We’re nearly two years into the pandemic and another year is coming to an end. While businesses are expecting significant improvements in the results of their operations this year, they should also be mindful of various compliance requirements.
Christmas is fast approaching and the whole world is slowly emerging from the ravages of the pandemic. While most people are getting busy preparing their gifts and menus for Noche Buena, taxpayers are reminded of year-end tax compliance and other reporting requirements. To name a few: taxpayers need to comply with filing and submission of annual information returns and their attachments, books of account, and withholding tax certificates, as well as the filing of Requests for Confirmation (RFC) for income payments to nonresidents which were subjected to tax treaty rates or preferential rates.
A rise in election campaign spending is anticipated, albeit in more creative ways as we are still coping with the COVID-19 pandemic. According to the Philippine Center for Investigative Journalism (PCIJ), some P5.8 billion was spent during the 2016 polls, with major spending on ad placement in various media platforms — and that is assuming that there were no misstatements in the Statement of Contributions and Expenses submitted by the political candidates to the Commission on Elections (Comelec).
During a Bureau of Internal Revenue (BIR) tax audit, taxpayers avoid, as much as possible, receiving a Final Assessment Notice (FAN) or think of elevating their concerns to the Court of Tax Appeals. These late stages of the tax assessment process mean incurring significant costs and expending effort to challenge the assessment or defend taxpayers’ arguments, with little to no assurance of a reduction or cancellation of the assessment.
With the government hard-pressed for funds to finance economic recovery programs, much of the burden falls on the Bureau of Internal Revenue (BIR) to increase tax collections. It is no wonder that BIR audits are proliferating like TikTok videos. For taxpayers, one of the most common fears is being subjected to a BIR audit. Such audits not only entail substantial investments in time and effort, mainly to prepare supporting documents and legal arguments; they also require strength of character and tremendous patience to see the process to its conclusion.
Amid new government issuances and pandemic constraints, flexible work arrangements, especially remote work or “work-from-home” (WFH) setups as we call them, continue to be implemented by businesses. Government orders allowing only essential businesses to keep their physical locations open forced unprepared employers to adopt flexible work options on the fly.
The IATF adjusted the COVID-19 alert levels of certain areas such as that of the National Capital Region, where the alert level is now at 3. Through a resolution, the authorities relaxed quarantine restrictions over the coming days to provide more mobility to people in certain trades. According to the 2021 Asian Development Outlook update, the Philippine economy is recovering and rebounding at a growth rate of 11.8% from the second quarter due to the government’s expansionary fiscal policy, which it resorted to in order to fund the pandemic response, vaccination, and infrastructure projects. From these economic indicators, businesses and investors may expect that the Philippines to get back on track soon.
The pandemic supercharged the growth of the digital economy; the implementation of community quarantines forced us to stay at home and encouraged the use of online platforms to obtain our basic needs. Many continue to heavily rely on the internet and digital services for education, work, and entertainment. There’s no denying that online transactions quickly became part of our new normal. And while these offer advantages to us as consumers, it allows foreign online retailers to penetrate the Philippine market without having to invest or employ Filipinos. Thus, to ensure fair competition between traditional and digital businesses, and further generate funding for the pandemic recover effort, legislators were swift to propose a tax on these digital businesses.
