With 2022 in our rearview mirrors, let us now face 2023 with full optimism and determination to succeed. To help us realize our aspirations for this new year, let us examine what 2023 has in store for us – taxpayers and tax practitioners alike.
Changes in tax rates
By now, taxpayers should be aware of the good news that the new year ushers in, including decreases in tax rates for certain individual taxpayers especially the middle-income earners. Individual taxpayers with annual taxable income amounting to PHP 250,000 or below will continue to be exempt from income tax. For taxpayers earning more than PHP 250,000 but not over PHP 8 million who were subject to the graduated rates of 20% to 32%, they will have a little bit more take-home pay this year. Starting January 1, 2023, they will be subject to lower income tax rates ranging from 15% to 30%. However, taxable income in excess of PHP 8 million will continue to be subjected to a 35% rate.
For the not-so-good news, tax rates which were lowered due to the pandemic as a temporary respite will revert to their regular rates starting July 1, 2023. These include the minimum corporate income tax which will revert to 2%, the percentage tax for non-VAT taxpayers back to 3%, and the special income tax rate for non-profit proprietary educational institutions and hospitals which will go back to 10%.
E-Receipting and E-Invoicing
Another provision of the TRAIN Law which will be implemented this year is the electronic invoicing requirement.
Under Section 237-A of the Tax Code, as amended, certain taxpayers shall, within five (5) years from the effectivity of the TRAIN Law and upon establishment of a system capable of storing and processing the data required, be required to issue electronic receipts or sales or commercial invoices in lieu of manual receipts or sales or commercial invoices and to electronically report sales data to the BIR.
We remember that the TRAIN Law took effect on January 1, 2018. As it has been five years since TRAIN Law took effect, taxpayers are now eagerly anticipating how this provision will affect their businesses.
The BIR, through Revenue Regulations (RR) No. 08-2022, announced the establishment of the Electronic Invoicing/Receipting System (EIS) capable of storing and processing the data required to be transmitted by covered taxpayers using their sales data transmission system. The EIS can be accessed online and hosts three portals namely, EIS Taxpayer Portal, EIS Certification Portal, and EIS Portal for Revenue Officers. Taxpayers may access the portal at https://eis-cert.bir.gov.ph/#/introduction/overview
Not all taxpayers are expected to comply with e-receipting/e-invoicing. Only the following taxpayers are mandated to issue e-receipts/e-invoices:
(a) Those who are engaged in the export of goods and services,
(b) Those who are engaged in e-commerce, and
(c) Those who are under the jurisdiction of the Large Taxpayers Service (LTS).
Taxpayers who are not mandated to comply may continue to issue manual receipts/invoices in lieu of e-receipts/e-invoices. However, if these taxpayers opt to issue e-receipts/e-invoices, they must enroll and submit their sales data in the EIS.
As a reminder, taxpayers are required to secure certification and permit to be allowed to transmit data in the EIS. Qualified taxpayers are required to submit applications for EIS certification, or “EIS CERT”, and to secure a Permit to Transmit, or “PTT”, to be allowed to transmit sales data using the EIS.
EIS Certification is the online verification of the BIR in determining if the system to be used by the taxpayer is compliant with requirements while securing a PTT allows the transmission of the sales in the EIS. The EIS Certification is separate from the accreditation of the system to be used by the taxpayer or from any arrangement the taxpayer has with the software provider of the system.
It must be noted that under RR No. 08-2022, only receipts/invoices issued by accredited Computerized Accounting System (CAS) and/or Cash Register Machines (CRM)/ Point-of-Sale (POS) shall be recognized to be compliant under the EIS.
While the EIS certification process and the CAS/CRM/POS accreditation will allow the BIR to notify the taxpayer of any non-compliant features of their system, persistent erring taxpayers may face jail time if they will persist in issuing unaccredited receipts or invoices either just to comply with e-receipting or e-invoicing or for other business reasons.
For some taxpayers, the EIS may be a welcome development as it is supposed to simplify tax reporting and compliance. It is also envisioned to simplify the refund process as the important documents to support refund claims are already in the EIS.
However, small taxpayers who are mandated to shift to e-invoicing are having problems educating themselves on how to be able to use the system. Some taxpayers have complained that the cost of the middleware to connect to the EIS is simply too expensive for them.
Right now, taxpayers are waiting for more training and issuances from the BIR so they can better assess how they can comply with this new requirement.
Online Registration and Update System
In line with its digitalization initiatives, the BIR also launched the ORUS, or the Online Registration and Update System, last year which allowed taxpayers to register, update, and perform registration-related transactions online.
Starting in 2023, taxpayers and tax practitioners alike can expect to have certain services to be done online. Services such as issuance of Tax Identification Number (TIN) for foreign individuals, registration of business and issuance of Certificate of Registration, securing authority-to-print receipts or invoices or use of BIR-printed receipts/invoices, registration of books of accounts will be available in the ORUS.
Under Revenue Memorandum Circular (RMC) 153-2022, the BIR laid down the gradual roll-out of features in the ORUS to various Revenue Regions (RRs) and Revenue District Offices (RDOs) starting December last year. Two weeks from now, or on January 16, 2023, taxpayers can expect full implementation of the ORUS in all RDOs and RRs.
Taxpayers who will use the online registration facility of the BIR are required to enroll or create an account in ORUS. Only valid and permanent official email addresses, as submitted and updated by the taxpayer and as prescribed in RMC No. 122-2022, may be used to enroll in the ORUS.
Resumption of Field Audits
While not related to digitalization, taxpayers should take note that the BIR will resume their field audits on January 8, 2023. Taxpayers may recall that last year, on December 15, the BIR issued a “cease fire”, through Revenue Memorandum Order (RMO) No. 55-2022, on field audits and other field operations starting December 16, 2022, up until January 8, 2023. Taxpayers should be ready for examination and verification of their books of accounts, records, and other transactions once the “cessation of hostilities” ends on January 8.
So, there you have it. Same as last year, the start of 2023 will surely be full of excitement for taxpayers and practitioners alike. Taxpayers should fully apprise themselves of developments in tax compliance requirements to avoid surprises as, in the words of Benjamin Franklin, “nothing is certain except death and taxes.”
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 03 January 2023
