed shall be subect toca+ital gain tax% based on the gross selling +rice or fair (arCet value at the ti(e of sale% whichever ishigher. !BIR Rlin" No# 111%98 &'te& (l) 8+ 1998,

EX-ISE TAX - The excise tax due on i(+orted cigarettes shall be due and +ayable to the ;ureau of usto(sbefore the cigarettes are withdrawn fro( the custo(shouse while the internal revenue sta(+s to be affixed oneach +acC of i(+orted cigarette shall be issued by the ;5R to the i(+orter u+on a++roval of the 'er(it to5(+ort as required under Revenue Regulations No. -!% as a(ended by Revenue Regulations No.-!.!BIRRlin" No# 11%98 &'te& (l) 16+ 1998,

?AT; Isol'te& S'le of 3i0ro:'e B'0.one Tr'nsmission net:or- The sale of a (icrowave bacCbonetrans(ission networC by 8iberty ;roadcasting NetworC% 5nc.% a do(estic cor+oration holding a congressionalfranchise to +rovide the +ublic with wireless radio co((unication services and to o+erate radio co((unicationstations nationwide% to another wireless co((unications carrier% being an isolated transaction% is not in thecourse of its trade or business of selling co((unication services. Thus% not subect to AT. &oreover% thesubect sale shall not result in any in+ut tax credit to the buyer. !BIR Rlin" No# 116%98 &'te& (l) 6+ 1998,

-A5ITAL GAINS TAX; S'le of 5rin0i'l Resi&en0e- a+ital gains +resu(ed to have been reali:ed fro( thesale or dis+osition of their +rinci+al residence by natural +ersons% the +roceeds of which is fully utili:ed inacquiring or constructing a new +rinci+al residence within eighteen 1B2 calendar (onths fro( the date of saleor dis+osition% shall be exe(+t fro( the ca+ital gains tax i(+osed under /ection $"14212 of the Tax ode of!!% +rovided that the historical or adusted cost basis of the real +ro+erty sold or dis+osed shall be carriedover to the new +rinci+al residence built or acquired and the o((issioner shall have been duly notified by thetax+ayer within thirty 1302 days fro( the date of sale or dis+osition through a +rescribed return of his intentionto avail of the tax exe(+tion% which exe(+tion can only be availed of once every ten 102 years. !BIR Rlin"No# 11%98 &'te& (l) =+ 1998,


18/27

5ER-ENTAGE TAX; DO-U3ENTAR4 STA35 TAX; G'ins from Tr'nsfer of Re0ei'.les - The gain to bereali:ed by 7A4' fro( the assign(ent of its receivables to /olivest or+oration in exchange for the latter=sco((on shares of stocC of 7A'R shall be the excess of the a(ount reali:ed therefro( over the cost oradusted cost of said receivables% and the loss to be recogni:ed by 7A4' fro( the assign(ent of saidreceivables shall be the excess of the cost or adusted cost of the receivables over the a(ount reali:ed% whicha(ount is deter(ined by considering the selling@transfer +rice based on the fair (arCet value of the +ro+ertyreceived and not the fair (arCet value of the receivables transferred% +ursuant to /ection "0 1A2 of the Tax

ode of !!

&oreover% considering that the 7A'R shares are listed shares and their transfer to 7A4' shall be coursedthrough a cross-sale in the stocC exchange% the fair (arCet value of the shares shall be the actual selling +riceas shown in the sale confir(ation issued by the (e(ber of the stocC exchange% wherein a +ercentage tax of Oof , shall be i(+osed on the gross selling +rice. The transfer of 7A'R shares shall also be subect todocu(entary sta(+ tax at the rate of *ne 'eso and ifty entavos 1'.902 on each Two >undred 'esos1'$00.002% or a fractional +art thereof% of the +ar value of said shares +ursuant to /ection of the sa(eode. !BIR Rlin" No# 11*%98 &'te& (l) 8+ 1998,

