Further Delegation of Authority to the Assistant Commissioner of Internal Revenue, Legal Service, to Sign Rulings with Established Precedents

September 24, 2001 REVENUE MEMORANDUM CIRCULAR NO. 39-01 SUBJECT : Further Delegation of Authority to the Assistant Commissioner of Internal Revenue, Legal Service, to Sign Rulings with Established Precedents TO : All Internal Revenue Officers and Others Concerned In order to expedite actions on certain cases and documents with established precedents and pursuant to Section 7 of the National Internal Revenue Code of 1997, the Assistant Commissioner, Legal Service, is hereby authorized to sign rulings and actions that are clearly covered by precedent rulings and guidelines as well as pertinent issuances on the subject, as follows: 1. Tax-deferred exchanges of property for shares under Section 40(C)(2) of the Tax Code of 1997 under appropriate guidelines; 2. Transfer of property by a pre-need corporation to a trustee in accordance with SEC guidelines on the establishment of trusts by pre-need companies; 3. Tax consequence of exchanges of properties made in order to correct clear mistakes of fact relating to ownership of subdivision lots; 4. Joint ventures for real estate development where no cash advance or other payments are made to any co-venturer; 5. Exemption or taxability of gains from sale or transfer of shares of stock in domestic corporations by non-resident foreign corporations pursuant to applicable provisions of the tax treaties to which the Philippines is a signatory; 6. Taxability or exemption of income of a resident of a foreign country from independent personal services by virtue of a tax treaty; 7. Embassy requests, either for itself or on behalf of its employees, for tax exemption; 8. Tax exemption of income derived by foreign governments from their investments in the Philippines pursuant to Section 32(B)(7)(a)(1) of the Tax Code of 1997; and 9. Tax exemption of interest and/or dividend income of such foreign government institutions as are specified in the tax treaties to which the Philippines is a signatory or in exchanges of letter between the government of the Republic of the Philippines and the foreign government. For this purpose, the documentary requirements that will have to be complied with and submitted at the time of filing the request for ruling shall be those listed in Annex 'A', which is made an integral part hereof. It is provided, however, that if the taxpayer believes that the ruling issued is erroneous or that the request remains unacted after the lapse of a reasonable period of time, he/it may appeal his/its case to the Deputy Commissioner, Legal and Inspection Group. The Commissioner or the Deputy Commissioner for Legal and Inspection Group may, motu proprio , reverse, modify or alter any such ruling issued by the Assistant Commissioner, Legal Service, at any time after its issuance if he determines the same not to be in accordance with the established precedent rulings or pertinent tax laws and revenue issuances, but after due notice to the taxpayer and in accordance with Section 246 of the Tax Code of 1997, without prejudice, however, to administrative sanctions relative to such actions. This Circular shall take effect immediately upon approval. (SGD.) RENE G. BAEZ Commissioner ANNEX A LIST OF DOCUMENTS TO BE SUBMITTED WITH THE FOLLOWING REQUESTS FOR RULING 1. Request for tax deferment on exchanges of property for shares under Section 40(C)(2) of the Tax Code of 1997: (a) In the case of transfer of property to a controlled corporation/partnership: 1. Deed of Transfer/Assignment /Exchange; 2. Duly registered Articles of Incorporation or Partnership with SEC of the corporate transferor and transferee corporation/partnership and By-Laws; 3. Certified True Copies of the Transfer Certificates of Title/Condominium Certificates of Title of the properties to be transferred or Certificates of Stock; 4. Certified True Copies of the corresponding Tax Declaration of the properties to be transferred; 5. Certification of the fair market value or zonal value of the real property involved in the exchange; 6. Sworn certification as to the historical cost of the property to be transferred. The historical cost of each real property/share of stock/or other property transferred must be itemized in the certification, instead of a single lump sum. This is in order to make it possible for the Register of Deeds or the corporate secretary, as the case may be. to annotate the historical cost on the Transfer/Condominium Certificate of Title of the real property involved or at the back of the Certificate of Stock, the said information in order to facilitate the determination of gain or loss from a subsequent disposition of real properties/certificates of stock/other property received in the exchange; 7. Such other documents as may be required by further guidelines on the matter. (b) In the case of Merger or Consolidation. 1. The documents stated in (a) above; 2. Plan of Corporate Merger or Consolidation; 3. Statement of the amount and nature of any liabilities assumed upon the exchange, and the amount and nature of any liabilities to which any of the properties acquired in the exchange is subject; 4. Articles of Incorporation duly registered with SEC of the merging or consolidating corporations; and 5. Audited Financial Statements duly submitted to the SEC in connection with the application for merger or consolidation. 6. Such other documents as may be required under further guidelines to be issued on the matter. 2. Transfer of trustor to trustee in accordance with SEC guidelines on the establishment of trusts by pre-need companies. a. Original Copy of the Trust Agreement to establish that no actual transfer of ownership has taken place; b SEC Registration of Trustor as a Pre-need Company; c. Transfer Certificate of Title of Properties or Certificates of Stock to be Transferred. 