Let's Talk Tax

A clear 2020 vision: New Year requirements

Many things can happen in a year. We realize our dreams, reach our goals, make mistakes, and meet new people; the most important thing is that we learn from experience. The same thing can be said from a business perspective, where we, as stakeholders, learn that each new year brings numerous challenges in complying with government requirements as part of continuing operations in the coming year. Listed below are some of the requirements — so mark your calendars to plan your activities this January.

RENEWING BUSINESS PERMIT
One of the first and the most important requirements is to renew your business permit with the Local Government Units (LGU) where your businesses, both the head office and branches, are physically located. One of the requirements of the business permit is paying the local business tax (LBT) imposed by the LGU. The LBT is due on Jan. 20, 2020 (Monday, though some LGUs extend the deadline. It is best to inquire with your respective LGUs on the actual deadline to be able to take advantage of the extension. Pursuant to BLGF (Bureau of Local Government Finance) Memorandum Circular No. 01-001-2017, the following enterprises are exempt from paying LBT:

1. Enterprises registered with the Board of Investments (BoI) as pioneer and non-pioneer for a period of six and four years, respectively, from the date of registration;

2. Businesses engaged in producing, manufacturing, refining, distributing, or selling oil, gasoline, and other petroleum products;

3. Cooperatives duly registered with the Cooperative Development Authority (CDA); and

4. Enterprises registered with the Philippine Economic Zone Authority (PEZA) and other Special Economic Zones, as may be provided for by their specific charters.

PAYING REAL PROPERTY TAX
As much as owning real property (RP) is a privilege, since its value rises each year, such a privilege comes with a responsibility to pay real property tax (RPT), which accrues on Jan. 1 of each year. The City/Municipal Treasurer announces the due date for paying the RPT in full, which is Jan. 31 for most LGUs. RPT is also payable in quarterly installments, without interest, due on the last day of each quarter: March 31, June 30, Sept. 30, and Dec. 31. You may confirm with your LGU if it offers discounts on prompt/advance payment of RPT which, under the Local Government Code, can run up to 10% or 20%, respectively. The discounts could mean significant savings.

Certain properties are exempt from RPT, such as those used by charitable institutions, local water districts, for power transmission, cooperatives registered under the CDA, machinery used to control pollution and for environmental protection, as well as PEZA-registered entities under the 5% gross income tax (GIT) regime. However, BoI-registered enterprises are not exempt from RPT, while PEZA-registered entities under income tax holiday (ITH) enjoy RPT exemption only on machinery. Machinery that is no longer being used in the business is also no longer liable to RPT and owners should apply to delist such equipment from the assessment roll. If you think your company or some of its real property should be exempt, file documentary evidence to claim the exemption.

SETTLING BIR ANNUAL REGISTRATION FEE
All BIR-registered enterprises are required to pay a P500 annual registration fee for each home office/branch registered with the BIR (Bureau of Internal Revenue), which is due on Jan. 31, 2020.

ANNUAL INFORMATION RETURNS AND ALPHALIST ATTACHMENTS
The BIR recently revised its BIR Forms 1604F and 1604C as circularized by Revenue Memorandum Circular (RMC) No. 73-2019 to accommodate the changes made by the Tax Reform for Acceleration and Inclusion Law. These include the adjustment of the format from a monthly summary to a quarterly summary for BIR Form 1604F and changes to the alphalist attachments of BIR Form 1604C. Please refer to our previous article “Flash Report: Revised BIR Reportorial Requirements” published on Dec. 16 for the list of changes to the BIR forms. This was originally due for filing on Jan. 31, which may be extended to Feb. 28 through RMC No. 124-2019, under the condition that the BIR releases a new Alphalist Data Entry and Validation Module, since the current version (6.1) is being enhanced to accommodate the changes to the alphalist. If the deadline for filing the tax returns is extended, the deadlines for the alphalist attachments to these annual information returns follow.

DISTRIBUTE WITHHOLDING TAX CERTIFICATES
Since all enterprises are required to withhold taxes on most purchases, whether they are Top Withholding Agents (TWAs) or not, they are also required to furnish their suppliers with proof of taxes withheld or BIR Forms 2306 and 2307. BIR Form 2306 represents final taxes withheld at source, which is required to be furnished by Jan. 31 or upon the request of the supplier, while BIR Form 2307 represents creditable taxes withheld at source, which must be furnished on or before the 20th day of the month following the end of the calendar quarter which, in this case, is on Jan. 20 for the fourth quarter of 2019.

Similarly, employers are required to furnish their employees’ BIR Form 2316, which represents taxes withheld on compensation on or before Jan. 31. This was not covered by RMC No. 124-2019; hence, the deadline for furnishing the forms to employees remains Jan. 31.

Withholding agents may continue issuing the old version of BIR Forms 2306, 2307, and 2316 covering transactions occurring until Dec. 31, pursuant to RMC No. 126-2019, after which all are required to furnish only the new versions. Hence, taxpayers generating these forms through their computerized accounting systems should have them reconfigured to conform with the new format to validly cover withholding taxes on transactions beginning Jan. 1.

SUBMIT INCOME PAYOR/WITHHOLDING AGENT’S SWORN DECLARATION
Under Revenue Regulations No. 11-2018, withholding agents shall execute a sworn declaration stating the number of income payees, specifically those classified as professionals who have submitted their sworn declarations and BIR Certificate of Registration (BIR Form 2303) to qualify for the lower withholding rate of 5 or 10%. This is due on Jan. 31 and 15 days following the month when a new income payee has submitted its sworn declaration. If these professional service providers do not submit their sworn declarations, the withholding agents should subject these professionals to the higher withholding rates of 10 or 15% for individuals/non individuals, respectively.

WITHHOLD TAXES FROM ADDITIONAL TWAS
The list of additional and delisted TWAs was circularized by the BIR through RMC No. 136-2019 on Dec. 16. Taxpayers who are not delisted or who are tagged as additional TWAs are required to withhold 1 or 2% on their purchases of goods and services, respectively, beginning Jan. 1. Check the RMC list to verify if you are required to withhold on your purchases of goods and services, as the BIR may disallow such expenses if they are not subject to withholding taxes.

PROVIDE ANNUAL INVENTORY LIST
The list of inventory is exclusive to taxpayers whose primary activities require keeping inventory of stock-in-trade, raw materials, goods in process, supplies, and other goods being maintained (e.g., for the construction, retail, manufacturing, or wholesale industries). For taxpayers adopting the calendar year-end period of accounting, the inventory list is due for submission on Jan. 30 in both electronic and printed copies with a notarized certification signed by the taxpayer’s authorized representative, stating that the data in the report is true and correct. For taxpayers adopting a fiscal year-end period of accounting, the deadline is 30 days after the end of the fiscal year-end.

PROVIDE A SUMMARY LIST OF REGULAR SUPPLIERS (SRS)
There is one thing to be happy about this new year: the SRS was previously required to be submitted by TWAs on or before Jan. 31. However, the requirement was repealed by RMC No. 122-2019, since the information contained in the SRS is readily available in the Quarterly Alphalist of Payees (QAP) attached to BIR Form 1601EQ. Both the SRS and the QAP list suppliers from whom TWAs withhold 1 or 2% on their purchases of goods or services; the BIR deemed the SRS redundant and not in line with the government’s ease of doing business policies.

Completing this list of requirements does not guarantee that we will not encounter problems with our regulators; but regulatory compliance is a good start that can help us have a clear vision for 2020.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Philip Christian D. Galiza is a semi-senior of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

 

As published in BusinessWorld, dated 07 January 2020