LENDING IN?ESTOR; Definition of- A lending investor is one who (aCes +ractice of lending (oney forthe(selves or others at interest. ;orrowings and lendings obtained by a lending investor is in the nature of ade+osit substitute. &oreover% the act of A/; 4evelo+(ent of lending and@or borrowing fro( its affiliates to

finance its +roect and vice-versa% is in the nature of cash advances wherein the interest that is being chargedto the affiliate-borrower is substantially the sa(e interest the banC or financing institution charges the cor+oratedebtor% the latter having (erely +assed on the sa(e to its affiliate. >ence% A/; 4evelo+(ent or+oration is nota lending investor and its activity of borrowing fro( or lending (oney to its affiliate is not a )de+osit substitute)conte(+lated under /ection $$162 of the Tax ode of !!. urther(ore% the interests which A/; Realty or+.or its affiliates charges each fro( each other% de+ending as to who is the affiliate-borrower do not constituteadditional or real inco(e to the affiliate-borrower since it (erely +asses on to affiliate-borrower the interestwhich the creditor banC actually charges nor it is required to withhold the $0, final tax on the said interest +aidconsidering that neither of the( is a lending investor. !BIR Rlin" No# 117%98 &'te& (l) 6$+ 1998,

FINAL TAX; DO-U3ENTAR4 STA35 TAX; 3e'nin" of te terms len&in" inestor+ simil'r'rr'n"ement+ len&in" or "ross%len&in" '0tiities+ Inter%offi0e 3emo- /ection $14212 of the Tax odeof !! refers to the $0, final tax being i(+osed on the interest inco(e on currency banC de+osit and yield orany other (onetary benefit fro( de+osit substitutes and fro( trust funds and si(ilar arrange(ent derived by

lending institutions and banCs. Thus% it has been ruled that borrowings@lendings obtained by a lending investoris in the nature of de+osit substitutes. As to who is considered lending investor% this *ffice defined the ter( as)as one who (aCes +ractice of lending (oney for the(selves or others at interest).

5n view of the above-(entioned ;5R rulings% this *ffice hereby holds that since the arrange(ent between A/;and its affiliate is in the nature of cash advances wherein the interest that is being charged to the affiliate-borrower is substantially the sa(e interest the banC or financing institution charges the cor+orate debtor% thelatter having (erely +assed on the sa(e to its affiliate% A/; Realty or+oration is not a lending investor and itsactivity of borrowing fro( or lending (oney to its affiliate is not a )de+osit substitute) conte(+lated under/ection $$162 of the Tax ode of !!. Neither will this Cind of arrange(ent between affiliates be consideredas )si(ilar arrange(ent) (entioned in said /ection $14212 of the sa(e ode.

The ter( )si(ilar arrange(ent) (ust necessarily be within the context of the definition of )4e+osit /ubstitutes).

;ut since the activity of borrowing and lending is exclusive to A/; and its affiliate% it cannot be categori:ed asactivity falling under )si(ilar arrange(ent) nor shall A/; and its affiliate be considered as non-banC financialinter(ediaries +erfor(ing quasi-banCing functions.

&oreover% the interests which A/; Realty or+. or its affiliate charges fro( each other% de+ending as to who isthe affiliate-borrower% do not constitute additional or real inco(e to the affiliate-lender since it (erely +asses onto affiliate-borrower the interest which the creditor banC actually charges. Dhile A/; or its affiliate charges thecorres+onding interest fro( either of the( de+ending on who is the affiliate-borrower% the sa(e is co(+uted insuch nu(ber of days the fund is actually used by the affiliate-borrower. >ence% the custo(ary +ractice ofborrowing@lending with interest being charged or +aid by A/; or its affiliate% as the case (ay be% at the rate


19/27

substantially equal to the rate the affiliate-debtor is liable to +ay to the creditor banC % does not constitute asbeing engaged in lending or quasi-lending activities. 8iCewise% there being no inco(e attributable fro( sucharrange(ent% A/; Realty or+. or its affiliate-borrower% as the case (ay be% is not required to withhold the $0,final tax on the said interest +aid considering that neither of the( is a lending investor.

*n the (atter of whether the corres+onding interest on the a(ount so borrowed can be deducted as legiti(atebusiness ex+ense% this *ffice o+ines that the cor+orate-debtor 1i.e.% the affiliate-lender2 which initially borrowedthe fund fro( the banC or any lending@financing institution and thereafter +ays the corres+onding interestthereon% (ay clai( the sa(e as legiti(ate business ex+ense +rovided% however% that such interest receivefro( its affiliate-borrower but which thereafter is +aid to the banC@financial institution% is re+orted as interestinco(e for the +ur+ose of co(+uting the regular cor+orate inco(e tax.

