3. NEC TECHNOLOGIES PHILIPPINES, INC. (NTPI) was registered with the Export Processing Zone Authority (EPZA) on
August 15, 1989 and is engaged in the manufacture and sale of transmission and telecommunications equipment,
exporting 100% of its total production; that as an EPZA-registered enterprise, it is entitled to the income tax holiday
incentive; that NTPI was also registered with the BIR for value-added tax (VAT) as exporter, and is therefore entitled to
the 0% output VAT rate on its sales and is under the law entitled to file a claim for refund or credit for the 10% input VAT
paid on its purchases of goods and services from VAT-registered suppliers; that after
having been registered for the VAT and during the construction of its manufacturing plant, it
paid a 10% passed-on VAT on its purchases of goods and services from VAT-registered
suppliers, duly supported with VAT invoices and receipts of these suppliers; that for financial
accounting purposes, it capitalized the 10% passed-on VAT on these purchases of goods
and services and depreciated the same as part of the "Property, Plant and Equipment"
account; that in your letter dated March 21, 1994, you informed this Office that NTPI has
already changed its method of recording and accounting for its VAT input taxes; that it has
already removed the VAT input taxes from its property, plant and equipment account and is
already reflecting the VAT input taxes as a separate asset item on its books of accounts as
reflected in NTPI's audited financial statements for the years ended March 31, 1993 and
1992; that likewise in your letter dated April 13, 1994 you alleged that even if NTPI,
previously capitalized and depreciated its VAT input taxes as part of its "Property, Plant and
Equipment Account" it did not claim any depreciation expense or deduction for the
capitalized VAT input taxes for income tax purposes because it is enjoying an income tax
holiday incentive; and that since NTPI has already stopped capitalizing and depreciating its
VAT input taxes for financial accounting purposes, no double tax benefit will result even if its
income tax holiday will already expire in 1994 and the claim for refund is granted.
4. BASED ON THE FOREGOING, NTPI IS REQUESTING FOR CONFIRMATION OF YOUR OPINION THAT
1) NTPI is entitled to the refund or credit of its VAT input taxes, even if it capitalized and depreciated the
same as part of its "Property, Plant and Equipment" account for financial accounting purposes, because
being exempt from income tax under its income tax holiday incentive as an EPZA-registered enterprise, it
did not derive any tax benefit from such depreciation charges;
2) Assuming for the sake of argument that NTPI did not comply with the accounting
procedures prescribed in Revenue Regulations No. 5-87 in recording the purchases
and the VAT input taxes thereon, said non-compliance is not fatal to its right to
claim a refund or credit for its VAT input taxes, because the accounting procedures
prescribed in the Regulations are merely directory, and not mandatory;
3) Since NTPI has no output VAT liabilities, it follows that it is entitled by law
to claim a refund or credit for its VAT input taxes.
5. BASED ON THE FOREGOING, NTPI IS REQUESTING FOR CONFIRMATION OF YOUR OPINION THAT
1) NTPI is entitled to the refund or credit of its VAT input taxes, even if it capitalized and depreciated the
same as part of its "Property, Plant and Equipment" account for financial accounting purposes, because
being exempt from income tax under its income tax holiday incentive as an EPZA-registered enterprise, it
did not derive any tax benefit from such depreciation charges;
2) Assuming for the sake of argument that NTPI did not comply with the accounting
procedures prescribed in Revenue Regulations No. 5-87 in recording the purchases
and the VAT input taxes thereon, said non-compliance is not fatal to its right to
claim a refund or credit for its VAT input taxes, because the accounting procedures
prescribed in the Regulations are merely directory, and not mandatory;
3) Since NTPI has no output VAT liabilities, it follows that it is entitled by law
to claim a refund or credit for its VAT input taxes.
6. VALUE ADDED TAX (VAT)
1) To be considered as a tax credit, an input tax claim must always be
recorded in the claimant's accounts under the asset statement "Input
Tax," which meets the accounting concept of timeliness. It happened to
be as input taxes that have been capitalized or charged to expense,
according to RMC No. 42-2003, cannot be claimed as a tax refund for
any taxable year, regardless of any changes made in the succeeding
taxable year.
2) The revenue regulatory requirements' provisions are mandatory;
failure to meet any of them will be devastating to one's situation. The
amount of input tax charged for the purchase of PPE shall not be
included in the capitalization of PPE in order for the company to assert
the amount of input tax paid for the acquisition of PPE as a tax credit.
Since the tax recognition guidelines would impact the financial
statement's reporting and filing as a whole, NTPI must follow these
protocols.
7. VALUE ADDED TAX (VAT)
3) Having no output VAT liabilities means that a VAT-registered entity
like NEC Technologies Philippines, Inc. has sales which are zero-rated
or effectively zero-rated. As stated by the Section 112(A) of New Tax
Code, they may apply for the issuance of a tax credit certificate or
refund of creditable input tax due. Comparable to the case in G.R. No.
149073, both Court of Appeals and Court of Tax Appeals found out
that respondent Cebu Toyo Corporation is engaged in taxable
transaction subject VAT as it exports products, which in case of NTPI
are equipment, subject to value-added tax at 0%.
