2013: New Year. New Hope.

It's 2013!  How time flies...  Happy New Year!

2012 was a tumultuous year for me.  I'm proud to say that I learned a lot about myself, and I was able to do some things I didn't know I was capable of.  I had the pleasure and honor of working for an Ayala Land subsidiary (Alveo Land), and I met some cool hardworking people in the course of that stint (shout out to Orange Stallions!).  I'm happy to say that my confidence went up accordingly, even as my wallet got lighter overall.  I'm also ecstatic to add that last December 15, 2012, my fiancee and I went ahead and 'officially' got engaged by telling our parents of our plans to settle down by December 2013 (woot woot!!!).

Now, it's 2013, a new year again.  It's time to really buckle down and start making some serious income.  So I decided to go back to the BPO industry to get a steady income which is badly needed, especially with the upcoming events.  I'm not saying goodbye to real estate, though, I'm just going to let it take a back seat for now.  After all, I am a licensed broker, and that distinction is NOT easy to come by, especially in the years ahead, with plans to finally require a real estate course in college before you can get a license.  However, if you want to get me as your broker to help you buy or sell property, just holler (or contact me via my Facebook page).

So this short post is only to greet you good people out there, and to announce my intentions.  I know that things will work out, and good things will come to pass this year.  For the licensed professionals like me, it's additionally the time to renew your CoR (certificate of registration with the BIR) and the PTR (with your local municipal hall).  That's another Php 800 right there.  But you know what they say, the only things permanent are change, death, and taxes.

Happy New Year!  May God bless us all.

- jon

Should Condo Dwellers Expect Higher Fees Soon?

This is a synopsis of the article "Higher Fees For Condo Dwellers?" by Mr. Jun Ramirez that appeared in Manila Bulletin on November 8, 2012 in the Metro News section.  No representations are made or claimed.

Condo dwellers and owners are likely to be paying higher association and membership dues soon because the Bureau of Internal Revenue (BIR) has decided to impose income and value-added tax (VAT) on these monthly charges.

Apparently, in previous BIR rulings, condo corporations that collect said fees were exempted from paying the taxes (income tax and VAT) on the grounds that these were not for gain nor profit, but for managing and maintaining the condominium property.  However, BIR Commissioner Kim S. Jacinto Henares appears to disagree and has withdrawn the tax exemption privilege in her recent Revenue Memorandum Circular No. 65-2012 because "it has no legal basis."  She maintains that association dues and membership fees form part of the gross earnings of the condo corporations, thus subject to both income and business taxes.

Commissioner Henares further explains that the VAT collection is in line with Section 106 of the tax code, imposing it on persons or entities engaged in the sale of goods and services.  Thus, even non-profit and non-stock corporations, and even government entities, are subject to VAT on the sale or exchange of goods and services.  This ruling was affirmed by the Supreme Court on its March 30, 2000 decision (BIR vs. the Commonwealth Management and Services Corporation).

In other words, this withdrawal of the tax exemptions might (or should I say 'will?') increase the association and membership fees as well as service fees because the condo corporations and operators most likely will pass on the extra financial burden to their residents and unit owners.  

For those who do not know, VAT is currently 12%.  So if this is going to happen, expect your dues to go up by at least that much.  Ah well, it's still worth the convenience of living in a condominium, isn't it?

Keep your chin up,

Jon

Sale of Principal Residence

Just a short post about the capital gains tax exemption on the sale of your primary residence.  What this means is, you're selling your main/primary residence, and moving to another residence that will become your new primary residence.  In this case, you get a capital gains tax exemption.  From the BIR's website:

• The proceeds of the sale of the principal residence have been fully utilized in acquiring or constructing new principal residence within eighteen (18) calendar months from the date of sale or disposition; 
• The historical cost or adjusted basis of the real property sold or disposed will be carried over to the new principal residence built or acquired;  
• The (BIR) Commissioner has been duly notified, through a prescribed return, within thirty (30) days from the date of sale or disposition of the person’s intention to avail of the tax exemption;
• Exemption was availed only once every ten (10) years; and  
• There is no full utilization of the proceeds of sale or disposition. The portion of the gain presumed to have been realized from the sale or disposition will be subject to Capital Gains Tax. 

In case of sale/transfer of principal residence, the Buyer/Transferee shall withhold from the seller and shall deduct from the agreed selling price/consideration the 6% capital gains tax which shall be deposited in cash or manager’s check in interest-bearing account with an Authorized Agent Bank (AAB) under an Escrow Agreement between the concerned Revenue District Officer, the Seller and the Transferee, and the AAB to the effect that the amount so deposited, including its interest yield, shall only be released to such Transferor upon certification by the said RDO that the proceeds of the sale/disposition thereof has, in fact, been utilized in the acquisition or construction of the Seller/Transferor’s new principal residence within eighteen (18) calendar months from date of the said sale or disposition. The date of sale or disposition of a property refers to the date of notarization of the document evidencing the transfer of said property. 