>owever% if the first borrower does not (aCe use of its fund but instead relends it to an affiliate% it shall only beallowed interest ex+ense duly deductible fro( its gross inco(e if such relending activity actually generatesinco(e to it as the affiliate-lender. *therwise% if no interest inco(e is re+orted by an affiliate-lender fro( suchactivity% it cannot deduct as legiti(ate business ex+ense the interest it initially +aid to the banC since it did notactually assu(e such interest.

inally% inter-office (e(o evidencing the lendings@borrowings which is neither a for( of +ro(issory note nor acertificate of indebtedness issued by the cor+oration-affiliate or a certificate of obligation% which are% (ore or

less% categori:ed as )securities)% is not subect to docu(entary sta(+ tax i(+osed under /ections B0% "and of the Tax ode of !!% res+ectively. Rather% the inter-office (e(o is being +re+ared for accounting+ur+oses only in order to avoid the co-(ingling of funds of the cor+orate affiliates. !BIR Rlin" No# 11=%98&'te& (l) 6$+ 1998,

-A5ITAL GAINS TAX; Seriffs -ertifi0'te of S'le- A certified xerox co+y attested by the sheriff-executorconcerned of a ertificate of /ale over a real +ro+erty is a sufficient basis for +ay(ent of ca+ital gains tax% theoriginal of which has been lost% considering that under /ection $"% Rule 3$ of the Revised Rules of ourt%secondary evidence of a +ublic docu(ent (ay be used as evidence% when it a++ears that the officer by who(they +ur+ort to be certified had the right to the custody of the record and had authority to furnish authenticatedco+ies.

5n settling the corres+onding tax liability@ies arising fro( the latest auction sale% the +resent successor-in-

interest% is not under any obligation to +ay the tax liability of the +redecessor-in-interest before being allowed to+ay the tax due fro( the latest sale transaction. >owever% for +ur+oses of registration of the /heriff ertificateof /ale with the Registry of 4eeds% both the tax liabilities of the +redecessor-in-interest 1seller2 and that of the+resent successor-in-interest (ust first be settled before registration (ay be effected% +ursuant to /ection91A2132 of the Tax ode of !!. /hould +ay(ent of both tax liabilities be (ade by the +resent successor-in-interest% the +ortion of such +ay(ent to the tax liability of the +redecessor-in-interest (ay be rei(bursed by the+redecessor-in-interest +ursuant to Article $$ of the ivil ode% should the for(er seeC rei(burse(ent of thesa(e.!BIR Rlin" No# 118%98 &'te& A"st 7+ 1998,

R3O No# 1=%9=; Iss'n0e of T'x -le'r'n0e -ertifi0'tes !T-Ls, 'n& -ertifi0'te Atoriin" Re"istr'tion!-ARs,- 'aragra+h 3. and 3.$ of Revenue &e(orandu( *rder No. -! +rovides that every sale%exchange% or transfer of real +ro+erty whether classified as ordinary or ca+ital asset (ade by an individualestate or trust or by a cor+oration% a T8@AR shall be issued by the Revenue 4istrict *fficer where the seller-transferor is registered or is required to be registered. The tax returns and all taxes due on the transaction

involving transfer of real +ro+erty should be filed and +aid with the R4* where the seller-transferor is liCewiseregistered. &oreover% considering that ili+inas 4aewoo 5ndustries or+oration was (ade to believe by R4*No. 3$ that it had urisdiction to receive +ay(ents on the transaction and the issuance of the corres+ondingAR% the additional a(ount being +ro+osed to be assessed to the cor+oration for +aying at the wrong venue ishereby waived. !BIR Rlin" No# 119%98 &'te& A"st 16+ 1998,

>IT@@OLDING TAX ON DI?IDENDS- The dividends to be received by &r. Go ;un 'in fro( &7RA8* is notsubect to 30, withholding tax but to a final withholding tax of , beginning #an. % !!B% B, beginning #an. %!!! and 0, beginning #an. % $000 +ursuant to /ection $"1;21$2 of the Tax code of !!% with the +rovisothat such tax on dividends shall a++ly only on inco(e earned on or after #anuary % !!B. &oreover% inco(e


20/27


21/27


22/27

the withholding tax since it does not have a +er(anent establish(ent in the 'hili++ines% is given retroactiveeffect. !BIR Rlin" No# 167%98 &'te& Setem.er + 1998,

