Here at Greenpoint, we make sure to stay updated on all Tax Advisories to ensure that we give you reliable and efficient services. Today, let us breakdown the latest amendments to RA 11976 so that you can stay informed with your tax activities!
Section 21: Sources of Revenue
The amendment now classifies taxpayers based on Gross Sales (in Php):
Micro (<P3M)
Small (P3M - <P20M)
Medium (P20M - <P1B)
Large (P1B+)
Section 22: Definitions
The amendment now defines 'filing of return' as submitting tax returns electronically or manually, or through any authorized agent bank or authorized tax software provider, as required under this Code or as prescribed under existing rules and regulations. Similarly, 'payment of tax' is defined as delivering the amount due electronically or manually, or through any authorized agent bank or authorized tax software provider, as required under this Code or as prescribed under existing rules and regulations.
Section 51: Individual Returns
The amendment now allows certain individuals, like 'Overseas Contract Workers' or 'Overseas Filipino Workers,' an exemption from filing income tax returns. Taxpayers can opt for electronic or manual filing with any authorized agent bank, Revenue District Offices, or authorized tax software providers.
Section 56: Payment and Assessment of Income Tax
The amendment now allows the total tax amount to be paid either electronically or manually at the time of return filing. This amendment introduces electronic payment options, offering convenience. Requirements for tramp vessels and agents to file returns before departure remain, with non-compliance leading to detention by the Bureau of Customs until proof of payment or a sufficient bond is provided.
Section 57: Withholding of Tax at Source
The amendment now introduces an exemption, stating that micro taxpayers are not required to withhold taxes under Subsection (B) of this Section during the review and amendment process. The Department of Finance, conducting reviews at least once every three years, directs the Bureau of Internal Revenue to amend regulations if found to adversely impact taxpayers.
Section 58: Returns and Payment of Taxes Withheld at Source
The amendment allows flexibility in payments, permitting electronic or manual transactions to any authorized agent bank, Revenue District Office, or authorized tax software provider. Introduces a provision specifying the timing of withholding taxes. Maintains the treatment of withheld taxes as trust funds.
Additionally, establishes stringent conditions for claims of tax credit or refund. Claims will be considered only when it is shown that the income payment has been declared as part of the gross income, and the fact of withholding is established.
Notably, claims for tax credit of creditable income tax deducted and withheld in a prior period remain valid in the subsequent calendar or fiscal year, contingent on their declaration in the tax return where the corresponding income is reported.
Section 76: Final Adjustment Return
The amendment expands the provision, allowing the carry-over of excess income taxes paid during the year. The amendment specifies that once the option to carry over and apply the excess income tax against future liabilities has been made, it is irrevocable for that taxable period. Notably, a new provision is introduced: in cases where a taxpayer cannot carry over the excess income tax credit due to dissolution or cessation of business, the taxpayer may file an application for a refund. The Bureau of Internal Revenue shall decide on the application and refund the excess taxes within two (2) years from the date of dissolution or cessation of business.
Section 77: Place and Time of Filing and Payment of Quarterly Corporate Income Tax
The amendment modernizes the process, allowing quarterly income tax declaration and final adjustment return filing, either electronically or manually, with any authorized agent bank, Revenue District Office, or authorized tax software provider. The amendment maintains the sixty (60) days filing requirement for corporate quarterly declarations and specified dates for final adjustment returns. Income tax payment, due at filing, can be done electronically or manually, as prescribed by the Commissioner.
Section 90: Estate Tax Returns
The amendment modernizes the process, allowing estate tax returns to be filed, either electronically or manually, with any authorized agent bank, Revenue District Office through Revenue Collection Officer, or authorized tax software provider. This amendment enhances flexibility and efficiency in the filing of estate tax returns, offering multiple avenues for submission.
Section 91: Payment of Estate Tax
The amendment modernizes the payment process, allowing the estate tax imposed by Section 84 to be paid, either electronically or manually, at the time the return is filed by the executor, administrator, or the heirs. The liability for payment, imposed by Section 84, is also updated, permitting electronic or manual payment by the executor or administrator before delivering any beneficiary's distributive share of the estate. Beneficiaries are subsidiarily liable for the payment of the estate tax, with the extent of their liability based on their distributive share relative to the total net estate value.
Section 103: Filing and Payment of Gift Tax
The amendment modernizes the process, allowing the return of the donor to be filed, either electronically or manually, within thirty (30) days after the gift is made. The tax due can be paid, either electronically or manually, at the time of filing. The amendment expands filing and payment options, allowing them to be done, either electronically or manually, with any authorized agent bank, Revenue District Office through Revenue Collection Officer, or authorized tax software provider.
