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I Can Be Body Beautiful at Any Age with Wacoal

My body can be beautiful with Wacoal because fit just right to my shape and size.  I've been a long time user of Wacoal products and it has never let me down.  I am very comfortable with it and it brings out my best in terms of fashion.

In my early twenties, I'm glad that their collections are so varied that I always find a style that fits to my liking.
This sorci age design has a nice and cute print with matching ribbons which makes me feel attractive even from within.  This can be worn in several ways too which is good because I have mood swings with the way I wear my clothes.  I can have it without strap when I'm wearing sleeves or halter when I'm wearing a backless top.  This is just gorgeous and convenient at the same time.

Importance of Accounting in Business

Here in the Philippines, accounting is often seen by many people as book keeping and just essential for meeting tax requirements.  This is how I see it. 

Truthful Information

Input  à Process à Output
                                ꜜ            ꜜ
                                                 Transactions                     Financial Statements:
                                             Input = Output                    1. Balance Sheet
                                 Asset = Liabilities + Capital            2. Income Statement
                                          Debit = Credit                       3. Statement of Owner’s Equity
                                                                                      4. Statement of Cash Flow
                                                                                     Increase in Wealth = Income

Balance Sheet (Statement of Financial Condition)
Investing (Assets)
  • Returns
  • Also called resources in economics
Financing (Liabilities and Owner’s Equity)
  • Considers risk in debt to capital ratio

Income Statement (Operating)
  • Production à Distribution à Collection

Business Cycle
Finance à Invest à Operating

Petty Cash – Checking of receipts and other documents with signatures

Notes on International Taxation

International Taxation
  • body of domestic tax laws together with the collection of tax treaties applying to cross-border transactions
  • taxation of cross border transactions and it has two main spheres of application: (worldwide) residence taxation and (territorial) source taxation
  • 2 dimensions:
1.   Out-bound transactions – taxation of a country’s taxpayers on income derived from foreign sources
2.   In-bound transactions – taxation of non-residents on income derived within a country’s borders

Double Taxation
  • taxing the same income twice, in once in the home country and again in the home country and again in the host country
  • A great disincentive as it:
1.   Hampers FREE flow of capital
2.   Becomes a prohibitive burden on taxpayers leading to decline in foreign investments
  • NOTE: NO rule of international law prohibit international double taxation.
  1. Economic  double taxation – when 2 treaty countries tax the same item of income in the hands of 2 different persons
  2. Juridical double taxation – when 2 or more jurisdictions  impose similar taxes on the same taxpayer on the same item of income or capital gains and for the same income period

Scope of tax treaties in determining jurisdiction:
  1. Persons
  2. Taxes
  3. Territory
  4. Time

Status jurisdiction – Taxing citizens on their world income

Source Jurisdiction – Taxing income in the country

Double tax relief – granting of relief in respect of income on which income tax has been paid under the law of the home country and the other country

Double tax avoidance – avoidance of double taxation of income under the tax laws of the two countries