DO-U3ENTAR4 STA35 TAX; ?otin" Trst A"reement exemt- 4ocu(entary sta(+ tax shall be i(+osedon the 8and ;anC Note based on the face value of the Note actually issued and equivalent to the a(ount of theloan actually disbursed as of drawdown date. The assign(ent or transfer of shares in favor of a trusteedesignated in the oting Trust Agree(ent is not subect to the docu(entary sta(+ tax under /ection ! of theTax ode of !! but only to the docu(entary sta(+ tax of '9.00 on notarial acCnowledg(ent under /ectionBB of the sa(e ode. !BIR Rlin" No# 16=%98 &'te& Setem.er + 1998,

5AG-OR; Exemtion from t'xes- The exe(+tion fro( taxes% fees and charges enoyed by 'AG*R isextended to its contractors% liCe A; 8eisure 7x+onent% 5nc. which is doing business under the na(e and style of;ingo ;onan:a.!BIR Rlin" No# 168%98 &'te& Setem.er *+ 1998,

5ER-ENTAGE TAX; S'res of Sto0 liste& tro" te lo0'l sto0 ex0'n"e- /ale% barter or exchange ofshares of stocC listed and traded through the local stocC exchange by residents of countries with which the'hili++ines has a tax treaty% shall continue to be exe(+t fro( +ercentage tax under /ection $ 1A2 of the Taxode of !! in s+ite of the reclassification of the tax on shares of stocC listed and traded through the localstocC exchange as subect to +ercentage tax under Title of the Tax ode of !!. !BIR Rlin" No# 169%98&'te& Setem.er 8+ 1998,

IN-O3E TAX; S'l'ries of DS>D :orers 0oere& .) 3OA- DorCers hired by the 4e+art(ent of /ocialDelfare and 4evelo+(ent 14/D42 which is covered by a &e(orandu( of Agree(ent 1&*A2 are considerede(+loyees of 4/D4. As such% salaries of hired +ersonnel worCers of 4/D4 under the &*A are subect to theregular inco(e tax i(+osed under /ection $"1A2121a2 of the Tax ode of !!. !BIR Rlin" No# 1$%98 &'te&Setem.er 9+ 1998,

-A5ITAL GAINS TAX; EX5ANDED >IT@@OLDING TAX- ?nder /ection ! of the Tax ode which s+eaCs ifa )blocC sale) of real and +ersonal +ro+erties% only the consideration attributed to the real +ro+erty shall besubect to the docu(entary sta(+ tax. The blocC sale of three 132 sugar (ills on as )as-is-where-is basis) is inline with the Asset 'rivati:ation 'rogra( conte(+lated under 'rocla(ation No. 90% hence% exe(+t fro( ca+italgains tax and fro( withholding tax +ursuant to /ection "1a2 of Revenue Regulations No. -B9 as a(ended byRevenue Regulations No. 0-!" i(+le(enting /ection 901b2 of the Tax ode as a(ended. !BIR Rlin" No#

11%98 &'te& Setem.er 9+ 1998,

?AT; Retention mone)- AT is based on gross recei+ts whether actually or constructively received +ursuantto /ection 3 of Revenue Regulations No. -B9% as a(ended by Revenue Regulations No. $-!B. /ince theretention (oney is not +aid at the ti(e the +rogress +ay(ents are (ade% the said retention (oney should notbe included in the co(+utation of the B.9, creditable AT as +rovided by /ection 0$ of the Tax ode of!!. !BIR Rlin" No# 1%98 &'te& Setem.er 9+ 1998,

IN-O3E TAX; Termin'l le'e ') of 0o%termins emlo)ees - Ter(inal leave +ay of co-ter(inuse(+loyees in the /enate is not subect to inco(e tax and consequently to the withholding tax +ursuant to/ection 3$1;2121b2 of the Tax ode of !!. >owever% the tax exe(+tion does not include the +ay(ent of thestaff=s salary% if any% which is subect to inco(e tax and consequently to the withholding tax. !BIR Rlin" No#16%98 &'te& Setem.er 6$+ 1998,

