quality assurane ulletin i march 2019 edition...

QUALITY ASSURANCE BULLETIN I March 2019 Edition 1


RECENT SECURITIES AND EXCHANGE COMMISSION ISSUANCES

RECENT BUREAU OF INTERNAL REVENUE ISSUANCES

Revenue Regulations No. 3-2019: Prescribes the use of the Electronic Certificate Authorizing

Registration System relative to transactions involving registration and transfer of real and

personal properties pursuant to Section 5(B) of the NIRC of 1997, as amended, and in relation

to Sections 58(E), 95 and 97 of the same Code.

Revenue Memorandum Circular No. 31-2019: Reiterates the tax compliance requirements of

candidates, political parties/party list groups and campaign contributors.

Revenue Memorandum Circular No. 34-2019: Clarifies the treatment and reporting

requirements of Input Tax as of December 31, 2018 relative to VAT-exempt medicines pursuant

to the TRAIN Law.

Revenue Memorandum Circular No. 35-2019: Reiterates the definition of Accounts

Receivable/Delinquent Accounts for purposes of issuance of Delinquency Verification

Certificates and Tax Clearance for certain/specific purpose.

Revenue Memorandum Circular No. 36-2019: Circularizes the Additional Lists of Withholding

Agents required to deduct and remit the 1% or 2% Creditable Withholding Tax for the purchase

of goods and services under RR No. 11-2018.

Revenue Memorandum Circular No. 37-2019: Circularizes the enhanced BIR Form No. 1701

[Annual Income Tax Return for Individuals (including Mixed Income Earner), Estates and Trusts]

January 2018 (ENCS).

Revenue Memorandum Circular No. 38-2019: Amends RMC No. 102-2018 specifically the

deadline for the processing of pending VAT Refund/Credit Claims filed prior to the effectivity of

RMC No. 54-2014.

NOTICE:

Clarification on the Filing of Audited Financial Statements pursuant to the Revised Corporation Code of the Philippines.


REVENUE REGULATIONS

NO. 3-2019

Prescribes the use of the Electronic Certificate

Authorizing Registration System relative to

transactions involving registration and transfer of real

and personal properties pursuant to Section 5(B) of

the NIRC of 1997, as amended, and in relation to

Sections 58(E), 95 and 97 of the same Code.

The Regulations mandate the Land

Registration Authority to use the eCAR System

with barcode developed and owned by the BIR as

agreed in a Memorandum of Agreement

circularized through Revenue Memorandum

Circular No. 28-2015. The BIR is likewise obligated

to upload its data to LRA using the Philippine Land

Registration and Information System (PHILARIS)

of the latter. Both systems of the BIR and LRA are

linked to make use of the LRA-BIR eCAR

Verification System (LRA-BIR-CVS), which is now

available nationwide. The eCAR System with

barcode in the meantime, however, is limited to the

use of BIR and LRA until such time that all LGUs,

banks and other entities processing the transfer of

properties are ready with their systems to link with

the BIR eCAR System in the future.

The eCAR system replaces the manually-

prepared Certificate Authorizing Registration

(CAR). The eCAR shall have a system-generated

Barcode Reference Number (BRN) printed (below

a barcode) on an accountable security paper.

There shall be issued one (1) eCAR per

title in case of registered land and/or improvement/

s, and one (1) eCAR for each tax declaration, in

case of unregistered land and/or improvement/s. A

separate eCAR shall be issued for all personal

properties. A system-generated information, such

as eCAR number, date of eCAR issuance, amount

paid, date of payment and signature of the

authorized signatory of eCAR shall be indicated or

stamped on the reverse side of each page of the

original copies of the transfer document, e.g.,

Deed of Sale, Deed of Exchange, Deed of

Donation, Deed of Extrajudicial Settlement of

Estate, etc.

The Provincial, City and Municipal

Assessor’s Offices of all LGUs, banks, and other

issuers of Stock Certificates, Bonds and other

similar Paper Securities are mandated to accept

only the eCAR printed and issued by the BIR from

the said System before any transfer of ownership

is changed to the new owner.

The eCAR shall have a validity of five (5)

years reckoned from date of issuance, for

purposes of presenting the same to the Register

of Deeds (RD). Otherwise, the eCAR shall be

deemed permanently expired and, therefore, of no

force and effect. A new eCAR may be generated

and issued upon request of the taxpayer for the

re-issuance of a new eCAR to replace the expired

eCAR.