1.   Taxation systems
2.   International tax planning
  1. Permanent establishments
  2. Tax aspects of financing for multinational groups
  3. Cross-border tax arbitrage - inconsistency exists betwen two tax laws
    1. Double non-taxation
    2. Double tax arbitrage
    3. Double deduction
    4. Double dip lease - set interest rents where 2 companies have
3.   Withholding taxes
4.   Tax credits
5.   Thin capitalization rule
-financial structure heavily weighted toward debt, generally undertaken in order to gain the tax advantage of deducting
- cap on debit to balance with capital 
- implemented on countries that do not need capitalization
6.   Tax sparing credit - special form of double taxation relief in tax treaties with developing countries. Where a country grants tax incentives to encourage foreign investment and that company is a resident of another country with which a tax treaty has been concluded, the other country may give a credit against its own tax for the tax which the company would have paid if the tax had not been "spared (i.e. given up)" under the provisions of the tax incentives.
7.   International Tax Avoidance
  1. Tax havens
  • A country that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment. Tax havens also provide little or no financial information to foreign tax authorities.
  • Nation with nil or moderate level or taxation and/or liberal incentives for under-taking specific activities
  1. Nil tax outside  haven countries
o   Impose tax on any income accruing from WITHIN its territory BUT exempt from tax any income brought into the tax haven from outside
o   Example: Hong Kong, Panama
  1. Low tax haven countries
o   Income is NOT exempted but taxed at lower rates
o   Example: British Virgin Islands (12%), Netherlands Antilles.
  1. Special exemption tax haven counties
o   special exemptions, which are given in theform of a special act or concessions to attract investments
o   usually on countries that are trying to promote development in certain regions or encourage industrialization within the country
o   Example: Republic Of Ireland - exempts from taxation the export earnings of corporations that setup manufacturing opera-tions in certain region
Factors that are to be considered by companies while choosing a tax haven:
  • The political and economic stability of the country and the integrity of its Government
  • Attitude of the country towards tax haven business
  • Other taxes, aside from income taxes, it imposes
  • Tax treaties
  • Lack of exchange controls
  • Liberal incorporation laws that minimize both the cost of incorporation and the length of time it takes to incorporate
  • Banking facilities
  • Infrastructure facilities such as roads, telecommunication etc.
  • Long range prospects for continue freedom of taxation

Form of tax avoidance in tax havens
  1. Profit Diversion – profit is diverted away from high tax jurisdiction into the tax haven
  2. Profit Extraction – Company in tax haven country renders services to a company in a high tax jurisdiction and extracts money in the form of fees from that jurisdiction while the high tax jurisdiction subsidiary claim the fees as deductible expenses
  • OECD publishes from time to time a list of tax havens based on their co-operation or non-cooperation.  OECD feels that tax havens have distorted the natural flow of international tax and funds.  It asked tax havens to cooperate by matching the tax rates with those of OECD members.  As of 2000 Progress Report there are 35 jurisdictions meeting the OECD criteria for being considered a tax haven.

  1. Transfer pricing - setting, analysis, documentation, and adjustment of charges made between related parties for goods, services, or use of property (including intangible property).
·         Price charged by one company for a product or service supplied to a related company such as the price a parent corporation charges its wholly-owned subsidiary
·         Transfer pricing rules in most countries are based on what is referred to as the “arm’s length principle”
·         arm’s length principle  - to establish transfer prices based on analysis of pricing in comparable transactions between two or more unrelated parties dealing at arm’s length to get the best price for both parties
  1. The role of OECD (Organisation for Economic Cooperation and Development) in international taxation
·         OECD seeks to promote growth through coordination of economic and regulatory policies between its members, all of which are democratic market economies
·         OECD develops  international tax norms
  1. Advance pricing agreements (covered transactions) - ahead of time agreement between a taxpayer and a taxing authority on an appropriate transfer pricing methodology (TPM) for some set of transactions at issue over a fixed period of time
·         An APA is a contract, usually for multiple years, between a taxpayer and at least one tax authority specifying the pricing method that the taxpayer will apply to its related-company transactions. These programmes are designed to help taxpayers voluntarily resolve actual or potential transfer pricing disputes in a proactive, cooperative manner, as an alternative to the traditional examination process.

Although styled as "advance" agreements, APAs often involve the resolution of transfer pricing issues pending from prior years—and in some cases can provide an effective means for resolving existing transfer pricing audits or adjustments.