UNLA>FUL DI?ULGEN-E- Request by the *ffice of the *(buds(an for the +roduction and sub(ission ofthe certified true and clear co+ies of the 5nco(e Tax Return filed by &r. Tito Nabua is denied in view of the+rohibition under /ection $0 of the Tax ode of !!.!BIR Rlin" No# 1%98 &'te& Setem.er 6$+ 1998,

ESTATE TAX- 4issolution by the co-owners of the co-ownershi+ of real +ro+erties by an Agree(ent to dividea(ong the co-owners of the +ro+erties is not subect to ca+ital gains tax i(+osed under /ection $" 14212 ofthe Tax ode of !!. >owever% that +ortion of the +ro+erties of the co-ownershi+ which is designated to be the+ro+erties belonging a deceased co-owner shall be subect to estate tax under then /ec. !! of the Tax ode orthe law enforced at the ti(e of the death of the decedent. !BIR Rlin" No# 1*%98 &'te& O0to.er 9+ 1998,


23/27

-A5ITAL GAINS TAX; S'le of s'le of s'res of sto0 not tr'&e& in lo0'l ex0'n"e - The net ca+ital gainsderived by the seller on the sale of the shares of stocC of a do(estic cor+. not traded in the local stocCexchange is subect to the ca+ital gains tax under /ection $ 1421$2 of the Tax ode of !!. The transfer ofthe shares or the certificates of stocC re+resenting the shares is subect to docu(entary sta(+ tax under/ection of the Tax ode of !!. !BIR Rlin" No# 17%98 &'te& O0to.er 1+ 1998,

IN-O3E TAX; Filiinos emlo)e& 'n& o00)in" m'n'"eri'l or te0ni0'l ositions- ili+inos e(+loyedand are occu+ying (anagerial or technical +ositions as those of aliens e(+loyed by the sa(e *ffshore;anCing ?nits are subect to the +referential tax rate of 9, on their gross co(+ensation inco(e +ursuant to/ection $9142 of the Tax ode of !!. !BIR Rlin" No# 1=%98 &'te& O0to.er 17+ 1998,

-A5ITAL GAINS TAX; -'it'l "'ins t'x 'i& on ' s'le of re'l roert) :i0 tr'ns'0tion :'s res0in&e&m') .e 0re&ite& 's ')ment fro ne: De&& of S'le to .e exe0te& .) some 'rties - The ca+ital gains taxon the sale of a real +ro+erty +reviously +aid and which sale transaction was rescinded due to the erroneousco(+utation of the taxes% (ay be credited as +ay(ent for the new 4eed of /ale to be executed by the +artiesinvolving the sa(e +ro+erty. >owever% the docu(entary sta(+ tax cannot be credited to the new 4eed of /alenor refunded since there has been a valid sale transaction which was subsequently rescinded.!BIR Rlin" No#18%98 &'te& O0to.er 17+ 1998,

?AT; ADB; 5ersonnel of em.'ssies- 7(bassies or +ersonnel of e(bassies with which the 'hil. Govern(ent

has di+lo(atic relations are exe(+t fro( tax including indirect taxes based on the +rinci+le of reci+rocity.urther(ore% Asian 4evelo+(ent ;anC 1A4;2 is exe(+t fro( 'hil. Taxation based on Article 912 and 1$2 ofthe harter of A4;. ;ut A4; is subect to AT at 0, +ursuant to Revenue Regulations No. -!9% i(+le(enting/ection s 0-$1c 2 and 00-3 of the Tax ode% as a(ended by RA No. . !BIR Rlin" No# 19%98 &'te&O0to.er 19+ 1998,

-A5ITAL GAINS TAX; Tr'nsfer of ' ro'& lot to 'n 'ffili'te- The +ro+osed transfer by /tandard 7lectric&anufacturing or+. of a )road lot) to its affiliate% Dellton or+.% a realty holding co(+any% is subect to ca+italgains tax and docu(entary sta(+ tax based on the actual consideration +ursuant to R&* "-!. 5t shall not besubect to AT since /tandard is not engaged in real estate business and subect +ro+erty is virtually withdrawnfro( the co((erce of (an by virtue of the restriction annotated on the title thereof.!BIR Rlin" No# 1*$%98&'te& O0to.er 19+ 1998,