Section 106: Value-Added Tax on Sale of Goods or Properties
The Section maintains the rate and base of tax, with a value-added tax equivalent to twelve percent (12%) of the gross sales of the goods or properties sold, payable by the seller or transferor. The critical change is replacing "gross selling price or gross value in money" with "gross sales," indicating a shift from a cash to an accrual basis for VAT recognition. The term "gross receipts" is removed, highlighting this shift. This aligns the language with accrual accounting principles, signifying that VAT is now recognized when sales occur, not when cash is received.
The provisions for deducting the value of returned goods or allowances granted, excluding sales discounts, and the Commissioner's authority to determine the appropriate tax base in specific cases remain unchanged. This amendment clarifies the value-added tax provisions, emphasizing the removal of "gross receipts" and the shift towards accrual accounting for the sale of goods or properties.
Section 108: Value-Added Tax on Sale of Services and Use or Lease of Properties
The section maintains the rate and base of tax, with a value-added tax equivalent to twelve percent (12%) of the gross sales derived from the sale or exchange of services, including the use or lease of properties. The significant change is replacing "gross receipts" with "gross sales," signifying a shift from a cash to an accrual basis for VAT recognition. The term 'gross sales' encompasses the total amount paid by the purchaser to the seller for the services and the use or lease of properties, excluding value-added tax.
The amendment clarifies that this includes amounts paid for materials supplied with the services, excluding value-added tax. The definition also excludes amounts earmarked for payment to a third party or received as reimbursement for payment on behalf of another that do not benefit the seller. For long-term contracts of one (1) year or more, invoices shall be issued in the month the service or use or lease of properties is rendered or supplied. Provisions for deducting the value of services rendered for which allowances were granted, and excluding certain sales discounts, remain unchanged.
Section 110: Tax Credits
The amendment streamlines creditable input tax to be evidenced solely by a VAT invoice issued in accordance with Section 113. It no longer distinguishes between VAT invoices and official receipts. The revised section specifies the types of transactions where input tax is creditable against output tax, including the purchase or importation of goods and services. Additionally, a new provision allows sellers to deduct output VAT on uncollected receivables in the next quarter under certain conditions. If uncollected receivables are recovered, the output VAT must be added to the taxpayer's output VAT during the recovery period.
Section 112: Refunds of Input Tax
The amendment introduces flexibility in the application for a cash refund for unused input tax after the cancellation of VAT registration. The 90-day period for the Commissioner to grant a refund is maintained but emphasizes risk-based classification for VAT refund claims. The amendment also clarifies that the Commissioner must state in writing the legal and factual basis for any denial within the 90-day period. In case of denial or the Commissioner's failure to act within the prescribed period, taxpayers may appeal to the Court of Tax Appeals. Refunds remain subject to post-audit by the Commission on Audit, with the new provision outlining consequences in case of disallowance.
Section 113: Invoicing and Accounting Requirements for VAT-Registered Persons
The amendment simplifies the process, eliminating the need for a VAT official receipt and mandating the issuance of only a VAT invoice for all transactions. The invoicing requirements, while still comprehensive, no longer necessitate the inclusion of business style in information for sales over P1,000 to VAT-registered persons. Moreover, the amendment introduces provisions for noncompliance when issuing a VAT invoice to another VAT-registered person. Despite noncompliance, the purchaser may still utilize the VAT as an input tax credit, provided critical transaction details are not omitted.
These critical details include the following: Amount of Sales Amount of VAT Names and Taxpayer Identification Numbers of both the purchaser and issuer/seller Description of goods or nature of services Date of the transaction.
Section 114: Return and Payment of Value-Added Tax
The amendment maintains the quarterly and monthly filing and payment framework but introduces flexibility by allowing electronic or manual submission. The 25-day window remains, with a reminder that starting January 1, 2023, the filing and payment must be completed within 25 days after the close of each taxable quarter. The authorized entities for filing and payment now include any authorized agent bank, Revenue District Office through Revenue Collection Officer, or authorized tax software provider, providing more options for taxpayers. The term "receipts" is removed, emphasizing the focus on gross sales.
Section 115: Power of the Commissioner to Suspend the Business Operations of a Taxpayer
The amendment maintains the quarterly and monthly filing and payment framework but introduces flexibility by allowing electronic or manual submission. The 25-day window remains, with a reminder that starting January 1, 2023, the filing and payment must be completed within 25 days after the close of each taxable quarter. The authorized entities for filing and payment now include any authorized agent bank, Revenue District Office through Revenue Collection Officer, or authorized tax software provider, providing more options for taxpayers. The term "receipts" is removed, emphasizing the focus on gross sales.
Section 117: Percentage Tax on Domestic Carriers and Keepers of Garages
The amendment replaces "gross receipts" with "gross sales," requiring cars for rent or hire, transportation contractors, domestic carriers, and keepers of garages to pay a three percent (3%) tax on their quarterly gross sales. The provision regarding the exemption of gross sales of common carriers from local taxes remains unchanged.