3. Tax consequence of exchanges of properties made in order to correct clear mistakes relating to ownership of subdivision lots. a. Original Copy of the Duly Executed Deed of Exchange of Properties; b. Certified True Copy of the Deed of Sale By and Between the Parties to the Deed of Exchange and their respective Original Sellers; c Transfer Certificates of Title to the Properties held by the Parties to the Exchange; d. Sworn Statement of Party-in-Error; e. Latest Tax Declarations of the Properties. 4. Joint ventures for real estate development where no cash advance or other payments are made to any co-venturer. a. Original Copy of the Joint Venture Agreement; b. Transfer Certificates of Title of the Properties Contributed to the Joint Venture. 5 Ruling on exemption or taxability of gains from sale or transfer of shares of stocks in domestic corporations by non-resident foreign corporations pursuant to applicable provisions of the tax treaties to which the Philippines is a signatory . a. Letter providing information on transactions covered by treaty provisions and requested tax treaty treatment for such transactions, and legal justification; b. Original copy of proof of residence of income recipient such as a certification by the tax authority of its country or a certified copy of Articles of Incorporation duly certified by the Securities and Exchange Commission (or its equivalent)/Philippine Consulate/Embassy of the respective country; c. Original copy of certification from the Philippine Securities & Exchange Commission that the income recipient is or is not registered to engage in business in the Philippines; d. Original copy of Special Power of Attorney duly executed by the income recipient authorizing withholding agent/representative that he is the duly authorized representative of the income recipient in the Philippines; e. Documents pertaining to the acquisition/transfer of shares by the applicant, f. Duly notarized certificate of Secretary of Phil. Corporation which shares of stocks are sold showing the number and value of the shares of the seller and the latter's percentage ownership to the corporation as of date of sale; g. Detailed Schedule of Fixed Assets of Philippine corporation; and h. Certified copy of the Audited Financial Statements of the Philippine corporation as of date of sale. If not available, then the most recent financial statements adjusted up to the date of the sale may be used. 6 Ruling on taxability or exemption of income of a resident of a foreign country from independent personal services by virtue of a tax treaty. a. Letter providing information on transactions covered by treaty provisions and requested tax treaty treatment for such transactions, and legal justification; b. Original copy of proof of residence of income recipient such as a certification by the tax authority of its country or a certified copy of Articles of Incorporation duly certified by the Securities and Exchange Commission (or its equivalent)/Philippine Consulate/Embassy of the respective country; c. Original copy of certification from Philippine Securities & Exchange Commission that income recipient is/is not registered to engage in business in the Philippines; d. Original copy of Special Power of Attorney duly executed by the income recipient authorizing withholding agent/representative that he is the duly authorized representative in the Philippines of the income recipient e. Certified copy of notarized Contract (e.g. Service, Sales, Charter, etc.); f. Certified copy of passport of applicant/concerned personnel of income recipient showing pages of dates of arrival and departure; and g. Certification by the Philippine contractor/employer of the duration of service performed by the applicant. 7. Embassy requests, either for itself or on behalf of its employees, for tax exemption. a. Issuance of a Note Verbale by the requesting Embassy to the Department of Foreign Affairs informing the latter of the Embassy's intention to apply for the issuance of a ruling exempting the Embassy or its personnel from the payment of tax; and b. Endorsement/recommendation by the DFA Office of Protocol. 8. Tax exemption of income derived by foreign governments from their investments in the Philippines pursuant to Section 32(B)(a)(1) of the Tax Code of 1997. Letter providing information on transactions covered by law and requested tax treatment for such transactions, and legal justification, provided that the ruling to be issued shall always state that the exemption is subject to proof that this investment is in fact owned by the foreign government. 9. Tax exemption of interest and/or dividend income of such foreign government institutions or financial institutions on their direct financing and/or investments as are specified in the tax treaties to which the Philippines is a signatory or in exchange of letter between the government of the Republic of the Philippines and foreign government. a. Letter providing information on transactions covered by law and requested tax treatment for such transactions, and legal justification; and b. For interest income , certified copy of proof of loan, or a certification of direct financing by the foreign government or the financial institution designated in the treaty. For dividend income , proof of investment in the Philippines owned by such foreign government or financial institution, and a Certified True Copy of the Board of Directors' Meeting declaring such dividends. c. Certified copy of the exchange of letter or notes between the Republic of the Philippines and the foreign government.