-A5ITAL ASSET; S'le of 5il# Sto0 Ex0'n"e 3em.ersi Se't - ollection of the $nd install(ent of thetax due fro( the sale of a 'hil. /tocC 7xchange (e(bershi+ seat cannot be (ade before #uly 9% the deadlineset by law under /ection "! of the Tax ode of !!. The (e(bershi+ seat in the '/7 is considered as)ca+ital asset) and the gains reali:ed fro( such sale is includible as +art of gross inco(e and taxable underthen /ection $1f2 of the Tax ode% as a(ended. !BIR Rlin" No# 1*1%98 &'te& O0to.er 19+ 1998,

?AT; S'le of lot :i0 is less t'n 51+$$$+$$$#$$- /ale by Atlanta 8and or+. of a house and lot at theGrand ictoria 7states subdivision which is less than '%000%000 is exe(+t fro( AT +ursuant to /ection 0!1w2 of the Tax ode of !!. !BIR Rlin" No# 1*%98 &'te& O0to.er 19+ 1998,

IN-O3E TAX; Se'r'tion .enefits- The se+aration benefits to be received by &r. Antonio A. Avis% #r. fro('eninsula >otel &anila are exe(+t fro( inco(e tax and consequently fro( the withholding tax. The se+arationbeing the result of his involuntary ter(ination@se+aration fro( the service which is a cause beyond his controlunder /ection 3$ 1;2121b2 of the Tax ode of !!. !BIR Rlin" No# 1*6%98 &'te& O0to.er 19+ 1998,

EX5ANDED >IT@@OLDING TAX; T'x .'se in te 0omt'tion of 12 E>T 'n& 72 -re&it'.le ?AT- The, ex+anded creditable withholding tax i(+osed under /ection 1e21$2152 of Revenue Regulations No. -B9% asa(ended and the , creditable AT +rescribed under /ection 3 of Revenue Regulations No. 0-!3 as+ay(ents (ade by the Govern(ent to sellers of services shall be co(+uted based on gross +ay(ents% which(eans total +ay(ents inclusive of the o((ission 'rivilege fund. !BIR Rlin" No# 1*%98 &'te& O0to.er 19+1998,


24/27


25/27


26/27

re+resent inco(e or ca+ital gain to the reci+ient but rather% the distribution of shares to the qualified +olicyholders re+resent an exchange by the +olicyholders of their +ro+riety interest in the o(+any for the sharesreceived. /ection "0 of the Tax ode shall a++ly considering that in the course of de(utuali:ation% the+olicyholders will have to surrender their (e(bershi+ interest in the o(+any as a (utual co(+any% inexchange for the +ublicly-traded shares issued by the new &anulife co(+any or >oldco. urther(ore% theste+s to be taCen to effect de(utuali:ation of &anulife constitute as de facto (erger or consolidation under/ec. "0 of the Tax ode and considering further that the de(utuali:ation is clearly for a bonafide business

+ur+ose. >ence% no gain or loss shall be recogni:ed on the issuance of shares of a newly organi:ed holdingco(+any to the eligible +olicyholders of &anulife in exchange for the connection of their (e(bershi+interest. !BIR Rlin" No# 1=$%98 &'te& De0em.er + 1998,

DONORS TAX; Lot ':'r&e& to N'tion'l -il&rens @osit'l .) irte of 5ro0l'm'tion No 69 - 8otawarded to National hildren=s >os+ital by virtue of 'rocla(ation No "3! dated 4ece(ber $3% !93 is exe(+tfro( donor=s and donee=s tax +ursuant to /ection $132 of o((onwealth Act No. ". !BIR Rlin" No# 1=1%98 &'te& De0em.er + 1998,

BIR Rlin" No# 1=%98 &'te& De0em.er 6+ 1998 isse& to Sn Life Assr'n0e -om'n) of -'n'&'!SLA-, is ' reiter'tion of BIR Rlin" No# 1=$%98 isse& to 3'nlife to the effect that no gain or loss shallbe recogni:ed on the issuance of shares of a newly-organi:ed holding co(+any to the eligible +olicyholders of/8A in exchange for the cessation of their (e(bershi+ rights and interest in /8A as a (utual co(+any

considering that de(utuali:ation is clearly for a bonafide business +ur+ose.