Section 118: Percentage Tax on International Carriers
The amendment revises the wording from "gross receipts" to "gross sales" for both international air carriers and international shipping carriers. These carriers are now required to pay a three percent (3%) tax on their quarterly gross sales derived from transporting cargo from the Philippines to another country.
Section 119: Tax on Franchises
The amendment revises the wording from "gross receipts" to "gross sales" for both radio and/or television broadcasting companies and gas and water utilities. The tax rates and conditions remain the same, with radio and television broadcasting companies having the option to register as value-added taxpayers, and this option being irrevocable once exercised.
Section 120: Tax on Overseas Dispatch, Message or Conversation Originating from the Philippines
The amendment revises the wording from "amount paid" to "amount billed" for overseas dispatch, message, or conversation services. The tax rates, collection procedures, and exemptions remain unchanged.
Section 128: Returns and Payment of Percentage Taxes
The amendment simplifies the process, emphasizing electronic filing and payment. Taxpayers can now file, either electronically or manually, a quarterly return of gross sales or earnings, and pay, either electronically or manually, to any authorized agent bank, Revenue District Office through Revenue Collection Officer, or authorized tax software provider. The option to file separate returns for each branch is removed, promoting efficiency and providing flexibility in choosing filing methods. Additionally, the amendment removes the requirement for receipts, aligning with the focus on gross sales.
Section 200: Payment of Documentary Stamp Tax
The amendment streamlines the processes for paying documentary stamp tax. Now, individuals liable for this tax can file tax returns and make payments either electronically or manually, providing greater flexibility. The amendment expands the options for filing and payment locations to include any authorized agent bank, Revenue District Office through Revenue Collection Officer, or authorized tax software provider, facilitating easier compliance for taxpayers.
Section 204: Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes
The amendment introduces several modifications to Section 204(C). Notably, it expands on the procedural aspects of filing claims for credit or refund. The Commissioner is now mandated to process and decide on refund applications within 180 days from the date of submission of complete documents. Failure to adhere to this timeframe is subject to penalties. The amendment emphasizes transparency by requiring the Commissioner to provide legal and/or factual bases for denial. The provisions regarding Tax Credit Certificates and the limitations on tax refunds related to incentives remain unchanged.
Section 229: Recovery of Tax Erroneously or Illegally Collected
The amendment introduces changes by extending the conditions for maintaining a suit or proceeding. Now, such actions can be filed only after a full or partial denial of the claim for refund or credit by the Commissioner or if there is a failure on the part of the Commissioner to act within the 180-day period prescribed in Section 204 of this Code. The taxpayer is given a specific timeframe of thirty (30) days to appeal to the Court of Tax Appeals after receiving a decision denying the claim or after the expiration of the 180-day period.
Section 235: Preservation of Books and Accounts and Other Accounting Records
The amendment revises by setting a fixed preservation period of five (5) years for all books of accounts, including subsidiary books and other accounting records. This period is reckoned from the day following the deadline for filing a return, or if filed after the deadline, from the date of the filing of the return, for the taxable year when the last entry was made in the books of accounts.
Section 236: Registration Requirements
The amendment introduces significant changes to the registration process, emphasizing a more streamlined and modernized approach. Taxpayers now have the flexibility to register either electronically or manually with the Revenue District Office. Cancellation processes have been made more flexible. Taxpayers can cancel their registration by merely filing an application for registration information update, either electronically or manually. However, this change comes with a caveat: it does not preclude the Commissioner of the Internal Revenue or his authorized representative from conducting an audit to determine any tax liability.
Furthermore, the amendment modifies the procedure for non-resident decedents. The executor or administrator of the estate is now required to register, either electronically or manually, with the Revenue District Office where they are registered. Additionally, in cases where a registered taxpayer dies, the administrator or executor shall register the estate of the decedent in accordance with Subsection (A) hereof, and a new Taxpayer Identification Number shall be supplied in accordance with the provisions of this Section.
Section 237: Issuance of Receipts or Sales or Commercial Invoices
The amendment significantly modifies the issuance requirements for internal revenue tax transactions. Now, individuals are mandated to issue duly registered sale or commercial invoices for transactions valued at Five hundred pesos (P500) or more. The amendment includes a provision for adjusting this amount every three (3) years based on the consumer price index published by the Philippine Statistics Authority.
Moreover, the seller is now obliged to issue sale or commercial invoices when the buyer requires it, regardless of the transaction amount. For transactions below the specified threshold, the seller may issue one (1) invoice for the aggregate sales amount at the end of the day, provided that the aggregate sales amount is at least Five hundred pesos (P500). Additionally, VAT-registered persons are now required to issue duly registered sale or commercial invoices for all transactions, irrespective of the amount.
