Pay from longer maternity leave is tax-free – BIR

Robie de Guzman   •   October 17, 2019   •   269

Filipino mothers breastfeed their newborn babies at a maternity ward of the Fabella Memorial Hospital in Manila, Philippines, 10 July 2008. EPA/AKIRA LIWANAG

MANILA, Philippines – Working women and expectant mothers in the private sector can now enjoy their 105-day maternity leave as the salary differential provision in the law is not subject to tax.

The Bureau of Internal Revenue (BIR) has clarified that the expanded maternity leave for female workers is considered as a benefit, which means it should be exempted from withholding or income taxation.

The BIR made the clarification in its memorandum circular 105-2019 posted on its website last week.

“The maternity benefit of the female worker has been expanded from the previous 100% of the average daily salary credit to a full pay or salary which includes now the salary differential as its component, aside from the added duration of the maternity leave. Accordingly, it is therefore clear that salary differential is considered as a benefit,” reads the circular signed by BIR Commissioner Caesar Dulay.

The BIR said it took into account the law’s provisions and implementing rules, as well as issuances from the Department of Labor and Employment (DOLE) and the Social Security System (SSS).

The Expanded Maternity Leave Act, signed by President Rodrigo Duterte in February, grants working mothers in private and public sectors – regardless of civil status –105 days of paid maternity leave with option to extend for 30 days without pay.

Solo mothers can get additional 15 days of leave.

The measure also allows the mother to transfer seven days of her 105-day maternity leave to the father to extend his paternity leave.

Senator Risa Hontiveros, the law’s author and principal sponsor, welcomed the BIR clarification calling it good news to all working mothers and their families.

“This is welcome news indeed. Now mothers and their families will not only be able to enjoy the biological benefits of the EML law, but their financial welfare is also looked after, particularly those who earn just enough to meet basic needs and still feel the pinch in times of economic strain. This is truly an early Christmas gift to all working mothers and their families,” Hontiveros said in a statement.

Finance chief backs proposed tax on offshore gaming revenues

Robie de Guzman   •   October 22, 2019

Department of Finance (DOF) Secretary Carlos Dominguez III

MANILA, Philippines – The proposal to impose a five-percent tax on revenues generated by Philippine Offshore Gaming Operators (POGO) and their service providers is ‘a good idea,’ Department of Finance (DOF) Secretary Carlos Dominguez III said.

According to a statement released by DOF on Tuesday, Dominguez made the comment when asked about the proposal filed by Albay Representative Joey Salceda which seeks to impose a franchise tax on offshore gaming firms and register these companies as resident corporations as the basis for their taxability.

However, the finance chief pointed out that under existing revenue rules, POGOs are already subject to a 5-percent franchise tax.

“Yes, I haven’t seen the exact proposal, but in general, yes. I think that’s a good idea. But they are already paying a fee. A fee for that,” Dominguez was quoted as saying in a recent media interview.

The DOF cited in its statement the Bureau of Internal Revenue (BIR) Memorandum Circular No. 102-2017 which states that, “the entire gross gaming receipts/earnings or the agreed or pre-determined minimum monthly revenues/income from Gaming Operations under existing rules, whichever is higher, shall be subject to a Franchise Tax of five percent (5 percent), in lieu of all kind of taxes, levies, fees or assessments of any kind, nature or description.”

It also cited BIR data which showed that the government has so far collected P1.63 billion in withholding taxes from POGOs and their service providers from January to August this year.

These online gaming firms paid P175 million in withholding taxes in 2017 and P579 million in 2018, the DOF said.

The BIR has so far listed 218 POGOs and their service providers, employing a total of 108,914 foreign workers.

BIR closes two branches of POGO service provider over tax violations

Robie de Guzman   •   October 17, 2019

MANILA, Philippines – The Bureau of Internal Revenue (BIR) on Thursday (Oct. 17) said it has shut down two offices of a Philippine Offshore Gaming Operator (POGO) service provider for tax code violations.

