What every Corporation owning Real Estate Should Know !

You may have noticed my blogs have been limited for sometime now and this is due to the various real estate properties owned by our clients, relatives and friends through their CORPORATION that had to go through a process below due to the new Revenue Regulations by the Bureau of Internal Revenue and also the new requirements by the Securities Exchange Commission.  Take note that the rules and requirements by the Securities Exchanges Commission ( SEC )  and Bureau of Internal Revenue ( BIR ) in the early 1950s to the 1980s  monthly and quarterly reports were not really enforced, although non reporting still resulted in an "open case".  The process of updating to the current procedure is tedious but I will just discuss the more important details in this blog, should you need further details, it's best that you call both the SEC and BIR.

For clarification, this blog will refer particularly to Corporations owning real estate properties.  Now if a property is owned by a Corporation, monthly and quarterly filing for Income Tax or Value Added Tax is now a pre-requisite and if filing hasn't been done, chances are the registration to the Securities Exchange Commission has been revoked.

To lift the revocation and to reactivate the Corporation, penalties must be paid for the "open cases" that has accumulated over the years.  This is the first process that has to be addressed and fixed.

This is what the Certificate of Registration from the Securities Exchange Commission looks like :

This is what the Certificate of Registration from the Bureau of Internal Revenue looks like :

These are the various forms that need to be filed with the Bureau of Internal Revenue ( monthly and quarterly ) depending on the nature of the Corporation's registration, please refer to your accountant, tax lawyer or the help desk at the Bureau of Internal Revenue for clarification :

Unfortunately, most  Corporations aren't aware of the new BIR and SEC regulations so their current status are mostly revoked due to Non - Compliance with the current requirements and procedures.

With regards to the Securities and Exchange Commission, both the General Information Sheet ( GIS ) and yearly Financial Statement ( F/S ) must be submitted yearly in order to be in compliant.  Below is a copy of both the GIS and Financial Statement.

Once all requirements are in COMPLIANCE with both the SEC and BIR, a Certificate of Registration from the Bureau of Internal Revenue will be issued.  Below is a copy of the form, Certificate of Registration.  ( Depending on which Revenue District Office you are dealing with, this may take anywhere from 3 months to a year, in some cases, we had to wait for the RDO officer's signature as long as two months ! )

When all the penalties and proper registration has been done and the Corporation is now in COMPLIANCE with all requirements, most importantly, the Certificate of Registration has been released, an Authority to Print receipt is then released.  Below is what an Authority to Print looks like :

Once an Authority to Print is issued by the Bureau of Internal Revenue, the corresponding Official Receipts and Invoices may now be printed and the property may now be sold.  Below is what an Official Receipt looks like :

Take note that a Corporation cannot sell a property unless all the above requirements are complete.  Should a Corporation sell a property without going to the due process, the law specifically states that the Corporation is subject to Fraud which is considered a Criminal Liability !

Here is an excerpt from Republic Act No. 8424 otherwise known as Tax Reform Act of 1997, an act amending the National Internal Revenue Code, as amended, and for other purpose.  I have specifically focused on the portion of Compliance Requirements to stress the importance of the Compliance Requirements.  Should you need the complete article on Republic Act No. 8424, click on the link :  http://www.bir.gov.ph/index.php/tax-code.html#tIVcII

CHAPTER II - COMPLIANCE REQUIREMENTS

SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. -

(A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax.

(B) Accounting Requirements. - Notwithstanding the provisions of Section 233, all persons subject to the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance.

SEC. 114. Return and Payment of Value-Added Tax. -

(A) In General. - Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-added tax on a monthly basis.

Any person, whose registration has been cancelled in accordance with Section 236, shall file a return and pay the tax due thereon within twenty-five (25) days from the date of cancellation of registration: Provided, That only one consolidated return shall be filed by the taxpayer for his principal place of business or head office and all branches.

(B) Where to File the Return and Pay the Tax. - Except as the Commissioner otherwise permits, the return shall be filed with and the tax paid to an authorized agent bank, Revenue Collection Officer or duly authorized city or municipal Treasurer in the Philippines located within the revenue district where the taxpayer is registered or required to register.

(C) Withholding of Creditable Value-added Tax. - The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installment payment which shall be creditable against the value-added tax liability of the seller or contractor: Provided, however, That in the case of government public works contractors, the withholding rate shall be eight and one-half percent (8.5%): Provided, further, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For this purpose, the payor or person in control of the payment shall be considered as the withholding agent.

The value-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made.

SEC. 115. Power of the Commissioner to Suspend the Business Operations of a Taxpayer. - The Commissioner or his authorized representative is hereby empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations:

(a) In the case of a VAT-registered Person. -

(1) Failure to issue receipts or invoices;

(2) Failure to file a value-added tax return as required under Section 114; or

(3) Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct taxable sales or receipts for the taxable quarter.

(b) Failure of any Person to Register as Required under Section 236. -The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.

Hope this article is informative to all and will serve both as an eye opener to most and more importantly for those affected to address the issue immediately.

For your info, I've been frequently asked if putting a newly purchased property under a Corporation is still advantageous given the current procedures and requirements by both BIR and SEC.  It really depends on your objective and again, I really recommend that you seek advise from your Taxation Lawyer or Accountant.

Visit www.robertgsarmiento.org for blogs, news, case studies, updated rulings and property listings which you may find informative.

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Finally, should you have a property for SALE or LEASE, let me know if our office could be of assistance.

Thank you.

Robert

Robert G. Sarmiento Properties

Professional Affiliation :

Philippine Association of Real Estate Boards

Member, City of Taguig Real Estate Boards 2016, 2017

Real Estate Broker’s Association of the Philippines 2000 – 2015

President, Greenhills Chapter 2008, 2009

Philippine Association of Real Estate Boards

San Juan Mandaluyong Chapter 1998, 1997

PRC # 6569

PRC Lecturer # 0294

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