An APA offers a company several other benefits. It provides greater certainty on the transfer pricing method adopted, mitigating the possibility of disputes and facilitating the financial reporting of potential tax liabilities. Importantly, an APA also reduces the incidence of double taxation, and the costs associated with both audit defence and documentation preparation.
  1. Treaty shopping -  a situation where a person, who is resident in one country (say the “home” country) and who earns income or capital gains from another country (say the “source” country), is able to benefit from a tax treaty between the source country and yet another country (say the “third” country).  This situation often arises where a person is resident in the home country but the home country does not have a tax treaty with the source country
·         The practice of structuring a multinational business to take advantage of more favorable tax treaties available in certain jurisdictions. A business that resides in a home country that doesn't have a tax treaty with the source country from which it receives income can establish an operation in a second source country that does have a favorable tax treaty in order to minimize its tax liability with the home country.
·         Connotes a premediated effort to take advantage of the international tax treaty network and a careful selection of the most favourable tax treaty for a specific purpose

8.   Tax treaties
·         bilateral agreement made by two countries to resolve issues involving double taxation of passive and active income.
·         generally determine the amount of tax that a country can apply to a taxpayer's income and wealth. Tax haven countries are the only countries that typically do not enter into tax treaties.
·         exist for the most part to avoid double taxation and prevent tax fraud or fiscal evasion

Most treaties:

  • define which taxes are covered and who is a resident and eligible for benefits,
  • reduce the amounts of tax withheld from interest, dividends, and royalties paid by a resident of one country to residents of the other country,
  • limit tax of one country on business income of a resident of the other country to that income from a permanent establishment in the first country,
  • define circumstances in which income of individuals resident in one country will be taxed in the other country, including salary, self-employment, pension, and other income,
  • provide for exemption of certain types of organizations or individuals, and
  • provide procedural frameworks for enforcement and dispute resolution.

    • Treaties v. domestic law – depends on the forum filed
    • Dispute resolution - Legal agreement between two parties that lays out the method and timetable for solving conflict between them
Interpretation of tax treaties
  • Vienna Convention on the Law on Treaties
    • Article 31 (1) VCLT establishes the “general rule of interpretation”, specifying that “a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”.
    • Article 31 (2) VCLT defines the term “context”, which comprises the text of the treaty as well as “any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty” and “any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty”.
    • Article 31 (3) VCLT, “any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions”, “any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation”, as well as “any relevant rules of international law applicable in the relations between the parties” are to be taken into account, together with the context.
  • Most favoured nation clause - A country grants this clause to another nation if it is interested in increasing trade with that country. Countries achieving most favored nation status are given specific trade advantages such as reduced tariffs on imported goods
    A clause, often inserted in treaties, by which each of the contracting nations binds itself to grant to the other in certain stipulated matters the same terms as are then, or may be thereafter, granted to the nation which receives from it the most favorable terms in respect of those matters. It is used most frequently in treaties regarding the terms of trade between countries, as regarding tariffs and non-tariff barriers to trade
Application of MFN clause under RP-US Tax treaty (BIR Ruling No. 126-11, April 15, 2011)
Under the RP-US Tax Treaty, royalties derived in the Philippines by a company in the United States (US) for its web-based performance and talent management service or use of its “know how” by a domestic company are generally subject to 25% or a lower rate of 15% if the payor-domestic company is registered with the Board of Investment (BOI) and engaged in preferred areas of activities.

Pursuant to the most-favored-nation (MFN) clause of the treaty, the same royalties may also be subject to the lowest rate of Philippine tax that may be imposed on royalties of the same kind paid under similar circumstances to a
resident of another treaty country.

In the instant case, the US company invoked the RP-Czech Tax Treaty as granting the lowest tax at 10% on royalties derived from the Philippines by a Czech company. Applying the MFN clause, the BIR held that the royalties derived by the US company may be subject to the lower 10% tax prevailing under RP-Czech Tax Treaty if it satisfies the two conditions cited by the Supreme Court (SC) in the case of Commissioner of Internal
Revenue v. SC Johnson and Son, Inc. v. Court of Appeals (GR No. 127105).
Under the SC decision, these two conditions are: (a) the royalties derived by
a US resident must be of the same kind as those derived by the resident of the other treaty country; and (b) the mechanism employed by the two countries in mitigating the effects of double taxation of foreign-sourced income derived by its residents must be the same.

Under the RP-US Tax Treaty, payment received by a resident of the United States as a consideration for the use of or the right to use patents, information concerning industrial, commercial or scientific experience (know-how), and copyright of literary, artistic or scientific work are all considered royalties. When received by a resident of the Czech Republic, the same income payments are likewise deemed in the nature of royalties, and subject to income tax rate of 10% on the gross amount thereof under the RP-Czech Tax Treaty. Considering that the royalties derived by a resident of the US is of the same kind as those derived by a resident of the Czech Republic, the
first condition for the MFN tax treatment of royalties is satisfied.

As to the second condition, the mechanism employed in mitigating the effects of double taxation of income derived from foreign sources is the ordinary credit method under the RP-US Tax Treaty, which is similar to the mechanism provided under the RP-Czech Tax Treaty. Hence, since the RP-US and RP-Czech treaties provide for similar mechanism in avoiding the effects of double taxation of its residents, the second condition is also satisfied.

Considering that the two conditions for the MFN tax treatment of royalties are both satisfied under the RP-US and RP-Czech treaties, the royalties paid by the domestic company to the US company are subject to 10% preferential tax rate pursuant to the RP-US Tax Treaty in relation to the RP-Czech Tax Treaty.

CIR v. SC Johnson GR No. 127105 June 25, 1999
  • S.C. Johnson and Son, Inc. (state of source) a domestic corporation organized and operating under the Philippine laws, entered into a license agreement with SC Johnson and Son, United States of America (USA) (state of residence) for the right to use the trademark, patents and technology including the right to manufacture, package and distribute the products covered by the Agreement and secure assistance in management, marketing and production.  S.C. Johnson and Son, Inc. pays royalties based on a percentage of net sales and subjected the same to 25% withholding tax on royalty payments.
  • S.C. Johnson and Son, Inc. filed with the International Tax Affairs Division (ITAD) of the BIR a claim for refund of overpaid withholding tax on royalties based on the most-favored nation clause of the RP-US Tax Treaty or Article 13 (2) (b) of the RP-US Tax Treaty which provides that in case of the Philippines, at least 25%, 15% if registered with the Philippine Board of Investments (PBI) or the lowest rate of Philippine tax that may be imposed on royalties of the same kind paid under similar circumstances to a resident of a third State (West Germany) which is 10%.
  • Commissioner did not act on said claim for refund. 
  • Petition for review before the Court of Tax Appeals (CTA) – favoured S.C. Johnson and Son and ordered CIR to issue a tax credit certificate
  • CTA – Affirmed

ISSUE: W/N S.C. Johnson and Son (USA) can claim under Article 13(2) (b) (iii) of the RP-US Tax Treaty “most favored nation" clause the lowest rate of the Philippine tax at 10% may be imposed on royalties derived by a resident of the United States from sources within the Philippines because the circumstances of the resident of the United States are similar to those of the resident of West Germany under the RP-Germany Tax Treaty.

HELD: NO. petition is GRANTED
  • most favored nation" clause
o   to grant to the contracting party treatment NOT less favorable than that which has been or may be granted to the "most favored" among other countries
o   to establish the principle of equality of international treatment by providing that the citizens or subjects of the contracting nations may enjoy the privileges accorded by either party to those of the most favored nation
o   intended to allow the taxpayer in one state to avail of more liberal provisions contained in another tax treaty wherein the country of residence of such taxpayer is also a party thereto, subject to the basic condition that the subject matter of taxation in that other tax treaty is the same as that in the original tax treaty under which the taxpayer is liable
§  requires that same kind paid under similar circumstances (circumstances that are tax related)
§  The RP-US and the RP-West Germany Tax Treaties do not contain similar provisions on tax crediting:
a.   RP-West Germany - allows crediting against German income and corporation tax of 20%
b.   RP-US - does not provide for similar crediting of 20%
  • matching credit
o   to soften the impact of double taxation by different jurisdictions
  • Tax Treaty
o   bilateral treaties to reconcile the national fiscal legislations of the contracting parties in order to help the taxpayer avoid international juridical double taxation
o   to encourage the free flow of goods and services and the movement of capital, technology and persons between countries, conditions deemed vital in creating robust and dynamic economies
  • international juridical double taxation
o   imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical periods
  • two methods of relief to avoid double taxation:
1.   exemption method
o   the income or capital which is taxable in the state of source or situs is exempted in the state of residence (although in some instances it may be taken into account in determining the rate of tax applicable to the taxpayer's remaining income or capital)
o   focus is on the income or capital itself
2.   credit method
o   although the income or capital which is taxed in the state of source is still taxable in the state of residence, the tax paid in the former is credited against the tax levied in the latter
o   focuses upon the tax
  • The Vienna Convention on the Law of Treaties
o   treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose
  • tax refunds are in the nature of tax exemptions
o   regarded as in derogation of sovereign authority
o   to be construed strictissimi juris against the person or entity claiming the exemption
o   burden of proof is upon him who claims the exemption in his favor and he must be able to justify his claim by the clearest grant of organic or statute law

The Coca-cola Export Corporation v. CIR CTA Case. No. 7059 May 26, 2006
  • The Coca-cola Export Corporation (TCCC) (state of residence), a corporation organized and existing under the laws of the State of Delaware, U.S.A., duly licensed and registered to do business in the Philippines through a Philippine branch (state of source) in Makati City. 
  • The brancH entered into a Royalty Agreement with TCCC for use of the trademarks, secret processes and formulae, other confidential know-how as well as the use of other intangibles in connection with the manufacture of concentrates beverage bases and syrups used in the preparation of beverages deducting 15% withholding tax before remitting.
  • Subsequently, the Agreement between the Government of the Republic of the Philippines and Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income came into force on March 23, 2001 which directs 10% tax on royalties
  • TCCC filed with the BIR a request for confirmation that the royalties paid by the branch to TCCC beginning January 1, 2002 are subject to 10% withholding tax, pursuant to the RP-US Tax Treaty in relation the RP-China Tax Treaty
  • Pending BIR’s action on the petitioner’s request for confirmation, TCCC filed with the BIR its Monthly Remittance Return of Final Income Taxes Withheld for the month of September 2002
  • July 24, 2003:  BIR Ruling No. DA-ITAD is issued confirmed that royalties arising in the Philippines and payable to TCCC for 2001 are subject to 15% while those accruing beginning January 1, 2002 shall be subject to 10 % pursuant to Article 13(2)(b)(iii) of the RP-US tax treaty, in relation to Article 12(2)(b) of the RP-Russia and RP-China tax treaties, respectively
  • August 11, 2004: TCCC filed with the BIR an amended Monthly Remittance Return of Final Income Taxes Withheld for September 2002
  • August 27, 2004: TCCC filed with the BIR an administrative claim for refund/tax credit in the amount of P10,315,424.46 representing the alleged overpaid final withholding taxes on royalties it paid to TCCC for the period September 2002
  • September 29, 2004: Due to the CIR’s inaction on its claim and the period within which to file a judicial action for recovery of erroneously collected national internal revenue tax is about to prescribe, TCCC filed a Petition for Review with CTA

ISSUE: W/N TCCC should be allowed refund/tax credit the overpayment due to its qualification under Article 13(2)(b)(iii) or “most favored nation” clause of the RP-US tax treaty, in relation to Article 12(2)(b) of the RP-Russia and RP-China tax treaties that reduced the withholding tax from 15% to 10%.

