Let's Talk Tax

Are you ready for the April 15 electronic ITR filing?

As the April 15 deadline for the filing of annual income tax return (ITR) is drawing near, taxpayers shall once again start flocking towards various revenue district offices (RDO) of the Bureau of Internal Revenue (BIR).

It is at this point that taxpayers should be reminded of the rules on those required to file electronically rather than manually. For those required to file electronically, the available electronic platforms of the BIR are: (a) Electronic Filing and Payment System (eFPS); and (2) Electronic BIR Forms Systems (eBIRForms).

The use of electronic platform by the BIR in the filing of returns and payment of tax through online banking system paves way to a more convenient mode for taxpayers to settle their tax obligations.

Not all taxpayers, however, are required to file their returns using the electronic platform. Only those who are mandated to use the eFPS and the eBIRForms as provided under pertinent Revenue Regulations, and those who have opted to file electronically, are required to do so.

Some of those mandated to file their returns via eFPS are as follows:

a. Taxpayer Account Management Program (TAMP) Taxpayers;

b. Accredited Importer and Prospective Importer required to secure the BIR-ICC & BIR-BCC;

c. All Licensed Local Contractors, Enterprises Enjoying Fiscal Incentives (PEZA, BoI, Various Zone Authorities, Etc.);

d. Top 5,000 Individual Taxpayers;

e. Corporations with Paid-Up Capital Stock of P10 million and above;

f. Corporations with Complete Computerized Accounting System (CAS);

g. Government bidders;

h. Insurance companies and Stock brokers;

i. Large Taxpayers; and,

j. Top 20,000 Private Corporations.

On the other hand, among those required to use eBIRForms and eFile include:

a. Accredited Tax Agents/Practitioners and all its client-taxpayers who authorized them to file on their behalf;

b. Accredited Printers of Principal and Supplementary Receipts/Invoices;

c. One-Time Transaction (ONETT) taxpayers; and

d. Those engaged in business, or those with mix income (both compensation and business income) who shall file a “NO PAYMENT” Return (exception under RMC No. 12-2015).

Being included in the list of those required to use eFPS or eBIRForm is crucial. It must be emphasized that a penalty of P 1,000.00 shall be imposed on those mandated to file their returns using eFPS or eBIRForms but fail to do so. In addition, a 25% surcharge shall be imposed on taxpayers filing to the wrong venue.

As between the two penalties above, a 25% surcharge could easily translate to millions or hundreds of millions of pesos, depending on the amount of tax due.

Also, it is important to note that those who are non-compliant with the mandate to file through eFPS and eBIRForms will be included in the BIR’s priority list for future BIR audits.

Aside from the correct mode of filing, another basic reminder is the timing of filing. April 15 has long been known as the traditional deadline every year for income tax filings. However, taxpayers should not forget that the filing deadline in the tax rules actually includes the phrase of “on or before ....”

Hence, taxpayers should not wait for the exact date to lodge their income tax filings.

Taxpayers have experienced difficulties in the previous years when filing on the exact date, including system crashes from the sheer volume of filing.

For those who miss the April 15, 2016 deadline, the 25% surcharge also applies, even if the ITR is filed using the correct mode, and 20% interest per annum shall also be charged until the filing is made by the taxpayer. Also for late filing, the 25% surcharge for “one-day” late filing can no longer be applied for cancellation under the current rules.

A worse scenario is willful or deliberate failure to file return and/or pay tax due. The surcharge imposable is 50% of the total tax due on top of the criminal prosecution in which the penalty prescribed, if found guilty, is a fine of not less than P10,000.00, and imprisonment of not less than one year but not more 10 ten years.

These reminders are very basic rules -- on the correct mode of filing the income tax return and on the deadline to file the same. However, it is interesting to note that there are still some who find themselves being assessed significant amounts for filing in the wrong venue or for late filing.

For those taxpayers who are required to file their ITR by April 15, it is important to not wait for the last day of filing, as huge penalties await for missing the deadline.

Gilbert e. Moreno is an associate with the Tax Advisory and Compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.