Ensuring Tax Compliance - New Tax Regulations

31
8/13/2019 Ensuring Tax Compliance - New Tax Regulations http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 1/31 Atty. Jonathan P. Capanas CPA Dean, School of Law University of San Jose-Recoletos Cebu City

Transcript of Ensuring Tax Compliance - New Tax Regulations

Page 1: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 1/31

Atty. Jonathan P. Capanas CPADean, School of Law

University of San Jose-RecoletosCebu City

Page 2: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 2/31

Revenue Regulations No. 4-2013 – RequiredMachine Identification No. and sticker for theuse of CRM and/or business/sale machinegenerating receipts and invoices.

(Related issuances : RR 11-2004, RMO 9-2006 and RMO 19-2007)

Revenue Regulations No. 9-2013 – Requiringpayment of the amount offered as

compromise settlement before theapplication will be entertained. (relatedissuance: RR 30-2002)

Page 3: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 3/31

Revenue Regulations No. 12-2013 – Requirements for deductibility of certainincome payments. “No withholding, nodeduction. ” (related issuance: RR 2-98)

Revenue Regulations No. 4-2012 – aboutabatement or cancellation of internal revenue

liabilities (penalties and/or interest due to“Failure to beat bank cut- off”) (related issuance: RR 13-2001)

Page 4: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 4/31

Revenue Regulations No. 8-2012 – De minimisbenefits, clothing allowance increased toP5,000. (related issuances: RR 10-2018, RR 5-2008, RR 5-2011)

Revenue Regulations No. 12-2012 – prescribesthe limitations for deductibility ofdepreciation expense on vehicles as well asthe corresponding input taxes.

Page 5: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 5/31

Revenue Regulations No. 13-2012 – VATtreatment of adjacent residential lots, Houseand lot or other residential dwelling. (relatedissuance: RR 16-2005)

Revenue Regulations No. 14-2012 – Propertreatment of interest income on financialinstruments & other related transactions.

Page 6: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 6/31

Revenue Regulations No. 15-2012 – Guidelineson the accreditation of Printers.

Revenue Regulations No. 18-2012 – Guidelineson the issuance of Authority To Print (ATP)

Page 7: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 7/31

Revenue Memorandum Order No. 2-2013 – Prescribes the policies, guidelines andprocedures in processing specific requestsfor information pursuant to the exchange ofinformation provision of the tax treaties.(Related law: RA 10021, the Exchange ofInformation Act of 2010)

Page 8: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 8/31

Revenue Memorandum Order No. 20-2013 – Policies and guidelines in the issuance of taxexemption rulings to exempt organizationsunder Section 30 of the Tax Code.

Revenue Memorandum Order No. 21-2013 – Policies and guidelines on the issuance of

ATRIG. ( related issuances: RMO 35-2002, RMO20-2006)

Page 9: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 9/31

Revenue Memorandum Circular No. 3-2013 – clarification pertaining to some issues ondepreciation expense limit involving vehicle.

(related issuance RR12-2012)

Revenue Memorandum Circular No. 4-2013 – Requiring Tax-exempt hospitals to secure

revalidated tax-exempt ruling or certificate.

Page 10: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 10/31

Revenue Memorandum Circular No. 6-3013 – Clarifies taxpayers’ concerns on audit program &their responsibility in engaging taxagents/practitioners. (related issuance: RR 11-2006)

Revenue Memorandum Circular No. 9-2013 -Clarifies the taxability of association dues,membership fees and other assessments/charges

collected by the Homeowners Associations.(related law: RA 9904, Magna Carta forHomeowners and Homeowners Association)

Page 11: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 11/31

Revenue Memorandum Circular No. 11-2013BIR Priority Programs for CY 2013.

Revenue Memorandum Circular No. 16-2013 – Clarifying the tax implications and recordingof deposits/cash advances not covered byRMC 89-2012.

Page 12: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 12/31

Revenue Memorandum Circular No. 37-2013 – publishes the full text of DOF Order No. 17- 2013 establishing the priority program forthe Bureau of Customs.

Revenue Regulations No. 38-2013 – clarifiesthe implication of legal petitionnotices/declarations and similar documents

on the audit/assessment process. (relatedissuances: RMC 6-2013, RMO 45-2010, RMO88-2010)

Page 13: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 13/31

Revenue Memorandum Circular No. 39-2013-clarifies the guidelines on the receipt ofprotest letter on final Assessment Notices &Final Decision on Disputed Assessments.(related issuance: RR 12-99)

Revenue Memorandum Circular No. 50-2013 – clarifies about the “Tentative Income TaxReturn” being filed by the taxpayer.

Page 14: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 14/31

Revenue Memorandum Circular No. 53-2013 – Taxability of donations given to HomeownersAssociations.

Revenue Memorandum Circular No. 55-2013 – Reiterates the taxpayers’ obligations inrelation to online business transactions.

Page 15: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 15/31

Revenue Regulations No. 2-2013 – TransferPricing Guidelines. (related issuances: RMC 26-2008 interim transfer pricing guidelines, RAMO 1-98 audit guidelines, RMO 36-2010 Conglomerate

audit for TY 2009, RMO 23-2009 Audit of selectedTPs by the NID, RMO 26-84 determination oftransfer pricing)

Page 16: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 16/31

As published, it has 23 pages

It contains 17 sections.