All manually-issued CARs that are either

due for revalidation or has not been presented to

the RD within the validity period and manually

issued-CARs with partial transfer of properties as

prescribed in existing BIR issuances are

considered expired manual CARs already and, as

such, shall no longer be valid for presentation to

the RD. The said CARs shall be replaced with an

eCAR by the concerned Revenue District Officer

or Large Taxpayers Division who issued the CAR

upon presentation of the expired manual CAR.

Pursuant to the TRAIN Law, the

Commissioner of Internal Revenue is authorized

to obtain, on a regular basis, both financial and

non-financial information from persons and

offices. Accordingly, the BIR shall obtain any

information related to the payment of taxes on all

transfer of property made with the LRA and RDs.

No registration of any deed or instrument

resulting in the transfer of ownership of real

property shall be allowed by the RD unless the

Commissioner or his duly authorized

representative has issued the corresponding

eCAR that has been properly verified under

LRA- BIR-CVS. Accordingly, the RD shall inscribe

on the newly-issued Transfer Certificate of Title

(TCT) the following information: a) eCAR Number;

b) Date of Issuance of eCAR; c) Revenue District

Office (RDO) Number; and d) Amount and date of

payment per tax type.


An eCAR duly-issued by the BIR and

retrieved by the RD from the LRA-BIR eCAR

database, whether for taxable or tax-exempt

transactions, shall be the basis for the RD to effect

the transfer. Any eCARs not in the database are

deemed spurious and not issued by the BIR,

hence, transfer of the property should not be

effected.

For transactions involving Estate or Donor’s

Tax on which the eCARs are issued by the

Revenue District Office (RDO) having jurisdiction

over the place where the donor is domiciled at the

time of donation or where the decedent is

domiciled at the time of his death, the RDs who

have jurisdiction over the property shall no longer

require the eCAR to be authenticated or

countersigned by the issuing RDO. The provision

shall no longer apply to non-resident decedents/

donors whose eCARs are issued by RDO No. 39-

South Quezon City.

No deed, conveyance, mortgage, lease or

other voluntary instruments affecting unregistered

land shall be valid except as between the parties

thereto, unless such instrument shall have been

registered in the book of Unregistered Property of

the RD. Thus, no Tax Declaration shall be issued

in the name of the new owner by the Provincial,

City, Municipal Assessor’s Office concerned unless

proof is presented thereby that the said instrument

had already been registered with the RD.

For both manual and automated processing

of Tax Declaration, for titled and untitled real

properties, pursuant to Office of the President’s

Administrative Order No. 186, it shall be the duty

of Provincial City or Municipal Assessors to

indicate at the back/reverse side of the

newly-issued Tax Declaration the following

information contained in the eCAR: a) eCAR

Number; b) Date of Issuance of eCAR; c) Amount

and Date of payment per tax type; and d) RDO

Number.

The Tax Identification Number (TIN) of the

transferee shall, however, be indicated on the face

of the newly-issued Tax Declaration.

Subsequent updates of the Tax Declaration

without change in ownership shall require the carry

-over of the information contained in the previous

version of the Tax Declaration. Moreover,

Provincial, City or Municipal Assessors shall be

required to submit quarterly summary reports,

within 30 days after the end of the calendar

quarter, to the concerned Office of the Regional

Director of the BIR, copy furnished the

Assessment Performance Monitoring Division

(APMD) of the BIR National Office, who shall

cascade to the RDO having jurisdiction over the

Province, City or Municipality of all transfers

effected by its Office showing the following

information:

a. Tax Declaration Number of new Tax Declara-

tion issued;

b. Tax Declaration Number of Tax Declaration

cancelled;

c. Transfer Certificate of Title (TCT) No. for ti-

tled properties;

d. eCAR Number;

e. Date of issuances of eCAR;

f. TIN of Transferor;

g. Name of Transferor;

h. TIN of Transferee;

i. Name of Transferee;

j. Area of the real property transferred;

k. Location of the real property transferred;

l. Classification of the property transferred

indicating the specific area per classification

in case of multiple classifications;

m. Type of taxes paid (Capital Gains Tax, Estate

Tax, Donor’s Tax,…);

n. Amount and date of payment per tax type;

o. Official Receipt Number/Validation Number;

p. Official Receipt date/Validation Date; and

q. Remarks.