Section 238: Printing of Sales or Commercial Invoices
The amendment to Section 238 brings about significant changes. Now, individuals engaged in business can secure, free of charge, an authority from the Bureau of Internal Revenue to print sales or commercial invoices. The requirement for serially numbered invoices remains, along with the inclusion of specific details such as the name, Taxpayer Identification Number, and business address of the entity using them.
Furthermore, the logbook/register of taxpayers using the printing services is still required, with information on the following: Names TINs Number of booklets Sets per booklet, copies per set Serial numbers. However, the distinction between receipts and invoices has been eliminated, emphasizing a unified system where all transactions, whether goods or services, are now covered by sales or commercial invoices. Additionally, the requirement for including the business style in the invoices has been removed.
Section 242: Continuation of Business of Deceased Person
If an individual who has registered a business dies, and the same business is continued, no additional payment is required for the remaining tax term. Interested parties must submit inventories within thirty days of the decedent's death. This requirement also applies in cases of the transfer of ownership or a change of the business name. The adjustment from "paid annual registration fee" to "has registered the business" reflects the removal of the annual registration fee requirement, streamlining the process for business continuation after the owner's demise.
Section 243: Removal of Business to Other Location
The amendment eliminates the requirement for the annual registration fee, allowing any registered business to be relocated without the payment of additional tax during the term for which the payment was made. This adjustment signifies the removal of the annual registration fee obligation, providing businesses the flexibility to relocate without financial implications, streamlining the process for business mobility.
Section 245: Specific Provisions to be Contained in Rules and Regulations
The amendment introduces significant changes, including the addition of the requirement for the preparation and publication of information required by any law, rules, and regulations. For publication purposes, the Bureau of Internal Revenue may utilize any electronic means of publication in the Official Gazette or its official website. The modification of the payment methods for internal revenue taxes allows payments either electronically or manually through the collection officers of the Bureau of Internal Revenue or duly authorized agent banks, which are now deputized to receive such payments.
Section 248: Civil Penalties
The amendment broadens the scope of civil penalties. The revised section maintains the twenty-five percent (25%) penalty for failure to file a return and pay the tax on time or failure to pay the deficiency tax within the prescribed period. However, it adds a new provision, imposing a penalty for failure to pay the full or part of the amount of tax shown on any return required to be filed or the full amount of tax due for which no return is required to be filed by the specified deadline. This amendment aims to ensure stricter compliance with tax payment obligations and addresses various scenarios of non-compliance.
Notably, the amendment emphasizes flexibility by introducing the option of filing and paying through any authorized agent banks, Revenue District Office through Revenue Collection Officer, or authorized tax software provider. The term "any" is highlighted, emphasizing the broadened options for large taxpayers.
Other Updates:
Digitalization of Bureau of Internal Revenue
Republic Act No. 11976 mandates the BIR to implement an integrated digitalization strategy to enhance service efficiency for taxpayers. This involves adopting automated systems for various tax services such as registration, issuance and validation of Taxpayer Identification Numbers (TINs), filing of returns, submission of supporting documents, and payment of taxes, fines, surcharges, or penalties. Additionally, measures will be taken to establish electronic and online systems for secure data exchange between offices, departments, authorized agent banks, and other units. The aim is to streamline procedures, minimize face-to-face transactions, and bolster technology capabilities by creating data centers, repositories, messaging, electronic mail facilities, encryption systems, and cyber-security measures.
What’s in it for us?
Taxpayers will benefit from streamlined processes, easier access to tax services, and improved security of their tax-related data, resulting in enhanced convenience and efficiency in complying with tax obligations.
Ease of Paying Taxes and Digitalization Roadmap
The BIR is tasked with developing an Ease of Paying Taxes (EOPT) and digitalization roadmap to ensure ease of compliance with tax laws. This includes simplifying tax returns to consist of a maximum of two pages in paper or electronic form, streamlining tax processes, reducing tax or documentary requirements, and digitalizing BIR services. Priority will be given to micro and small taxpayers, with tailored streamlining of tax procedures and documentary requirements based on taxpayer size and capacity to comply. Furthermore, the BIR will submit an annual report on the EOPT and digitalization roadmap to the Congressional Oversight Committee on the Comprehensive Tax Reform Program (COCCTRP).
What’s in it for us?
Micro and small taxpayers will experience simplified tax procedures, reduced paperwork, and improved accessibility to BIR services, enhancing tax compliance and convenience.
Special Concessions for Certain Taxpayers
Micro and small taxpayers will receive special concessions to ease their tax burden. These include: Simplified Income Tax Returns (ITR) consisting of a maximum of two pages. A reduced civil penalty rate of 10%. A 50% reduction in interest rates. A reduced fine of P500 for failure to file certain information returns. A compromise penalty rate reduced by at least 50% for violations of specific sections of the National Internal Revenue Code (NIRC).
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