Page 17: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 17/31

Section 1 - Objectives & ScopeSection 2 - Purpose of the RegulationsSection 3 - Authority of the Commissioner to

allocate income and deductionsSection 4 - Definition of termsSection 5 - Arm’s length principle Section 6 - Comparability analysisSection 7 - Identification of tested party and the

appropriate transfer pricing

method.Section 8 – Determination of the arm’s lengthresults.

Page 18: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 18/31

Section 9 - Comparability adjustmentSection 10 - Arm’s length pricing methodologies Section 11 - Advance pricing arrangements and

mutual agreement procedureSection 12 - DocumentationSection 13 - PenaltiesSection 14 -Transitory provisions

Section 15 - Separability clauseSection 16 - Repealing clauseSection 17 - Effectivity

Page 19: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 19/31

1. Comparable transaction2. Comparable uncontrolled transaction3. Associated enterprises

4. Control5. Controlled transaction6. Independent enterprises or parties7. Advance Pricing Arrangement (APA)8. Mutual Agreement Procedure (MAP)

Page 20: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 20/31

Requires the transaction with a related partyto be made under comparable conditions andcircumstances as a transaction with anindependent party.

It is founded on the premise that wheremarket forces drive the terms and conditionsagreed in an independent party transaction,

the pricing of the transaction would reflectthe true economic value of the contributionsmade by each entity in that transaction.

Page 21: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 21/31

Step 1: Conduct comparability analysis

Step 2: Identify the tested party and theappropriate transfer prising method

Step 3: Determine the Arm’s Length results

To present a logical and persuasive basis todemonstrate that transfer prices set betweenassociated enterprises conform to theprinciple.

Page 22: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 22/31

a. Comparable Uncontrolled Price (CUP)Method

b. Resale Price Method (RPM)c. Cost Plus Method (CPM)d. Profit Split Method (PSM)e. Transactional Net margin Method (TNMM)

Page 23: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 23/31

Avon Products Mftg Inc. vs. CIRCTA Case No. 6802 Aug. 31 2006

Domestic selling price is not a benchmarkprice for export sales because the export &domestic markets are two different markets.Lower export sales prices are not attributable

to the relationship between the Petitioner andthe Buyers but to the competitive market.

Page 24: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 24/31

The CTA finds the petitioner’s evidencesufficient to establish its position that theprices of its export sales may be lower thanits local sales, taking into accountrespondent’s lack of evidence to support hisassertion.

Page 25: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 25/31

Transactions with affiliates are inter-relatedtransactions & must be considered as arm’s length transactions.

Arms-length pricing is the price an unrelatedparty would have paid under similarcircumstances for the property involved in atransaction between two or more

organizations, trades or businesses owned orcontrolled directly or indirectly by the sameinterests .

Page 26: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 26/31

“We are not convinced that the manner ofimposing "imaginary" income againstpetitioner is justifiable under the presentsituation. As correctly explained bypetitioner, there are factors to be consideredin determining the application of arm's lengthpricing. ”

Page 27: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 27/31

The CIR has no authority to make animputation of an imaginary interest incomebecause his power to distribute, apportionand allocate do not include the power toimpute an "arms-length" interest rate orimaginary interest income.

Page 28: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 28/31

It correctly averred that respondent adopted the"comparable uncontrolled price method" indetermining the arm's-length pricing of itsproducts. Under the method, the arm's-length

price of a sale between group members(controlled sale) is equal to the price paid incomparable sales in which the sellers and thebuyers are not members of the same controlled

group (uncontrolled sales), with certainadjustments. (Vol. 12 Merten's Law of FederalIncome Taxation, $451.55, p. 164)

Page 29: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 29/31

By provision of law, uncontrolled sales are consideredcomparable to controlled sales if the physical property andcircumstances involved in the uncontrolled sales are identicalto the physical property and circumstances involved in thecontrolled sales, or if such properties and circumstances are

so nearly identical that any differences either have no effecton price, or such differences can be reflected by a reasonablenumber of adjustments to the price of uncontrolled sales. . . .Some of the differences which may affect the price ofproperty are differences in the quality of the product, termsof sale, intangible property associated with the sale, time ofsale, and the level of the market and the geographic marketin which the sale takes place . . . “(U.S. Treasury Regulations1, Section 482-2(e)(2))

Page 30: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 30/31

In conclusion, respondent gathered her findings in anarbitrary, unreasonable and capricious manner. There was noapparent attempt to verify with technical circumspection thecomparability of the products in question. It can be gleanedreadily from the facts that the physical property andcircumstances in the processing and sale of petitioner'sproducts are not "identical" or "so nearly identical that anydifference can either have no effect on price, or suchdifference can be reflected by a reasonable number ofadjustments to the price" of Pfizer's products. (U.S. TreasuryRegulations, ibid) By the adjective "identical" or the phrase "sonearly identical," the compared products must be exactly oressentially alike. (Merriam Webster's Dictionary.) Even ifpenicillin could be established to be a part of vigofac, itwould remain physically distinct and beyond compare withaurofac. This also applies with minocycline and doxycycline.

Page 31: Ensuring Tax Compliance - New Tax Regulations

8/13/2019 Ensuring Tax Compliance - New Tax Regulations

http://slidepdf.com/reader/full/ensuring-tax-compliance-new-tax-regulations 31/31

In other words, comparability must be basedon generic similarity before any adjustmentscan be considered. Those adjustments fornearly identical products could either refer toaddition of ingredients such as vitamins,minerals and amino acids, or differences inthe production process and the like but themain component or essential materialsbetween the compared products must be alike.