EX5ANDED >IT@@OLDING TAX; Te0ni0'l 'n& m'n'"ement 0onslt'nts- The co((ission for servicesto be +aid by a local fir( to &itsubishi or+oration of #a+an shall be subect to the ex+anded withholding tax of9, a++licable to technical and (anage(ent consultants since &itsubishi has a +er(anent establish(ent in the'hili++ines !BIR Rlin" No# 1=6%98 &'te& De0em.er + 1998,

?AT; S'le of fis in ori"in'l st'te- 7xe(+tion fro( AT under /ection 0! 1d2 of the Tax ode of !! on thesale of fish in their original state covers only the direct tax liability. Any in+ut AT being +assed on by su++lierson +urchases of su++lies% ewels% etc. to rabelle fishing or+oration cannot be clai(ed as an exe(+tion. !BIRRlin" No# 1=%98 &'te& De0em.er 11+ 1998,

-AR; Iss'n0e of - The ca+ital gains tax and docu(entary sta(+ tax due on the sale of house and lot owned

by /+ouses 7rnesto and #ocelyn ;aliwag were +aid by the buyer% ?+holder 8anding or+oration 1?+holder2 inRevenue 4istrict *ffice No. 33% where ?+holder is registered. R4* of 8as 'iPas-&untinlu+a should to issue theertificate Authori:ing Registration 1AR2 since R&* -! +rovides that the AR shall be issued by the R4*where the seller-transferor is registered. !BIR Rlin" No# 1=*%98 &'te& De0em.er 11+ 1998,

-@ANGE OF -O35UTING DE5RE-IATION EX5ENSE- anon &arCeting 'hils.% 5nc. 1for(erly 4atagra+hics%5nc.2 was given authority to change its (ethod of co(+uting de+reciation ex+ense of its +ro+erty equi+(entfro( su(-of-the-years digits (ethod of costing su++lies and s+are +arts inventories fro( first-in-first-out 15*2(ethod to the (onthly average (ethod. !BIR Rlin" 1=7%98 &'te& De0em.er 1+ 1998,

-A5ITAL GAINS TAX; DO-U3ENTAR4 STA35 TAX; Fore0losre of roerties n&er -AR5 - 5n aforeclosure sale of agricultural lands covered under the AR' 1RA 9 and other agrarian refor( laws2% the(ortgage banC as statutory seller re+resenting the owner (ortgagor of the real +ro+erty shall be liable for the+ay(ent of the ca+ital gains tax due the (ortgagor +ursuant to R&* -!$. Thus% 4AR and@or 8and ;anC of the

'hili++ines (ay deduct the ca+ital gains tax obligation fro( the +roceeds of the landowner-(ortgagor=s clai(and re(it the sa(e to the ;5R. !BIR Rlin" No# 1==%98 &'te& De0em.er + 1998,

5RE3IU3 TAX; N'tion'l @ome 3ort"'"e Fin'n0i'l -oror'tion not te 'torie& :itol&in" '"ent-N>& is not the authori:ed withholding agent with res+ect to the 9, +re(iu( tax relative to the insurance+re(iu(s re(itted to &R5 'ool of insurers. N>& is (erely a conduit and not the +ayor-insured. 5t is 'ag-ibig&R5 'ool which initially receives the +re(iu( fro( N>& and thereafter distributes the sa(e to the+artici+ating (e(ber insurers% for a fee. Thus% 'ag-ibig &R5 'ool is the duly constituted withholding agent


27/27

+ursuant to /ection $. 1A212 of Revenue Regulations No. $-!B since it has control of the +re(iu(+ay(ents. !BIR Rlin" No# 1=8%98 &'te& 1%%98,

-A5ITAL GAINS TAX; Tr'nsfer of re'l roert) :itot monet'r) 0onsi&er'tion- Transfer of real +ro+erty

to /+ouses Neri without any (onetary consideration which (erely acCnowledges and confir(s their title and

ownershi+ over the 00 sq. (. lot covered by TT No. "!"0 is not subect to ca+ital gains tax +rescribed under

/ection $ 142 of the Tax ode of !! nor to the creditable withholding tax i(+osed under RevenueRegulations No. $-!"% as a(ended by Revenue Regulations No. $-!B. 8iCewise% the 4eed of onveyance is

not subect to the docu(entary sta(+ tax under /ection ! but only to docu(entary sta(+ tax of '9.00

under /ection BB% both of the Tax ode of !!. !BIR Rlin" No# 1=9%98 &'te& De0em.er 8+ 1998,

Documents

DIGEST OF 1998 BIR RULINGS.docx