Posted on April 09, 2015 10:24:00 PM
By Mikhail Franz E. Flores, Reporter
Twenty-one banks sought temporary relief before the Makati court against the tax rule.
BIR Lawyer Felix Paul R. Velasco III confirmed that the bureau received a copy of the order. TRO was served after office hours, Mr. Velasco said via text.
He also said that Bank of the Philippine Islands, which filed a separate but related petition, has been assessed P3 billion in tax dues under RR 4-2011. The other banks did not indicate the amount in their petition. But they said the preliminary assessment is significant, Mr. Velasco added.
RR 4-2011 prescribed the proper allocation of costs and expenses among income earnings of banks and other financial institutions for income tax reporting purposes.
RR 4-2011 noted a banks income comes from its regular banking unit (RBU), foreign currency deposit unit (FCDU), expanded FCDU (EFCDU) and offshore banking unit (OBU). BIR defined RBU as a unit or department of a local bank or of a local branch of a foreign bank that is authorized by the central bank to engage in regular banking activities; FCDU as such a unit or department authorized to engage in foreign currency-denominated transactions; EFCDU as such a unit or department of a commercial or universal bank that is authorized to deposit, invest or grant loans in long-term foreign currency-denominated transactions; and OBU as a branch, subsidiary or affiliate of a foreign bank authorized to operate as a separate off-shore banking business in the Philippines.
RR 4-2011 provides that only costs and expenses related to RBU operations can be deducted in order to arrive at taxable income subject to regular income tax. Any cost or expense related with or incurred for the operations of FCDU/EFCDU or OBU is not allowed as deduction from the RBUs taxable income, the issuance read.
Common expenses or those that cannot be tagged for a particular unit should be allocated based on percentage share of gross income of the specific unit to total gross income that is subject to a 30% regular income tax and 10% final income tax.
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Court stops restriction on bank tax deductions