Request For Reinvestigation - Global

Conrado M.
Briones
ATTORNEY AT LAW
Address: Lot 10C, Block 3, Alfa Street, North Fairview

Park Subdivision, Quezon City
Contact No: 0927-9614609
Email: conrado_briones@yahoo.com
December 22, 2017
The Revenue Regional Officer

Revenue Region No. 8
Makati City
Attention: Mr. Glen A. Geraldino

Regional Director
Re: GLOBAL POWER BATTERY SOLUTIONS, INC. – Investigation of Taxable Year 2015
Internal Revenue Taxes
Gentlemen,
This refers to your Formal Letter of Demand dated November 17, 2017, which was received by
my client on November 22, 2017, and the corresponding report of investigation submitted by
your Revenue District Officers, finding GLOBAL POWER BATTERY SOLUTIONS, INC.
(GLOBAL for brevity) liable for the following deficiency taxes, plus increments, for taxable year
2015:
Income Tax:
Basic P1,422,009.44
Interest 698,148.20 P2,120,157.64
Value Added Tax:
Basic P9,232,257.18
Interest 4,942,419.32 14,174,676.50
Expanded Withholding Tax:
Basic P219,890.00
Interest 119,523.77 339,413.77
CONRADO M. BRIONES
CERTIFIED PUBLIC ACCOUNTANT
Withholding Tax on Compensation:
Basic P32,556.30
Interest 17,696.36 50,252.66
Total P16,684,500.57
I wish to inform you that GLOBAL does not agree with the above proposed deficiency
assessment. On behalf of GLOBAL, I am submitting this protest letter to state and explain the
reasons why the proposed assessment should be recomputed and reinvestigated.
I - INCOME TAX
The proposed deficiency income tax assessment consists of the following:
A. Disallowed expenses due to failure to withhold - P2,149,260

A. Undeclared income from unaccounted expense - P188,039.37
B. Disallowed salaries and wages due to non-withholding - P146,650
C. Unsupported creditable withholding tax - P676,825
A. DISALLOWED EXPENSES DUE TO FAILURE TO WITHHOLD - P2,149,260
The BIR examiners arrived at this finding based on the following computation:
Amounts per FS/ITR:

Professional fees P 237,100
Brokerage and other charges 2,019,860 P2,256,960
Less: Amounts reflected in form 1601-E 107,700

Amount not subjected to withholding tax P2,149.260
As per GLOBAL, the above computation was inaccurate since form 1601-E showed total amount
of P1,026,497.39 instead of P107,700, as follows:
Professional fees P 169,750.00 (See Annex A and exhibits)

Brokerage and other charges 856,747.39 (See Annex B and exhibits)
P1,026,497.39
It was clear from the foregoing that the amount not subjected to withholding tax was only
P1,230,462.61 (P2,256,960 minus P1,026,497.39) and not P2,149,260 as claim by the examiners.
C. DISALLOWED SALARIES AND WAGES DUE TO NON-WITHHOLDING

- P146,650
To arrive at this finding, the BIR examiners compared the amount of salaries and allowances
declared in the Income Tax Return (form 1702) as against its amount shown in form 1601-C, to
wit;
Salaries and allowances per ITR P1,625,650

Less: Salaries, wages and benefits per 1601-C 1,479,000
Salaries and wages not subjected to withholding tax P 146,650
GLOBAL disagree with the above findings for two reasons. Firstly, salaries and allowances
declared in the ITR amounted to P1,569,000 and not P1,625,650 (See page 4 of the ITR).
Secondly, its amount reflected in form 1601-C was also P1,569,000 instead of P1,479,000 (See
Annex C and exhibits). Therefore, all salaries and wages have been subjected to withholding tax
contrary to the above findings. In fact, the difference of P56,650 (P1,625,650 minus P1,569,000)
represents employer’s contributions to SSS, Philhealth and HDMF (See page 5 of the ITR).
CONRADO M. BRIONES
D. UNSUPPORTED CREDITABLE WITHHOLDING TAX - P676,825
The BIR examiners alleged that creditable withholding taxes declared in the ITR were not
properly documented. To refute this allegation, we are submitting schedule of Creditable
Withholding Tax showing total amount P670,869.77 and photocopies of form 2307 to
substantiate the amounts. See Annex D and exhibits.
II – VALUE ADDED TAX
The proposed deficiency VAT assessment consists of the following:
A. Unsupported exempt sales - P887,167.56

