The Philippines is celebrating its 123rd year of independence. We have been enjoying our freedom for over a century and much has changed since then. For the business sector, changes have been directed towards intensifying the use of technology. Can we now say that we are moving towards freedom from the old way of doing business?

It seems that the government is indeed trying to veer away from the manual way of doing things. Even the Bureau of Internal Revenue (BIR) is keen on going digital. This year, the agency issued several regulations on the use of electronic signatures. Citing the Ease of Doing Business and the Electronic Commerce Act of 2000, the BIR issued Revenue Memorandum Circular (RMC) 29-2021 and RMC 46-2021 to address taxpayers’ concerns on the filing of BIR forms as they work from the comfort of their homes due to lockdowns after the onset of the COVID-19 pandemic.

An e-signature refers to any distinctive mark, characteristic, and/or sound in electronic form, representing the identity of a person and attached to or logically associated with the form/certificate or any methodology or procedure employed or adopted by a person and executed or adopted by such person with the intention of authenticating or approving an electronic data message or document. For purposes of RMC 29-2021, an e-signature includes digital and other methods of signing electronic documents.

RMC 29-2021 was issued to lay down the guidelines for the use of e-signatures on certain BIR forms/certificates. Pursuant to the RMC, withholding agents or their duly authorized representatives are given the option to use e-signatures for the following BIR forms/certificates:

1. BIR Form 2304 — Certificate of Income Payment not Subject to Withholding Tax (Excluding Compensation Income);

2. BIR Form 2306 — Certificate of Final Tax Withheld at Source;

3. BIR Form 2307 — Certificate of Creditable Tax Withheld at Source; and

4. BIR Form 2316 — Certificate of Compensation Payment/Tax Withheld.

In addition to the above-mentioned forms/certificates, RMC 46-2021 was issued which allows taxpayers to use electronic or digital signatures in the filing of Annual Income Tax Return (AITR). The e-signature or digital signature shall be deemed equivalent to the actual signature or “wet signature” for filing purposes.

On a related note, RMC 29-2021 cited the legal basis for the recognition of the e-signature under Section 8 of the E-commerce Act. Under this provision, an electronic signature on the electronic document is deemed equivalent to the signature of a person on a written document if that signature is proved by showing that a prescribed procedure, not alterable by the parties interested in the electronic document, existed under which —

(a) A method is used to identify the party sought to be bound and to indicate said party’s access to the electronic document necessary for his consent or approval through the electronic signature;

(b) The method is reliable and appropriate for the purpose for which the electronic document was generated or communicated, in light of all circumstances, including any relevant agreement;

(c) It is necessary for the party sought to be bound, in or order to proceed further with the transaction, to have executed or provided the electronic signature; and

(d) The other party is authorized and enabled to verify the electronic signature and to make the decision to proceed with the transaction authenticated by the same.

The above provisions put the taxpayers on the lookout regarding their internal procedures in attaching e-signatures or in performing similar methods on documents they intend to submit or file before the BIR. Taxpayers should ensure the credibility of all “e-signed” documents. Control and monitoring procedures must be installed to guarantee the integrity of each e-signed document and to make it easier to prove or disprove whether a particular document or correspondence was electronically signed legitimately by the authorized signatory.

The BIR issuances on e-signatures are much appreciated, and many are looking forward to subsequent issuances which would allow e-signatures to be used for other types of BIR forms and letter-correspondences with the BIR, particularly in correspondence on tax assessments or in tax refund cases. Certainly, taxpayers would not want their position or claim to be denied just because their e-signatures are not considered valid.

Under RMC 29-2021, an electronic signature includes “any” methodology or procedure employed or adopted by a person and executed or adopted by such a person with the intention of authenticating or approving an electronic data message or electronic document. As it continues to conduct dialogues with stakeholders, perhaps the BIR can expound on the coverage of “any” methodology or procedure in a bid to provide more clarity to taxpayers. This is not to limit the applicability of the law, but to serve as a guide to those who intend to maximize the use of technology in their transactions with the BIR.

I hope subsequent issuances make further clarifications to ease the apprehension of taxpayers in using e-signatures or similar methods, as filings and transmittals to the BIR are very crucial. We hope that the BIR eventually goes fully digital and maximizes the use of technology to break free from traditional procedures and to efficiently and effectively serve 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.


As published in BusinessWorld, dated 15 June 2021