BIR Ruling No. 091-11

March 21, 2011 BIR RULING NO. 091-11 Secs. 46 & 47 of the Tax Code of 1997; BIR Ruling No. 074-64; BIR Ruling No. DA-(TAR-002) 133-09; BIR Ruling No. DA-713-06; BIR Ruling No. DA-712-06; BIR Ruling No. DA-711-06 Romulo Mabanta Buenaventura Sayoc & De Los Angeles 30th Floor, Citibank Tower 8741 Paseo de Roxas, Makati City Attention: Atty. Priscilla B. Valer Partner Gentlemen : This refers to your letter dated August 23, 2010 requesting authority to change accounting period from fiscal year covering the period July 1 to June 30 to calendar year beginning January 1 and ending December 31 pursuant to Section 46 in relation to Section 47 of the National Internal Revenue Code of 1997, as amended. AaCEDS It is represented that your client, Inova Pharmaceuticals (Singapore) Pte. Limited (Inova Singapore) with TIN 255-794-362-000, is a foreign corporation organized and existing under the laws of the Republic of Singapore licensed to do business in the Philippines as a representative office under the name Inova Pharmaceuticals (Philippines), Inc. (Inova Philippines); that Inova Philippines is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. FS200712618 dated August 10, 2007 and the Bureau of Internal Revenue (BIR) under BIR Certificate of Registration No. OCN 9RC000219168; that Inova Singapore has changed its accounting period from fiscal year ending June 30 to calendar year; that accordingly, Inova Philippines, which currently adopts a fiscal year ending June 30 for tax and financial accounting purposes, will have to align its accounting period with the accounting period of its head office Inova Singapore and the rest of its affiliates in the Wirra International Group; and that Inova Philippines will adopt the calendar year as its accounting period starting July 1, 2010 and ending December 31, 2010 for the initial period and January 1 to December 31 in the subsequent taxable years. In support of your request, you have submitted the following documents, to wit: 1. SEC Registration of Inova Pharmaceuticals (Singapore) Pte. Limited; 2. Application of a foreign corporation to establish a representative office in the Philippines with the SEC; 3. Certificate of Authentication by the Foreign Service of the Republic of the Philippines; and 4. BIR Certificate of Registration of Inova Pharmaceuticals (Singapore) Pte. Limited. 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 one 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." ScAIaT Corollarily, Section 47, supra , provides "SEC. 47. Fiscal 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 to 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." This will, therefore, serve as the authority for Inova Pharmaceuticals (Phils.), Inc. to change its accounting period from fiscal year to calendar year upon your compliance with the requirement of filing a short period return from July 1 to December 31, 2010. 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue