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Tax Updates

Makati RTC declares invalid RMC 65-2012 subjecting condominium corporation to VAT and income tax

A decision issued by the Makati Regional Trial Court (RTC) dated September 5, 2013 declaring Revenue Memorandum Circular (RMC) No. 65-2012, subjecting condominium corporation to VAT and income tax as invalid.  This decision was issued by the RTC with Judge Encarnacion Jaja G. Moya as the Presiding Judge.

The Decision

This decision was a result of the petition filed by First e-Bank Tower Condominium Corporation, as represented by Engr. Victorio M. Amante, versus the Bureau of Internal Revenue, as represented by Commissioner Kim S. Jacinto-Henares and Revenue District Officer Ricardo B. Esperitu.

The excerpts of the decision is shown below.

Makati RTC Decision

As this resolution is only at the Makati RTC level, there is a possibility that the decision will be reversed by the higher courts, Court of Appeals and the Supreme Court.

Impacts to and Reaction of Condo Corps

A number of condominium corporations have already complied with the provisions of the RMC 65-2012.  These condominium corporations already printed “VAT” official receipts and began charging the unit owners with VAT.  They also filed their quarterly income tax returns considering the provisions of RMC No. 65-2012 and some paid regular income tax, and others, minimum corporate income tax.

This decision creates a confusion on the part of the condominium corporation and are now questioning both issuances, “ano ba talaga?”.  Some of them wants to stop issuing VATable receipts in connection with the resolution issued, but some are afraid to stop issuing VATable receipts due to the fear that the decision may still be reversed by the higher court.

The question now is that how long do they have to wait and what will they do while they wait?  Another question they have is, in the event that the decision of the Makati RTC is held, what will happen with the VAT and income taxes already paid?

All we have to do now is wait.  But for some entities that are finalizing their fiscal year end financial statements and income tax returns, they can’t afford to incur penalties so they have to decide whether to take the risk and consider the RMC 65-2012 as invalid, or continue to comply to be safe.

Hopefully we can get more updates regarding these matter the soonest.

You can download the Makati RTC Resolution, Click Here.

Like this update?  Share and say something! 😉

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About leecpa

Orlando Calundan is a Certified Public Accountant. He has exposures in audit of financial statements of entities in various industries such as real estate, food (quick service restaurants), manufacturing, service organizations and BPOs, automotive, holding/investment companies and more. He also has exposure on internal audit engagements. http://calundan.co

Discussion

12 thoughts on “Makati RTC declares invalid RMC 65-2012 subjecting condominium corporation to VAT and income tax

  1. Any update if this court order has been final and executory? Do you have a copy of the certification?

    Posted by Francie Gee (@Pransesa) | October 14, 2013, 6:42 am
    • Hi Francie, as of now, no update come to my attention yet. You mean copy of the above decision? It’s attached at the end of the post.

      Posted by leecpa | October 14, 2013, 7:41 am
      • hi sir, is the Makati RTC judgement final? Can we now ask the condo builder (DMCI) to stop billing us for VAT and income taxes and ask for refund of all the past payments? Ang bigat sa bulsa, grabe..

        Posted by bc | October 16, 2013, 6:17 am
      • Hi! No final decision yet that we are aware of. Mapapublish naman yan pag meron na final decision. I think for conservatism, better if we should do anything in the contrary muna.

        Posted by leecpa | October 16, 2013, 11:35 am
  2. Hi Sir! Would you know if BIR was able to file a motion for reconsideration on the Court’s decision declaring VAt as invalid? Would you know other buildings in Makati who have stopped collecting and remitting Vat? What do you think in your opinion will happen in case the courts decision becomes final and executory? Are we going to get a refund?

    Posted by virma Chua | October 21, 2013, 2:30 am
    • Hi.. none so far, we are not aware of updates. Most assumed it safe to continue collecting as there is no final decision yet, so it is more prudent to continue complying. Should the final decision be in favor of taxpayers, then probably BIR will issue refund or tax credits, depending on what will be the direction of the court. But i guess that will still be along way to go..

      Posted by leecpa | October 22, 2013, 5:11 pm
  3. Hi sir! Would like to ask if there is already development regarding the Court’s decision ( RTC 146 Makati) declaring VAT as invalid? Thanks.

    Posted by Elmer | January 16, 2014, 5:36 am
  4. Any update as of now, March 6, 2014?

    Posted by gerry | March 6, 2014, 3:00 pm

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