B. Sales not subjected to VAT- P1,914,468.95
C. Undeclared income from unaccounted expense - P188,039.37
D. Unsupported Input tax P8,873,496.11
B. SALES NOT SUBJECTED TO VAT - P1,914,468.95
The above finding was computed as follows:
Sales per ITR/FS P80,211,876.00

Less: Sales per VAT returns (2550Q)
Subject to 12% VAT rate P77,410,239.49
VAT exempt 887,167,56 78,297,407.05
Sales not subjected to VAT P1,914,468.95
As per GLOBAL, the amount of P1,914,468.95 was not declared in the VAT return as it pertains
to export sale of goods subject to 0% VAT rate. The goods, with total invoice value of
US$51,000, were exported to Global Power Source PTE LTD of Singapore in fiscal year 2015.
In this connection, we shall submit copies of sales invoice and shipping documents to prove our
claim. (Annex E and exhibits).
D. UNSUPPORTED INPUT TAX - P8,873,496.11
Likewise, the BIR examiners alleged that Input tax declared in the quarterly VAT returns for
fiscal year ended March 31, 2015 were not properly substantiated. To belie this allegation, we are
submitting schedule of VAT paid on importations and VAT paid on local purchases amounting to
P7,031,478 and P603,961.7, respectively, with supporting documents. The VAT paid on
importations are supported by Import Entry and Internal Revenue Declaration and bank
certification while VAT paid on local purchases are covered with official receipts. See annexes F
and G and exhibits
III – EXPANDED WITHHOLDING TAX - P339,413.77
The above assessment represents failure to withhold taxes on payments for professional and
brokerage fees. As we have proven and explained above, the fees not subjected to withholding
tax was only P1,230,462.61 (P2,256,960 minus P1,026,497.39) and not P2,149,260 as claim by
the examiners. Moreover, the withholding tax rates applicable are 2% and 10% depending on the
nature of expense instead of fixed rate of 10% as proposed by the examiners. Please refer to
Annexes A and B and exhibits.
CONRADO M. BRIONES
IV – WITHHOLDING TAX ON COMPENSATION - P50,252.66
The assessment for withholding tax on compensation pertains solely to salaries of P146,650 that
examiners deemed not subjected to withholding tax. As discussed and explained above, there
have been no salaries, wages and benefits not subjected to withholding tax.
PRAYERS
In view of all the foregoing, we respectfully request that the proposed deficiency tax
assessments, together with interest, be now recomputed and reinvestigated.
Your favorable action on this request will be greatly appreciated.
Very truly yours,
CONRADO M. BRIONES
CPA Certificate No. 0092374, Valid until November 26, 2019
BOA Accreditation No. 3985, Valid until November 26, 2020
BIR Accreditation No. 07-000078-2-2016, Valid until June 7, 2019
IBP Roll No. 61965
Tax Identification No. 194-492-605
PTR No. MLA6110427, February 2, 2017, Manila

Request For Reinvestigation - Global

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Conrado M.

Address: Lot 10C, Block 3, Alfa Street, North Fairview

December 22, 2017

The Revenue Regional Officer

Attention: Mr. Glen A. Geraldino

Value Added Tax:

Expanded Withholding Tax:

Withholding Tax on Compensation:

The proposed deficiency income tax assessment consists of the following:

A. Disallowed expenses due to failure to withhold - P2,149,260

A. DISALLOWED EXPENSES DUE TO FAILURE TO WITHHOLD - P2,149,260

Amounts per FS/ITR:

Less: Amounts reflected in form 1601-E 107,700

Professional fees P 169,750.00 (See Annex A and exhibits)

C. DISALLOWED SALARIES AND WAGES DUE TO NON-WITHHOLDING

Salaries and allowances per ITR P1,625,650

D. UNSUPPORTED CREDITABLE WITHHOLDING TAX - P676,825

II – VALUE ADDED TAX

The proposed deficiency VAT assessment consists of the following:

A. Unsupported exempt sales - P887,167.56

B. SALES NOT SUBJECTED TO VAT - P1,914,468.95

The above finding was computed as follows:

Sales per ITR/FS P80,211,876.00

D. UNSUPPORTED INPUT TAX - P8,873,496.11

III – EXPANDED WITHHOLDING TAX - P339,413.77

IV – WITHHOLDING TAX ON COMPENSATION - P50,252.66

Your favorable action on this request will be greatly appreciated.

Very truly yours,

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