The SyCipLaw T.I.P.S. for January covers the following tax issues:


1. Can the 25% surcharge for late filing of a tax return be abated due to faulty internet connection at the taxpayer’s office on the last day of filing?
 
2. What are the new requirements for availing of the 15% tax sparing rate for dividends paid by a domestic corporation to a non-resident foreign corporation?
 
3. Are the EDSA MRT III real properties, which are owned by a private corporation but leased to the Republic of the Philippines through a build-lease-transfer arrangement, subject to real property tax?
 
4. Is there a need for a new letter of authority if the revenue officer/s named in the letter of authority are changed?
 
5. What are the requirements to establish that an entity is a non-resident foreign corporation for purposes of VAT zero-rating under Section 108(B)(2) of the Tax Code?
 
6. Can the CTA rule on issues raised for the first time on appeal?
 
7. What must the Bureau of Customs prove to order the forfeiture of imported goods under Section 113 of the Customs Modernization and Tariff Act?

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1. Can the 25% surcharge for late filing of a tax return be abated due to faulty internet connection at the taxpayer’s office on the last day of filing?
   
   No. In Qatar Airways with Limited Liability v. Commissioner of Internal Revenue (G.R. No. 238914, June 8, 2020), the Supreme Court ruled that it is neither unjust nor excessive on the part of the Bureau of Internal Revenue (BIR) to impose a 25% surcharge even if the taxpayer was only one day late in filing its tax return (and even if the late filing is due to faulty internet connection at the taxpayer’s office on the last day of filing) and in paying the tax due thereon. In this case, the taxpayer requested the abatement or cancellation of the 25% surcharge that was imposed by the BIR for the belated filing of its second quarterly income tax return. The taxpayer pleaded good faith and claimed that the late filing was due to a technical problem (i.e., faulty internet connection at the taxpayer’s office on the last day of filing), which was supposedly beyond the taxpayer’s control. The taxpayer also argued that it had difficulty in interpreting the correct Gross Philippine Billings (GPB) computation for income tax under the then newly-issued BIR Revenue Regulations No. 11-2001.
   
   The Supreme Court denied the taxpayer’s request and ruled that a technical malfunction does not fall under any of the instances – when penalties imposed on the taxpayer may be abated or cancelled on the ground that the imposition thereof is unjust or excessive – enumerated in BIR Revenue Regulations No. 13-2001, as amended by BIR Revenue Regulations No. 4-2012 (RR No. 4-12).
   
   In particular, according to the Supreme Court, a faulty internet connection is not a circumstance beyond the taxpayer’s control, because the delay could have been easily avoided had the taxpayer filed its income tax return (ITR) earlier or before the deadline. On the taxpayer’s argument that it had difficulty in interpreting the correct GPB computation, the Supreme Court January 2021 1 SyCipLaw TIP 1: The imposition of the 25% surcharge due to the belated filing of an ITR is strictly enforced. By itself, a faulty internet connection is not considered a meritorious circumstance in which the surcharge imposed on late payment of the tax may be abated or cancelled, even if the tax payment was only a day late. Keep in mind that, under RR No. 4-12, “one day late filing and remittance due to failure to beat the bank cut-off time” is no longer considered a meritorious circumstance in which penalties and/or interest imposed on late payment of the tax may be abated or cancelled. ruled that if the taxpayer was still unsure with the figures contained in the ITR, the taxpayer could have filed a tentative quarterly ITR to avoid paying the 25% surcharge for late filing. Thereafter, the taxpayer could have modified, changed, or amended the tentative ITR already filed, if warranted.
   
   
2. What are the new requirements for availing of the 15% tax sparing rate for dividends paid by a domestic corporation to a non-resident foreign corporation?
   

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