REVENUE MEMORANDUM CIRCULAR

NO. 31-2019

Reiterates the tax compliance requirements of

candidates, political parties/party list groups

and campaign contributors.

All candidates, political parties/party list

groups and campaign contributors are required

to register or update their registration with the

Revenue District Office (RDO) having jurisdiction

over their respective residence address, or

head/principal office following the guidelines

and procedures enumerated in Revenue

Memorandum Circular No. 38-2018. Individual

candidates shall be registered as “Professional”

in order to be issued an Authority to Print

Receipts/Invoices.

Continuation...


All candidates and political parties/party list groups

shall undertake the following:

Pay an Annual Registration Fee in the

amount of Five Hundred Pesos (P500.00).

Certificate of Registration is no longer

required to be issued to individual candidates

who are not engaged in business;

Register Non-VAT Official Receipts to be

issued for every contribution received,

whether in cash or in kind valued at Fair

Market Value;

Preserve records of contributions and

expenditures, together with all pertinent

documents, for a period of three (3) years

from the close of the taxable year during

which the election was held.

All political parties/party list groups shall

register and keep adequate books and other

accounting records such as Cash Receipts

Journal, Cash Disbursements Book or their

equivalent. Individual candidates may opt to use

a simplified set of bookkeeping records as long

as it can provide accurate information.

Income payments made by political

candidates and political parties/party list groups

on their purchases of goods and services as

campaign expenditures, and income payments

made by individuals or juridical persons for their

purchases of goods and services intended to be

given as campaign contribution to political

parties and candidates shall be subject to five

percent (5%) Creditable Withholding Tax (CWT).

BIR Form No. 2307 (Certificate of Creditable Tax

Withheld at Source) shall be issued to the payee.

All political parties/party list groups and

candidates shall:

a. Remit five percent (5%) CWT for the first two

months of the quarter on or before the 10th

day of the following month in which the

withholding was made using BIR Form No.

0619-E.

b. File and pay the quarterly Withholding Tax

return using BIR Form No. 1601-EQ not later

than the last day of the month following the

close of the quarter during which the

withholding was made, together with the

submission of the Quarterly Alphalist of

Payees through the eSubmission facility of the

BIR.

c. File the Annual Information Return of

Creditable Taxes Withheld [(Expanded)/

Income Payments Exempt from Withholding

Tax (BIR Form No. 1604-E)] as well as the

statement of Contributions and Expenditures

duly stamped “Received” by the

Commission on Elections (COMELEC) on or

before March 1 following the year of

election.

Expenses that were not subjected to the

5% CWT are not considered utilized campaign

funds, and the candidates, political parties, party

list groups are precluded from claiming such

expenditures as deductions from his/her/its

campaign contributions. As such, the full

amount corresponding to said expense shall be

reported as unutilized campaign funds subject to

Income Tax.

Only those donations/contributions that

have been utilized/spent during the campaign

period as set by the COMELEC are exempt from

Donor’s Tax. Donations utilized before or after

the campaign period are subject to Donor’s Tax

and not deductible as political contribution on

the part of the donor.

Unutilized/excess campaign funds net of

the candidate’s or political party’s/party list’s

campaign expenditures, shall be considered as

subject to Income Tax and, as such, must be

included in their/his taxable income as stated in

their/his Income Tax Return (ITR). No further

deduction, either itemized or optional, shall be

made against the said taxable income.

Continuation...


Any candidate or political party/party list

group, whether winner or loser, who fails to file

with the COMELEC the Statement of

Contributions and Expenditures required under

the Omnibus Election Code shall be

automatically precluded from claiming such

expenditures as deductions from the campaign

contributions making the entire amount directly

subject to Income Tax.

Every candidate and Treasurer of the

political parties/party list groups shall submit the

Statement of Contributions and Expenditures to

COMELEC and RDO where the candidates/

political parties/party list groups are registered

within thirty (30) days after the election.

The RDO shall maintain the list of all

registered candidates and political parties/party list

groups for monitoring and updating of its

registration record after election.

The registration of individuals in their

capacity as candidates shall automatically end ten

(10) days after the deadline of filing the

Quarterly Remittance Return of Creditable

Income Taxes Withheld (BIR Form No. 1601EQ).

The Client Support Section Chiefs of the

concerned RDOs shall end-date the Form Type

1601EQ and Tax Type WE of individual

candidates that were registered and/or updated,

and cancel the Branch code of those that were

registered as Branch for purposes of election.