HELD: YES. Petition for Review GRANTED and CIR ORDERED to refund or issue a tax credit certificate of P10,315,424.46
  • royalties paid “under similar circumstances” in the most favored nation clause of the RP-US Tax Treaty
o   circumstances that are tax-related
o   manner of payment of taxes
  • Clearly the provisions of the RP-China Tax Treaty to reduce tax rate on royalties at 10% should apply to TCCC
  • claim for refund/tax credit of alleged overpaid final withholding tax due to an erroneous tax base (NOT on the proper application/interpretation of tax treaties) - provisions of the NIRC 1997 shall apply
  • Sections 204 and 229 of the NIRC of 1997:
o   shall be filed WITHIN 2 years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment
o   PROVIDED Commissioner may, even WITHOUT a written claim refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid
§  TCCC had until October 9, 2004 within which to file its claim for refund/tax credit certificate both in the administrative and judicial levels.  - letter-claim for refund/tax credit certificate with the BIR on August 27, 2004 and the Petition for Review with CTA on September 29, 2004 were filed well within the prescriptive period.
§  sufficiently establish by documentary evidence that there was an actual over-remittance of P10,315,424.46 final withholding taxes on the royalties it paid to TCCC for the month of September 2002 which is 10% of tax base ( P346,223,015.00 less P243,068,770.38)

  • Mirant (Philippines) Operations Corporation v. CIR (2005)

  • It must be remembered that a foreign corporation wishing to avail of the benefits of the tax treaty should invoke the provisions of the tax treaty and prove that indeed the provisions of the tax treaty applies to it, BEFORE the benefits may be extended to such corporation.
Manila North Tollways Corp v. Commissioner of Internal Revenue
  • Manila North Tollways Corp is a corporation duly registered and operating under the laws of the Republic of the Philippines, with business office at the Caloocan City, Philippines. 
  • November 27, 2006: Manila North Tollways Corp‘s Board of Direction declared cash dividends of P70/share payable on or before Dec. 21, 2006. 
o   One of its stockholders is Egis, a sociedad aninima incorporated in France, owning 2,468,640 shares or 13.9% capital stock
o   Pursuant to Art. 10 of the Convntion between the Government of the Republic of the Philippines and the Government of the French Republic  for the Avoidance of Double Taxation withheld and paid 15% FWT
§  Egis protested that pursuant to the Protocol to the Tax Treaty, tax rate should be only 10% for those holding at least 10% of the voiting shares and demanded the 5% difference
  • Dec. 23, 2008: Manila North filed with the International Tax Affairs Division (ITAD) of the BIR its application for refund of P8,640,240
  • January 14, 2009: Still unacted upon, Manila North filed instant petition for review before the CTA
o   Commissioner of Internal Revenue answered that Manila North should prove that it is entitle to avail the preferential rate of 10% FWT pursuant to the Protocol on Tax Convention
  • June 5, 2009: Parties submitted a “Joint Stipulation of Facts and Issued” admitting the convention and the protocol
  • Trial proceeded with Manila North presenting testimonial and documentary evidence

ISSUE: W/N Manila North is entitled to claim refund for the overpaid FWT equivalent to 5%.

HELD: NO. Denied.
  • It is undisputed that petitioner should withhold only 10% of the cash dividends remitted.  BUT it did NOT comply with the guidelines set under RMO No. 1-2000 which provides that any availment of tax treaty relief should be preceded by an application for tax treaty relief with ITAD at least 15 days BEFORE the payment of dividends
o   Manila North filed its application for relief only on December 23, 2008 or more than 1 year from the payment of dividends to its stockholders
  • CIR v. CBK Power Company Ltd:
o   PRIOR application for tax treaty relief is required BEFORE a taxpayer can avail of preferential tax treatment under Philippine Tax treaties
  • Moreover, Manila North did NOT file an appropriate written claim for refund
o   It only made an Application for Relied from Double Taxation
  • Manila North never presented the Original BIR Form No. 1601-F which is the document from which its right to claim for refund springs
o   Only presented Amended Monthly Remittance Return of Final Income and receipt issued by Equitable PCI B ank  which does NOT show for what the amount was paid