9. Isla Luzon Maritime, Inc. (ILMI), a domestic corporation, entered into a
contract of affreightment with National Steel Corporation (NSC), Iligan
City, for the transport of the latter's cargo to Manila or other parts of the
Philippines; that due to the increase volume of cargoes, your client plans
to charter vessels of another domestic shipping company (Company A);
that your client pays the corresponding 3% common carrier's tax based
on the amount of gross receipts provided for in its contract with NSC,
pursuant to Section 115 of the Tax Code, as amended by Executive
Order No. 273.
10. Under the foregoing facts, ILMI is paying the 3%
tax based on its contract with the NSC, the query
is whether Company A is still liable for the
payment of the 3% tax based on the amount
received from your client.
11. PERCENTAGE TAX
According to Section 117 of New Tax Code, domestic carriers are required
to pay a 3% percentage tax. Based on the facts, Company A is considered
as domestic common carrier within the context of Article 1732 because
their business is engaged with transporting passengers or goods within the
Philippines, offering their services to the public. However, it is stated in the
law that the domestic carriers for transport of passengers only are liable for
3% percentage tax. Company A is liable for 12% value added tax as it will
transport cargoes, irrespective of mode of transportation by the carrier.
13. AMKOR TECHNOLOGY PHILIPPINES, INC. (formerly Amkor Aram Pilipinas, Inc. [the
corporation]), requesting opinion and/or ruling on the taxability of the transfer of a
Proprietary Membership Share.
It is represented that the corporation is the true and beneficial owner of one (1)
proprietary membership share in the Manila Polo Club, Inc.; that it had paid valuable
consideration to purchase the subject share from Mr. Jose T. Dayrit in 1993 for the
exclusive use of its corporate officers; that, however, inasmuch as the Club's Articles
of Incorporation and By-Laws provide that only natural persons shall be admitted as
shareholders, the subject share was registered in the name of Mr. Antonio R. Ng; that
at that time, Mr. Antonio R. Ng, was the corporation's Vice-President and General
Manager; that consequently although the corporation retained true and beneficial
ownership of the subject share, Proprietary Membership Certificate No. 4307 covering
the subject share was issued in the name of Mr. Ng on August 2, 1993; that presently,
however, Mr. Ng is no longer connected with the corporation; that the corporation
therefore intends to cause the transfer of the subject share to its current president, Mr.
Anthony Michael Petrucci and to have a new Proprietary Membership Certificate
issued in the latter's name; that the transfer shall be without consideration and would
involve only the legal title to the subject share; that the corporation, meanwhile, shall
remain its true and beneficial owner;
14. 1) The transfer of the subject share is not subject
to capital gains tax because it does not involve
any monetary or material consideration
whatsoever, and is merely a transfer of legal title
to the subject share from one nominee of the
corporation to another; and
2) That there being no donative intent under the
above-described circumstances, the transfer is not
subject to donor's tax;
THAT IT IS YOUR OPINION THAT:
15. DONOR’S TAX
1) The transfer of the subject share from Mr. Antonio Ng to Mr. Anthony
Michael Petrucci is not subject to capital gains tax since the share didn’t
accumulate any gains. Whereas, capital gains tax is a tax imposed on the
gains presumed to have been realized by the seller from the sale, exchange,
or other disposition of capital assets located in the Philippines, including
pacto de retro sales and other forms of conditional sale.
2) The transfer of Mr. Ng share to Mr. Petrucci, current president of AMKOR
TECHNOLOGY PHILIPPINES INC, has no donative intent therefore, it is not
subject to donor's tax. It is stated in the case that the transfer is without
consideration and would only involve the legal title to the subject share.
According to the Section 100 of the Tax Code, in relation to the sale of
shares of stock not traded in the PSE. RMC 30-2019 dated Feb. 28, 2019,
clarified that starting Jan. 1, 2018, when shares of stock not traded in the
PSE are sold for less than their FMV, the excess shall be treated as gift
subject to donor’s tax, except when the shares are sold at arm’s length, free
from any donative intent in the ordinary course of business.
17. In a letter dated February 1, 2019 that your cousin bought a lot
in 1997 and titled it in his name when he was still single; that
in 2004 he got married in the church; that the couple (husband
and wife) constructed a house in 2006 on the said lot where
they stayed and lived up to the time of his death in May, 2018;
that the couple are childless; and that the couple had not
agreed on a property regime to govern them prior to the
celebration of their marriage.
18. 1) 1.Who is the legal heir(s) of
the property?
2) Is the property conjugal or
exclusive?
IN VIEW OF THE FOREGOING, PROVIDE RESPONSE ON
THE FOLLOWING QUERIES:
19. DONOR’S TAX
1) As stated in the Philippine law of intestate succession, when the
decedent was not able to prepare a will before his death his spouse and
children will inherit the estate of the decedent at the time of death, with that
said, my cousin's spouse is the legal heir of the properties, despite the lack
of property regime agreements.
2) In addition, if the marriage took place on or after August 3, 1988, all of
their properties, acquired before or during their marriage, are considered
conjugal properties.
20. Group
Assessment
This semester has been very difficult for both students and professors.
Communication is the only way for us, online learners, to generate a
good output. We would rate ourselves an excellent remark as a group.
We always did our utmost to participate in whatever activities were
assigned to us. We began evenly distributing parts and were able to
finish the activities on schedule. We don't have 100% confidence in
our answers because we all struggle to grasp Business and Transfer
Taxes, but the group as a whole respects and trusts each other. When
anyone makes a mistake, we don't hold that against them. We are
grateful for each member's commitment to the success of each
activity, as well as the friendship we have established.