Those candidates who are not engaged in

business shall be reverted to its previous

taxpayer type, e.g. Executive Order No. 98 or

Local Employee. However, the political parties

including party list groups shall subsist, unless

they opt to update their registration.


NO. 34-2019

Clarifies the treatment and reporting requirements of

Input Tax as of December 31, 2018 relative to VAT-

exempt medicines pursuant to the TRAIN Law.

An Inventory List of drugs and medicines

as of December 31, 2018, which became VAT-

exempt beginning January 1, 2019 pursuant to

Section 34 of Republic Act No. 10963 (TRAIN

Law), shall be required from all manufacturers,

wholesalers, distributors and retailers regardless

of whether or not there is an existing excess Input

Tax.

The Inventory List, which shall include all

drugs and medicines on hand, imported and

locally-manufactured shall be filed (using the

format prescribed in Annex A of the Circular) with

the Large Taxpayer Service/Revenue District

Office where the taxpayer is registered on or

before April 25, 2019, as an attachment to the

Quarterly VAT Declaration Form (BIR Form

2550Q) for the first quarter of 2019. When

filing BIR Form 2550M/2550Q, the Input Tax

corresponding to the sale shall be deducted from

the taxpayer’s allowable Input Tax.

As the sale of VAT-exempt drugs and

medicines are made, the Input Tax

corresponding to the sale shall be closed to cost

or expense.


NO. 35-2019

Reiterates the definition of Accounts Receivable/Delinquent Accounts for purposes of issuance of Delinquency Verification Certificates and Tax Clearance for certain/specific purpose.

As provided in Revenue Memorandum Order No. 11-2014, “open stop-filer cases” and deficiency tax assessments which are timely protested, subject of reconsideration/ re-investigation, or pending appeal with the Appellate Division or Court of Tax Appeals/Supreme Court shall not be considered as AR/DA and, therefore, existence of which shall not be a ground for the non-issuance of a clear DVC or Tax Clearance, as the case may be.

Continuation...


For purposes of issuing DVC and Tax Clearance, the existence of the outstanding AR/DAs shall generally be verified through the utilization of the Accounts Receivable Management System (ARMS). However, in the event the concerned taxpayer has record of AR/DA in the manually-maintained Inventory List of AR/DAs under the respective jurisdiction of the DVC/Tax Clearance-issuing offices, such AR/DA must first be added or created in the ARMS before denying the application for Tax Clearance or before issuing DVC reflecting the said AR/DA. Provided further that the physical docket where such record of added/created AR/DA emanated must be with the concerned office to ensure that only enforceable AR/DA is added in the ARMS database, otherwise it shall not likewise hinder the issuance of a clear DVC or Tax Clearance.


NO. 36-2019

Circularizes the Additional Lists of Withholding Agents

required to deduct and remit the 1% or 2% Creditable

Withholding Tax for the purchase of goods and

services under RR No. 11-2018.

Additional Lists of Withholding Agents

under the jurisdiction of the Revenue Regions

who are required to deduct either the one percent

(1%) or two percent (2%) Creditable Withholding

Tax (CWT) from the income payments to their

suppliers of goods and services, as well as the

list of withholding agents for deletion from the

existing list who are no longer required to

deduct the said CWT.

Accordingly, the obligation to deduct and

remit to the BIR the 1% and 2% CWT from the

suppliers of goods and services shall continue,

commence or cease, as the case may be,

effective April 1, 2019. Any taxpayer that cannot

be found in any of the published lists of

inclusions is deemed to have been excluded and,

therefore, not required to deduct and remit the

1% or 2% CWT under Revenue Regulations No.

11-2018.

The said lists are posted in the BIR Web-

site (www.bir.gov.ph) with search facility for the

convenience of all concerned.


NO. 37-2019

Circularizes the enhanced BIR Form No. 1701 *Annual

Income Tax Return for Individuals (including Mixed

Income Earner), Estates and Trusts+ January 2018

(ENCS).

The newly issued return shall be used by

the individuals (including those with mixed

income), estates and trusts in filing the annual

income tax return and paying the income tax due

starting the year 2018 that is due on or before

April 15,2019.

The revised manual return is already

available in the BIR website

"http://www.bir.gov.ph" under the BIR Forms -

Income Tax Return Section. However, the form is

not yet available in the (eBIRForms); thus, eFPS/

eBIRForms shall use manual return in filing and

paying the income tax due thereon.