In other words, if you're selling your primary residence, and you intend to use the proceeds to buy or construct a new primary residence, you have to let the BIR know within 30 days of the sale of your intention to do so.  Additionally, the money from the sale of your primary residence has to be utilized in full within 18 months or else anything that is left over will be subject to the capital gains tax.  You can only avail of this exemption once every 10 years, and once you sell your old primary residence, the 6% capital gains tax will have to be deposited first in an authorized partner bank of the BIR and will only be released to you once it is proven that the full proceeds of the sale (less the 6% of course) was in fact used to buy the new primary residence.

Just making sure everybody is aware of this so you can save some money that you would otherwise pay to the BIR.

That's it pancit.

Jon

So You're Now a Professional. What Does The BIR Say About That?

A couple of months ago, after passing the real estate broker board exam given by the Professional Regulation Commission (PRC), I was at a loss regarding the procedures I should be aware of with regard to the Bureau of Internal Revenue (BIR).  I knew I had to find out because I didn't want to be labeled as a tax evader, and ignorance isn't an excuse.  So, I sent an e-mail to the BIR, without really expecting a reply:

Hello,

I'm a recent passer of the PRC-held real estate brokers exam last March 27, 2011.  I'd like to seek clarification about the requirements for a professional such as I.  Please verify that we need:

• Professional Tax Receipt (PTR) - municipal hall
• BIR Certificate of Registration - is this necessary for individual brokers?  I heard this is for those who want to put up a brokerage company
• Official Receipt - is this necessary for individual brokers?

I would appreciate it if you could point me to a resource where I can find the answers.  Thank you very much.

Sincerely,

Jon

So imagine my surprise when I receive a reply, albeit a couple of months late:

In reply, since you are now considered a professional being a real estate broker duly registered as one under the Professional Regulation Commission (PRC), you are required to issue the corresponding Professional Tax Receipt (PTR) to your prospective clients.  The said PTR has to be coordinated with the city or municipal hall that has jurisdiction over your place of residence or practice of profession.  However, we refer you to Section 7 of Revenue Regulations (RR) No. 11-2008, which mentions among others, that PTR is one of the documentary requirements required from professionals, to wit;
SEC. 7. BIR FORMS AND ADDITIONAL DOCUMENTARY REQUIREMENTS . - The registration forms  shall  generally contain the taxpayer's name, TIN, SEC/CDA/DTI/HLURB Registration Number, date of registration, registered address, taxpayer type, tax types, business style, place of residence  (for individual) , line of business, and such other information as may be required by the Commissioner in the form prescribed therefor to   be   filled out in two (2)   copies, properly labeled and indicated thereon the   specific purpose of the copy, i.e., “taxpayer’s   copy” and  “BIR’s copy” .
These forms shall be submitted together with the required documents , namely:

(a)  In   the   case   of   self-employed  individuals,  mixed    income   earners, professionals,  estates  and  trusts      -Form  to  be  prescribed  by  the  BIR,  together  with  the submission of the   following:

(a.1)   For self -employed, professionals , mixed income earners - Photocopy   of :

(a.1.1) Mayor’s Business Permit /PTR issued by the LGU;

(a.   1.2) Lease Contract, if applicable;

(a.1.3) DTI   Certificate   of Registration of Business Name, if a business trade name shall be used ;

(a.1.4) Certificate of Authority if Barangay Micro Business Enterprises (BMBE) registered-entity, if applicable ;

(a.1.5) Proof of Registration/Permit to Operate with Board of Investment (BOI)/Board of Investment for Autonomous Region for Muslim Mindanao (BOI-ARMM), Philippine Export Zone Authority  (PEZA), Bases Conversion Development  Authority  (BCDA)    &  Subic  Bay  Metropolitan  Authority (SBMA), if applicable;

(a.1.6) Franchise Agreement, if applicable;

(a.1.7) Sworn Statement of Capital, if applicable; (a.1.8) Working Permit for non-resident;

(a.1.9) Waiver of husband to claim additional exemption, if applicable;

(a.1.10) Marriage Contract, if applicable ; and

(a.1.11) Birth Certificates of declared dependents, if applicable.