The BIR said it padlocked Altech Innovations Business Outsourcing’s offices in Aseana City in Parañaque and its branch in Pasay City for failing to register with the agency its value-added tax collections.

Altech is registered under the name of Jan Erick Lavariaz Altavas as a sole proprietorship.

“This is a Pogo service provider not complying with our tax laws especially doon sa value-added tax, hindi ito naka rehistro sa BIR kaya we have to close this Pogo establishment,” BIR deputy commissioner for operations Arnel Guballa told reporters.

The BIR said the company employs an estimated 700 to 1,000 Chinese workers.

Guballa said the firm will not be allowed to resume its operations until it pays its dues.

“Provided they comply with the conditions, we can lift the closure order,” he said.

“We deal exclusively sa violations ng tax laws. As far as the other violations, like work permit and other license, let’s say it’s on immigration and Pagcor na iyon,” he added.

In the last two weeks, the BIR said it shut down five offshore gaming firms for tax troubles.

This is in compliance with the order of Finance Secretary Carlos Dominguez to shutter all POGOs and their service providers that fail or refuse to settle their tax liabilities.RRD (with details from Correspondent Benedict Samson)

DOF orders BIR to hasten audit to weed out tax abusive cooperatives

Robie de Guzman   •   October 14, 2019

Department of Finance (DOF) Secretary Carlos Dominguez

MANILA, Philippines – Department of Finance (DOF) Secretary Carlos Dominguez has ordered the Bureau of Internal Revenue (BIR) to hasten its ongoing audit of almost 30,000 registered cooperatives to weed out those that have abused their tax incentives.

During a recent DOF executive committee meeting, Dominguez directed the BIR to intensify its efforts in determining which cooperatives have exploited tax benefits granted to them under the law.

In a report submitted to Dominguez, the BIR said it has so far sent audit notices to 474 cooperatives nationwide resulting in tax assessments amounting to P1.62 million, from which the agency has collected more than P25 million.

During the meeting, BIR deputy commissioner Arnel Guballa reported that the BIR has on record a total of 29,623 registered cooperatives whose tax compliance amounted to P3 billion combined in 2017.

However, it declined to P2.84 billion or by 5.4 percent in 2018.

“You have the right to audit already, so please exercise it,” Dominguez said in a statement.

According to Guballa, the ongoing audit has uncovered enterprises with business models that only claim to be cooperatives to enjoy tax perks.

He cited as an example a “cooperative” that the agency discovered to own several gasoline-filling stations.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, cooperatives are required to submit regular reports on the fiscal incentives they are enjoying to the Cooperative Development Authority (CDA), which, in turn, will submit a consolidated report to BIR for inclusion in the DOF database.

All registered cooperatives are required to file their tax returns and pay their tax liabilities, if any, using the electronic system for filing and payment of taxes of the BIR under the Joint Administrative Order (JAO) No. 1-2019 signed by Dominguez last May 16.

Registered cooperatives that were issued Certificates of Tax Exemption (CTEs) and subsequently availed of tax incentives are required under the order to submit to the CDA their respective Annual Tax Incentives Reports on or before April 30 of the succeeding year or 15 days from the deadline of filing of their Annual Income Tax Returns, depending on the accounting period used.

Under the JAO, non-compliant cooperatives will get their CTEs revoked at first offense, and will be prohibited from availing of tax exemptions for a period of one year from the date of revocation.

A second offense prohibits a coop from availing of tax exemptions for three years, while a third offense bars it from tax exemptions for five years.

A fourth offense prohibits a coop from ever re-applying for any tax exemption.

“Registered cooperatives shall be liable for the payment of taxes immediately upon revocation of the certificate of tax exemption, inclusive of surcharge, interest and compromise penalty.

Upon payment of taxes, registered cooperatives can re-apply for the issuance of certificate of tax exemption which shall be effective only upon the lapse of the period of prohibition to avail of the tax exemption,” the JAO states.

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