Revenue District Offices (RDOs) shall

receive the manually-filed returns by the

taxpayers, either no payment returns or returns

with payments made online.


NO. 38-2019

Amends RMC No. 102-2018 specifically the deadline

for the processing of pending VAT Refund/Credit

Claims filed prior to the effectivity of RMC No. 54-

2014.

Amends the deadline prescribed in

Revenue Memorandum Circular (RMC) No.

102-2018, for the processing of pending VAT

Refund/Credit Claims filed prior to the effectivity of

RMC No. 54-2014 from March 29, 2019 to July

31, 2019.

Concerned revenue officers and officials

who fail to comply with the said deadline shall be

issued a “Show-Cause Order” and may be

imposed appropriate sanctions pursuant to

Section 269(c) of the Tax Code of 1997, as

amended, and Section 43 of the “Revised Code of

Conduct for Revenue Officials and Employees”,

as implemented by Revenue Memorandum Order

No. 53-2010.

Continuation...

http://www.bir.gov.ph/

http://www.bir.gov.ph/


CLARIFICATIOS ON THE FILING OF AUDITED FINANCIAL STATEMENTS PURSUANT TO THE REVISED CORPORATION CODE OF THE PHILIPPINES.

WHEREAS, on February 20, 2019, the Republic Act No. 1 1232 or the Act Providing for the Revised Corporation Code (the "Revised Code") was approved which took effect on February 23, 2019.

WHEREAS, Section 177 of the Revised Code requires that:

"Except as otherwise provided in this Code or in the rules issued by the Commission, every corporation, domestic or foreign, doing business in the Philippines shall submit to the Commission:

a. Annual financial statements audited by an independent certified public accountant: Provided, That if the total assets or total liabilities of the corporation are less than Six hundred thousand pesos (P600,000.00), the financial statements shall be certified under oath by the corporation's treasurer or chief financial officer ...xxx." (emphasis supplied)

WHEREAS, the Commission has identified the following areas for clarification arising from the above provision which may be raised by the public:

1. The impact of Section 177 in the preparation and submission of 2018 AFS;

2. Comparative presentation of financial statements; and

3. Additional information that should be disclosed in the financial statements.

NOW, THEREFORE, the Commission en banc, in its meeting held on March 14,2019, approved the following guidance to address the areas for clarification:

A. Impact of Section 177 in the preparation and

submission of AFS

All financial statements covering the

periods on or before February 22, 2019, should

be prepared and submitted in accordance with

the Old Corporation Code or Batas Pambansa

68, in addition to the requirements of SRC Rule

68.

Section 177 of the Revised Code should

be applied prospectively. The requirement to

prepare and submit AFS based on the Revised

Code should be made upon the effectivity of the

same, February 23, 2019 and onwards.

B. Comparative presentation of financial

statements beginning February 23, 2019

All companies required to file Audited

Financial Statements under the Revised Code

should comply with the required comparative

presentation as provided under SRC Rule 68.

Pursuant to Section 5 of the Rule, if the financial

statements of the prior year were not audited,

such statements shall be marked prominently as

"UNAUDITED." In addition, the auditor shall

disclose this in an "other matter" paragraph in the

auditor's report.

C. Additional information to be disclosed in the

financial statements

To enhance understandability of AFS,

companies should include in the Notes to FS a

discussion of the impact of the Revised Code

relative to the preparation and submission of

financial statements.


This bulletin is a compilation of relevant issuances, rulings and memoranda from various government agencies to enhance the

technical skills of the professional staff of Paguio, Dumayas and Associates, CPAs and is not intended to replace the original

issuances of the related government agencies.

PAGUIO, FLOYD C.

Managing Partner

[email protected]

[email protected]

GALLEGOS, AIRA G.

Tax Specialist

[email protected]

MELCHOR, AILEEN P.

Senior Tax Specialist

[email protected]

ASADON, KEN JOHN B.

Tax Supervisor

Unit 3207 Cityland Pasong Tamo Condominium, Pasong Tamo St., Barangay Pio del Pilar, Makati City

Contact us at: 950-9853/950-9854

We are a team of Certified Public Accountants, who aim to be the

accounting firm of choice for business entities in terms of:

Audit and Assurance

Taxation

Business Process Outsourcing

Management Consultancy

[email protected]

RULLODA, JOHN ERIC M.

Tax Specialist

quality assurane ulletin i march 2019 edition...

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