Are you anxious every time you leave your home, because of the outbreak of the 2019 Novel Coronavirus (2019-nCov)? If you are, it is normal. Most people now refrain from going to the malls, parks, and churches, and prefer to stay at home to prevent from catching the virus. Even my mother has observed that fewer people walk down Session Road in Baguio.
It has been more than a month since the first nCov case was reported in China but, to date, there is no drug that can cure or vaccine that can prevent the virus. News reports show that the number of patients under investigation in the Philippines has been continually increasing. On a positive note, last week, while browsing my Facebook feed, a news story caught my attention: China has begun testing an antiviral drug on nCov patients.
It is not only the possibility of an nCov antiviral drug that brings good news. The Bureau of Internal Revenue (BIR) also has some good news to deliver. A Valentine’s gift for some taxpayers. Last week, the BIR issued Revenue Memorandum Circular (RMC) No. 10-2020, suspending the requirement for a Permit to Use (PTU) Computerized Accounting System (CAS), Computerized Books of Account (CBA), and/or its components. Taxpayers with pending applications for CAS/CBA and/or its components (CAS/CBA) may now use their systems, subject to some administrative compliance. If you are one of those taxpayers who have been waiting for years for the approval of your PTU application or plan to apply for one, RMC No. 10-2020 is for you.
Prior to the issuance of RMC No. 10-2020, taxpayers had to register and get their PTU from the BIR before they use their CAS/CBA. The new RMC, however, allows such systems to be used without a PTU. However, the taxpayer will be subject to the post-evaluation of their CAS/CBA to ensure the compliance of the system with existing revenue issuances. The post-evaluation may be done simultaneously with the BIR audit pursuant to a Letter of Authority (LoA). Thus, taxpayers expecting an LoA, if they are frequently audited by the BIR, should also prepare not just to respond to the findings of the BIR on possible tax deficiencies, but also on those findings on their CAS/CBA. Findings on CAS/CBA typically include the sufficiency of audit trails and compliance with invoicing requirements.
Prior to the issuance of RMC No. 10-2020, all applications for PTU were submitted to the National Accreditation Board (NAB). Now, under RMC No. 10-2020, the NAB will turn over all pending applications to the Technical Working Group (TWG) of the Revenue District Office (RDO)/Large Taxpayer (LT) Office where the taxpayer is registered. The turnover includes pending applications that have undergone system demonstration.
The TWG will validate these applications during post-evaluation. There is an existing revenue issuance discussing the procedures for processing and approving of CAS. The BIR is expected to release a separate revenue issuance to clarify the post-evaluation process and to align the procedures with the changes under RMC No. 10-2020.
Taxpayers with pending PTU applications are required to submit the following documents to their respective TWG:
1. Duly accomplished and notarized Sworn Statement (Annex A of RMC No. 10-2020). This Sworn Statement is in addition to the Sworn Statement previously submitted during the application with the NAB. The taxpayer attests to the Sworn Statement that there is no suppression of sale/income within the system that may affect the appropriate computation of taxes due and that the CAS/CBA can produce an audit trail and comprehensive systems documentation. The taxpayer also attests that the system application and database backup shall be preserved for a mandatory period of 10 years.
The taxpayer also needs to submit Annex A-1 of RMC No. 10-2020, which summarizes the system description, commercial invoice, receipts, or document description, and forms or records and reports specifications. This annex requires the taxpayer to disclose the backup procedure and disaster recovery plan, even though the same has already been previously submitted during the application with the NAB.
2. Sample print copy of system-generated principal and supplementary receipts/invoices that are compliant with invoicing requirements. Examples of principal receipts/invoices are value-added tax (VAT) sales invoice, VAT official receipt, Non-VAT Sales Invoice, and Non-VAT official receipts. Examples of supplementary receipts/invoices are delivery receipts, order slips, debit and/or credit memo, purchase order, acknowledgment receipt, collection receipt, and billing statement.
3. Sample print copy of system-generated books of accounts such as but not limited, to General Journal, General Ledger, Sales Journal, Purchase Journal, Inventory Book, Cash Receipts Book and Cash Disbursements Book reflecting the mandatory fields stated in Revenue Regulations (RR) No. 9-2009. Examples of the mandatory fields for the General Journal under RR No. 9-2009 are date, reference, brief description, account title, debits, and credits.
Within three working days from the receipt of the requirements, the respective TWG Secretariats will issue an “Acknowledgment Certificate.” This Certificate has a Control Number that will be indicated/reflected on the face of the principal and/or supplementary receipts/invoices to be generated from the systems. The Certificate authorizes the issuance of the receipts/invoices.
RMC No. 10-2020 reiterated that in case of any system enhancement/modification and/or upgrade of CAS/CBA and/or its components that will result in the change of version number and/or systems release, the taxpayer shall inform in writing the TWG Secretariat of the RDO/LT Office where they are registered. A matrix showing the comparative changes between the current and upgraded systems shall be submitted with the letter notification.
Some taxpayers might be excited to submit the requirements described above to get the Certificate and control number that will finally allow them to use their CAS/CBA. The issue is whether the control number, once indicated on the receipts/invoices, is tantamount to an approval of such invoices/receipts. What happens when the receipts are found to be noncompliant with invoicing requirements upon post-evaluation? Will the taxpayer be subject to administrative penalties? What is the effect on customers/clients who rely on the invoices/receipts for their substantiation of deductible expenses or as proof of their refundable input VAT? If so, it is then prudent for taxpayers receiving these receipts/invoices to check for compliance before accepting. Are noncompliant receipts/invoices required to be returned to the issuing taxpayer in exchange for BIR-compliant versions? What happens if the post-evaluation is conducted years after the issuance of the Certificate and control number?
RMC No. 10-2020 did not address whether taxpayers without pending applications, but with plans to adopt a CAS/CBA, are covered. It is unclear whether the submission of the three items above is sufficient to get Acknowledgment Certificate, allowing the taxpayer to use their respective CAS/CBA or components thereof.
A separate Revenue Memorandum Order (RMO) will be issued by the BIR on the detailed procedures implementing RMC No. 10-2020. We hope that some, if not all the taxpayers’ concerns will be addressed in the RMO. Nevertheless, RMC No. 10-2020 is good news and an early Valentine’s Day gift to taxpayers.
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.
Marie Fe F. Dangiwan is a senior manager of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.
As published in BusinessWorld, dated 11 February 2020