Over the years, the Philippine tax system has undergone comprehensive amendments such as the Tax Reform for Acceleration and Inclusion (TRAIN) Act in 2018 and the Corporate Recovery and Tax Incentives for Enterprise (CREATE) Act in 2020. With these changes in the Philippine tax policy, the government is now eyeing on improving tax administration with the passage of Republic Act No. 11976, or the Ease of Paying Taxes Act, which was signed into law by President Ferdinand “Bongbong” R. Marcos Jr. on January 5, 2024.
The new law aims at enhancing the Philippine tax system and revenue collection by streamlining tax administration. The Ease of Paying Taxes Act amends certain sections of the National Internal Revenue Code (NIRC) of 1997 and introduces specific provisions that will notably affect taxpayers moving forward.
To summarize, below are the salient features of R.A. No. 11976:
- For purposes of responsive tax administration, taxpayers are now classified into four categories according to their gross sales, namely: micro, small, medium, and large.
- Filing and payment of internal revenue taxes, whether electronically or manually, can now be made to any revenue district offices, authorized agent banks or authorized tax software provider.
- Removal of the annual registration fee of five hundred pesos (P500.00) effective January 22, 2024. Consequently, business taxpayers are now exempt from filing the BIR Form No. 0605 and the payment thereof.
- Overseas Contract Workers (OCWs) or Overseas Filipino Workers (OFWs) earning income solely from overseas will no longer be required to file income tax returns.
- Disallowance of expenses due to non-withholding has now been repealed.
- There will now be three categories for VAT refund claims: low-risk, medium-risk, and high-risk. VAT refund claims categorized as medium- and high-risk will be subject to audit and verification processes.
- The basis for calculating VAT on the sale of services will now be gross sales rather than gross receipts; hence, the removal of the official receipt as a document for the sale of services, thereby requiring a sales invoice for both sale of goods and services.
- For claiming input tax credit, the business style as required information in the sales invoice is no longer needed.
- The threshold for mandatory issuance of duly registered invoice for each sale and transfer of merchandise is amended from one hundred pesos (P100.00) to five hundred pesos (P500.00), subject to adjustment every three years using the consumer price index (CPI); it is provided, however, that the seller shall issue invoices when the buyer requires irrespective of the amount.
- Special Concessions for micro- and small taxpayers such as (a) a reduced number of income tax return (ITR) pages from four (4) to two (2) pages; (b) a reduced rate of 10% for civil penalties under Sec. 248 of the NIRC; (c) a fifty percent (50%) reduction on the interest rate imposed under Sec. 249 of the NIRC; (d) a reduced fine of five hundred pesos (P500) as a penalty for failure to file certain information returns as provided under Sec. 250 of the NIRC; and (e) a reduced compromise penalty rate of at least fifty percent (50%).
- Digitalization of Bureau of Internal Revenue (BIR) services via implementation of an integrated, automated system for basic tax services and the development of a digitalization roadmap.
The Implementing Rules and Regulations (IRR) of the Ease of Paying Taxes Act shall be promulgated within (90) calendar days from the effectivity of the Act after due consultation between the Secretary of Finance, Bureau of Internal Revenue, and the private sector.
The Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation.
Please be guided accordingly.
P&A Grant Thornton
Certified Public Accountants
P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd.
As published in SunStar Cebu, dated 22 January 2024