BIR Ruling No. 059-11

March 1, 2011 BIR RULING NO. 059-11 Sections 46 and 47 of the Tax Code of 1997; BIR Ruling No. 060-96; BIR Ruling No. DA-491-98; BIR Ruling No. DA-107-08; BIR Ruling No. DA-110-07 SGV & Co. 6760 Ayala Avenue Makati City Attention: Ms. Antonette C. Tionko Principal, Tax Services Gentlemen : This refers to your letter dated September 13, 2010 stating that your client, API Asia Pacific, Inc. (API), is a corporation organized and existing under the laws of Delaware, USA; that it was granted by the Securities and Exchange Commission (SEC) a license to establish a branch office in the Philippines under SEC License No. A200002891 dated March 2, 2000 and is registered with the Bureau of Internal Revenue (BIR), Revenue District Office No. 21 with TIN 205-376-519-000; that it is a wholly-owned subsidiary of First Aviation Services, Inc. (FASI); that on July 27, 2001, the Board of Directors of FASI resolved to change its accounting period and all of its affiliated subsidiaries, including API, from fiscal year ending January 31 to calendar year ending December 31; and that in support of its application for change in accounting period, it has submitted the following documents, to wit: 1. Original and authenticated copy of the Board Resolution of FASI on the change in fiscal year ending January 31 to December 31 of FASI and all its affiliated subsidiaries including API; 2. Original authenticated copy of the Secretary's Certificate of API containing the appointment of its Vice-President & General Manager, Mr. Kevin Chieh-Wen Yang, as the duly authorized representative of API in the execution and signing of a Sworn Statement of Non-Forum Shopping and Special Power of Attorney in connection with the company's application for change in accounting period end from January 31 to December 31; 3. Original Copy of the Sworn Statement on Non-Forum Shopping executed by Mr. Kevin Chieh-Wen Yang on September 2, 2010; and 4. Original Copy of the Special Power of Attorney executed by Mr. Kevin Chieh-Wen Yang authorizing SGV & Co. to file and represent API in connection with the API's Application for Change in Accounting Period with the BIR. cADSCT Based on the foregoing representations, you now request confirmation of your opinion that 1. Its (API) short period return/separate final or adjustment return covering the period from February 1, 2010 to December 31, 2010, which is the period between the close of the last fiscal year for which return was made and the following December 31, be filed on or before April 15, 2011 and the tax due thereon, if any, be paid at the time of filing; and 2. Thereafter, its annual income tax return covering the 12-month period from January 1 to December 31 of the following year be filed on or before April 15 following the close of such calendar year and the tax due thereon paid at the time of filing. In reply thereto, please be informed that Section 46 of the Tax Code of 1997 provides that "SEC. 46. Change of Accounting Period. If a taxpayer, other than an individual, changes his accounting period from fiscal year to calendar year, from calendar year to fiscal year or from fiscal year to another, the net income shall, with the approval of the Commissioner, be computed on the basis of such new accounting period, subject to the provisions of Section 47." Corollarily, Section 47, supra , reads that "SEC. 47. Final or Adjustment Returns for a Period of Less than Twelve (12) Months. (A) Returns for Short Period Resulting from Change of Accounting Period. If a taxpayer other than an individual, with the approval of the Commissioner, changes the basis of computing net income from fiscal year; to calendar year, a separate final or adjustment return shall be made for the period between the close of the last fiscal year for which return was made and the following December 31. If the change is from calendar year to fiscal year, a separate final or adjustment return shall be made for the period between the close of the last calendar year for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year, a separate final or adjustment return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year. (B) Income Computed on Basis of Short Period. Where a separate final or adjustment return is made under Subsection (A) on account of a change in the accounting period, and in all other cases where a separate final or adjustment return is required or permitted by rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, to be made for a fractional part of a year, then the income shall be computed on the basis of the period for which separate final or adjustment return is made." IEHDAT In stressing the rationale of the above-cited provisions, this Office granted its permission to CIGI to change its accounting period as elucidated in BIR Ruling No. DA-107-08 dated February 22, 2008 , citing BIR Ruling No. DA-110-2007 dated February 19, 2007 , as follows: "Accordingly, CIGI should file a separate final or adjustment return for the period between the close of the former fiscal year and the following December 31 (October 1-December 31, 2007) on or before April 15, 2008 and the tax due thereon, if any, be paid at the time of filing. This will serve as your authority to change your accounting period from fiscal year to calendar year upon your compliance with the requirement of filing a short period return. (BIR Ruli ng No. DA-491-98 citing BIR Rul ing No. 060-96 dated May 22, 1996) " On the other hand, Section 77 of the Tax Code of 1997 provides that "SEC. 77. Place and Time of Filing and Payment of Quarterly Corporate Income Tax. xxx xxx xxx (B) Time of Filing the Income Tax Return. The corporate quarterly declaration shall be filed within sixty (60) days following the close of each of the first three (3) quarters of the taxable year. The final adjustment return shall be filed on or before the fifteenth (15th) day of April, or on or before the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year, as the case may be. (C) Time of Payment of the Income Tax. The income tax due on the corporate quarterly returns and the final adjustment income tax returns computed in accordance with Sections 75 and 76 shall be paid at the time the declaration or return is filed in a manner prescribed by the Commissioner." Such being the case, API's annual income tax return covering the 12-month period from January 1 to December 31 of the following year be filed on or before April 15 following the close of such calendar year and the tax due thereon paid at the time of filing. WHEREFORE, in view of the foregoing , this Office hereby GRANTS its authority for API to change its accounting period from fiscal year ending January 31 to calendar year ending December 31 as prescribed in Sections 46 and 47 both of the Tax Code of 1997. However, API is required to file, its short period return/separate final or adjustment return covering the period from February 1, 2010 to December 31, 2010, which is the period between the close of the last fiscal year for which return was made and the following December 31, on or before April 15, 2011 and the tax due thereon, if any, be paid at the time of filing. Likewise, its annual income tax return covering the 12-month period from January 1 to December 31 of the following year on or before April 15 following the close of such calendar year and the tax due thereon paid at the time of filing. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. HCITAS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue