EoPT Act: Insights on the draft Implementing Rules and Regulations

They say wishes do come true if you only believe in three (3). In April 2021, I wrote an article under this section entitled “Wish list for reforms on tax filing, payment, and administrative compliance.” In that article, I listed three wishes, some of which are already embodied under the then proposed bill on the Ease of Paying Taxes (EOPT) Act. My wishes and the general taxpayer’s wishes then are to enhance the portability of tax transactions by removing restrictions on the filing and payment of taxes, institutionalizing the acceptance of e-signature on all tax returns and documents required by the BIR, and removing the distinction between a value added tax (VAT) sales invoice and VAT official receipts.

Less than three years from that time, these wishes did come true as the EOPT Act, or Republic Act No. 11976, was finally signed into law on January 5, 2024, and published in the Official Gazette on January 7, 2024. Taxpayers and the tax community indeed welcomed the new year 2024 right.

Thankfully, in line with the above wishes, the EOPT Act principally include the following amendatory provisions:

• Out of district filing and payment of taxes;
• One VAT base and invoice for the sale of goods and services; and
• Digitalization, electronic filing, and acceptance of certain BIR applications.

To effectively implement the above provisions and other provisions of the EOPT Act, the said law provides that the Secretary of Finance (SOF), after consultation with the Bureau of Internal Revenue (BIR) and the private sector, shall promulgate the necessary rules and regulations within ninety (90) calendar days from the effectivity of the EOPT Act.

In line with this, the BIR was quick to release the draft revenue regulations (RRs). They held a public consultation on the said draft RRs last February 2024. The public consultation, which ran for two days physically and virtually via Zoom and Facebook Live, gave the private sector the chance to hear the BIR’s discussion of the draft RRs and thereafter to provide insights and comments on the draft rules to effectively implement the EOPT Act. 

With the above principal amendments by the EOPT Act of the Tax Code, below are the insights that the BIR may consider in finalizing the implementing rules and regulations in line with the EOPT’s objective of minimizing the burden on taxpayers in complying with tax laws:

Out-of-District Filing and Payment of Taxes

The draft revenue regulations on the filing of tax returns and payment of internal revenue taxes provide that the filing of tax returns and payment of tax with corresponding due dates shall be made electronically on any available electronic platforms. However, in case of unavailability thereof, the same can be done manually to any Authorized Agent Banks (AABs), Revenue Collection Officers (RCOs), or Authorized Tax Software Provider (ATSP), regardless of the Taxpayer Identification Number (TIN) registration.  

While the draft RR recognizes manual filing and payment to any AABs, RCOs, or ATSPs regardless of TIN registration, it seems that the same draft RR also limits the filing and payment of taxes to electronic filing and payment. Manual filing and payment anywhere can be done only in case of unavailability of the electronic platforms (eFPS/eBIRForms) and online banking platforms of AAB and ATSP.

However, not all taxpayers have the capacity and means to file and pay taxes online, and available online payment facilities have a daily limit on the amount of tax that can be paid per transaction. Hence, to encourage payment of taxes, the implementing rules and regulations may consider giving flexibility to the taxpayers on electronic filing and manual payment of their taxes as long as the same are paid on time.

One VAT base and invoice for the sale of goods and services

Aligned with the amended rules provided under the EOPT Act, the draft RR on VAT and other percentage taxes provides that only an “invoice” shall be issued for both sale of goods and services. Also, VAT on the sale of goods and services shall both be based on gross sales.

For ease of doing business, taxpayers engaged in sale of services shall be allowed to strike the word “Official Receipt” on the face of the manual and loose-leaf printed receipts and stamp “Sales Invoice” to be issued as the primary invoice to customers until December 31, 2024. Taxpayers using CRM, POS, and computerized books of accounts (CBA) with e-receipting or electronic invoices may change the word “Official Receipts” to “Sales Invoice” without the need to notify the BIR. However, other changes on the CBA to comply with the change in VAT base for the sale of services shall be considered major enhancements that require taxpayers to update their system registration with the BIR. The reconfiguration of machines and system adjustments shall be undertaken on or before June 30, 2024.

In addition, the transitory provision of the draft RR provides that billed but uncollected receivable from the sale of services shall be subject to 12% VAT upon the effectivity of the RR. The output VAT due on the transaction shall be declared in the immediate taxable quarter following the effectivity of the RR. Taxpayers are apprehensive of this transitory provision due to the possible cash flow issue that may arise from the expected huge VAT payable for all their accounts receivables. To invoice the output VAT and sale to the customer, the seller shall replace the billing statements/statement of accounts with Invoices.

We note the BIR’s consideration of giving ample time to the taxpayers to comply with the changes under the EOPT Act. However, the BIR may also consider the specific transitory clause of the EOPT Act in light of the ongoing preparations of the taxpayers for the annual filing of tax returns and financial external audits of taxpayers.

Note that the transitory provision of the EOPT Act specifically provides that taxpayers are given six (6) months from the effectivity of the implementing revenue regulations to comply with the amendments to Title IV on the Value-Added Tax and Title V on Other Percentage Taxes of the NIRC, as amended. Thus, affected taxpayers should be given six months from the effectivity of RR to reconfigure and update CAS registration with the BIR and to remit any VAT due on billed but uncollected receivables from services already rendered as of the effectivity of the RR.  

Lastly, the general rule that changes in tax laws should be applied prospectively unless it is favorable to the taxpayers must be taken also into consideration. For the sale of services which were billed and rendered under the old law, is it possible for the BIR to consider them as not be covered by the EOPT Act and should be subject to VAT only upon collection?

Digitalization, electronic filing and acceptance of certain BIR applications

Sections 43 and 44 of the EOPT Act mandate the BIR to develop an Ease of Paying Taxes and digitalization road map and eventually to adopt an integrated digitalization strategy by providing automated end-to end solutions for the benefit of taxpayers. Specifically, EOPT already provides electronic applications for cancellation of VAT registration and transfer/cancellation of registration.   

With this BIR digitalization program mandated by EOPT and the on-going efforts of BIR on digitalization, I do hope that the BIR will soon allow the use of electronic signatures and/or provide facilities for electronic submission of documents and letters that are still required to be manually filed with the BIR. This will not just be more convenient for taxpayers, but it will also save the BIR storage costs and time spent looking for lost dockets.

As the truthful reporting of income and timely payment of tax dues are fundamentals to healthy functioning of societies, I do hope that the above insights on the draft implementing rules and regulations of the EOPT Act will be considered to ensure smooth and easy compliance by taxpayers on the changes brought by EOPT Act.

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.

As published in BusinessWorld, dated 12 March 2024