(a.2)       For   Trust - In addition to the requirements under a.1 (1 to 7), photocopy   of the trust   agreement;

(a.3)      For   Estate (under judicial settlement)   -   In addition to the requirements under a.1 (1 to 7), photocopy  of the Death Certificate of the  deceased.
As to BIR - Certificate of Registration (COR), we affirm that you are also to be issued one by the BIR – Revenue District Office (RDO) that has jurisdiction over your place of residence or practice of profession.  We refer you to Section 8 (A) of the said RR, to wit;
SEC.   8. CERTIFICATE OF REGISTRATION (COR).   -

(A)  Persons Entitled to the Issuance of   COR. - The COR  shall only   be issued to individuals engaged in business or the practice of profession  and   to juridical   persons (whether taxable or exempt) by the Revenue District Officer (RDO) concerned  (i.e.,RDO of head office/branch/facility) upon compliance with the requirements for registration. Issuance of COR, whether upon registration or upon update of taxpayer’s information, is not subject to the payment of Certification Fee, unless the taxpayer requested for a certified copy of said COR, in which case, the same shall be subject to the payment of Certification Fee imposed by Sec. 15 hereof.

(B)  Persons Not Covered by the Issuance  of the  COR. - Employees, one-time taxpayers, and/or persons  who have secured TIN under EO 98 with the BIR shall not be issued a COR.
As to official receipts, we confirm that as a professional, you are likewise required to request for an authority to print receipts (ATP) prior to registration and issuance of such to your prospective clients.  We refer you to Section 237 and 238 of the 1997 Tax Code, to wit;
SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That in the case of sales, receipts or transfers in the amount of One hundred pesos (P100.00) or more, or regardless of the amount, where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals, commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client: Provided, further, That where the purchaser is a VAT-registered person, in addition to the information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser.

The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period.
 

The Commissioner may, in meritorious cases, exempt any person subject to internal revenue tax from compliance with the provisions of this Section.

SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same.

No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.

All persons who print receipt or sales or commercial invoices shall maintain a logbook/register of taxpayers who availed of their printing services. The logbook/register shall contain the following information:
 

(1) Names, Taxpayer Identification Numbers of the persons or entities for whom the receipts or sales or commercial invoices were printed; and

(2) Number of booklets, number of sets per booklet, number of copies per set and the serial numbers of the receipts or invoices in each booklet.
The full text of RR 11-2008 and the 1997 Tax Code are accessible from the BIR website under the Issuances and Rulings, Revenue Regulations, 2008, 11-2008 links and Special Sites, Tax Code links respectively.

For other inquiries, you may visit www.bir.gov.ph or call us at 981-8888. We appreciate your continued support.

Sincerely,
The BIR Contact Center Team

E-mail: contact_us@cctr.bir.gov.ph

The information contained in this communication is intended solely for the use of the individual or entity to whom it is addressed and others authorized to receive it.   It may contain confidential or legally privileged information.   If you are not the intended recipient you are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Any views expressed in this message are those of the BIRCC based on available references and is not binding as evidence against the BIR. If you have received this communication in error, please notify us immediately by responding to this email and then delete it from your system. All emails and file attachments sent to and received through the BIR domain is scanned for viruses by BIR's email Virus scanning system. However it is recommended that attachments, if any, be scanned for viruses before launching. The BIR is not liable for any damages caused due to virus(es), trojans or any other form of malicious software transmitted over email. It is neither liable for the proper and complete transmission of the information contained in this communication nor for any delay in its receipt.

Well what do you know, the BIR actually responds to e-mail inquiries!  I was really honestly pleasantly blown away by this happy happenstance.  At least now, I know what to do!  PTR, and BIR certificate of registration and official receipts to practice my chosen profession as a licensed real estate broker.  All's good, things are looking up, as I said *^_^*

Hit me back (I must be dreaming!)
Jon

Quezon City Vs. BIR... FIGHT!

The Quezon City local government is in a tiff with the Bureau of Internal Revenue (BIR) over P400M worth of taxes.  Former actor Herbert Bautista, the current occupant of the QC mayoralty chair, has asked the help of the Department of Finance's Secretary Cesar Purisima in an apparent bid to get the local government of Quezon City exempted from paying the Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) on properties it foreclosed for non-payment of real estate property taxes, or "amilyar" as known by Filipinos.  This developed after the BIR's Commissioner, Kim S. Jacinto-Henares, refused to let the local government off from paying capital gains and documentary stamp taxes on said properties.  BIR Commissioner Henares stands by Section 39 of the Tax Code (Republic Act 8424) which states that "capital gains tax is presumed to have been realized from the sale, exchange or other disposition of real property."  City Administrator Vic Endriga, however, countered that Quezon City did not realize any gains from confiscating the tax delinquent properties.  Instead, he argues that the city will actually be spending more to develop said properties into low-cost housing units for the poor residents of the city.

In this case, the QC local government is acting as the statutory seller in lieu of the owners of the confiscated properties.  I was not able to find any mention in the Real Property Tax Code (Presidential Decree 464) of any exemption for statutory sellers.  I say, pay up QC local government, since you paid yourselves, the Philippines deserves to get a slice of the pie, so to speak.


Death and Taxes,
Jon