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1.What is Republic Act No.11976 and why I sit relevant to
tax?
Republic Act (RA) No. 11976, otherwise known
as “Ease of Paying Taxes Act,” (EOPT
Act), is a new law that introduces key administrative
tax reforms and amendments to several provisions of the National Internal Revenue Code of 1997, as
amended (NIRC) to reduce tax compliance
costs while enhancing tax compliance efficiency. It seeks to
significantly boost revenue collection through digitalization
initiatives to support the administration?s8-Point Socioeconomic
Agenda and was signed into law on January 5,2024.
a) The EOPT Act introduced new categories of
taxpayers.
What are these categories? The EOPT Act has provided four (4)
new categories for taxpayers, namely:
- Micro – with gross sales of less than Php3 million;
- Small – with gross sales of Php3 million to less than Php20
million; - Medium – with gross sales of Php20 million to less than Php1
billion; and - Large – with gross sales of P1 billion and above.
b) Are there any advantages for taxpayers who are
considered “micro” or “small”, or those with
gross sales below Php20 million?
Yes. The EOPT Act provides special concessions for micro and
small taxpayers such as a simplified income tax return consisting
of a maximum of two pages only (reduced from four pages) in paper
form or electronic form; a reduced rate of ten percent (10%) for
civil penalties as provided under Sec. 248 of the NIRC; a fifty
percent (50%) reduction in interest rates imposed under Sec. 249 of
the NIRC; a reduced fine of five hundred pesos (Php500) as penalty
for failure to file certain information returns as provided under
Sec. 250 of the NIRC; and a reduced compromise penalty rate of at
least fifty percent (50%) for violations of Sec. 113, 237, and 238
of the NIRC.
c) The EOPT Act seeks to reduce compliance costs and
provide for digitalization alternatives. Are taxpayers now allowed
to register online with the Bureau of Internal Revenue
(BIR), and file and pay taxes electronically?
Yes. To entice foreign investors and facilitate their commercial
dealings in the Philippines, the EOPT Act offers registration
facilities available to all taxpayers, including non-residents.
Taxpayer registration, as well as the transfer and cancellation of
tax registration, may be done manually or electronically.
The EOPT Act codifies the definition of the terms “Filing
of Return” and “Payment of Tax or Remittance of
Tax”. The definition expressly states that filing and paying
taxes can now be made either manually or electronically to the BIR,
or through any authorized agent bank or authorized tax software
provider. This provides convenience and removes the burden of
paying hefty surcharges and interest for filing tax returns in the
wrong venue. However, we need to wait for the implementing
regulations to see how this will be implemented.
d) Has the Annual Registration Fee of Php500 been
removed?
Yes. The annual registration fee of Php500 for businesses has
been eliminated, reducing the administrative burden. Per the BIR
Advisory released on January 8, 2024, the BIR will cease collecting
the Php500 annual registration fee effective January 22, 2024,
which is favorable to taxpayers. However, see item 18 below on the
effective date of the EOPT Act.
e) Is there a change as to when taxes are to be
withheld?
Yes. The EOPT Act provides that the obligation to deduct and
withhold the tax arises at the time the income has become payable.
Previously, Sec. 57 of the NIRC provides that the withholding of
tax on specified items of income is when an income payment is paid
or becomes payable based on the rules and regulations promulgated
by the Secretary of Finance. Under Revenue Regulations No. 12-01
which amended Sec. 2.57.4 of Revenue Regulations No. 2-98
(Withholding Tax Regulations), the responsibility to deduct and
withhold tax arises at the time when an income payment is paid or
becomes payable, or when the income payment is accrued or recorded
as an expense or asset, whichever is applicable, in the payor’s
books, whichever comes first. Hence, the existing “whichever
comes first” rule of withholding will no longer apply under
the amendment introduced by the EOPT Act.
Under Revenue Regulations No. 12-01, the term
“payable” refers to the date the obligation becomes due,
demandable, or legally enforceable. Therefore, it appears that the
withholding obligation arises when the obligation becomes due,
demandable, or legally enforceable regardless of when it is accrued
in the books of the payor. However, again, we need to wait for the
implementing regulations to see how this will be implemented.
f) May a taxpayer now deduct expenses for purposes of
computing its taxable income despite failure to withhold taxes on
the expense?
Yes. The EOPT Act repealed Sec. 34 (K) of the NIRC which
requires withholding of taxes as an additional requirement for
deductibility of expenses from gross income. Previously, an expense
will not be allowed as a deduction for income tax purposes if the
taxpayer failed to show that the tax required to be deducted has
been paid to the BIR in accordance with Secs. 58 and 81 of the
NIRC. Please note however that this does not remove the withholding
obligation of the payor.
g) Is the income recipient claiming a tax credit or
refund of creditable income tax required to show proof that the
taxes withheld from it are indeed remitted to the BIR?
No. The EOPT Act provides that claims for tax credit or refund
of creditable income taxes which were deducted and withheld from
income payments will be given due course provided that it is shown
that (i) the income payment has been declared as part of the gross
income, and (ii) the fact of withholding is established (i.e.,
through submission of BIR Form No. 2307 (Certificate of Creditable
Tax Withheld at Source)). Accordingly, the income recipient is not
required to show proof that the withholding agent remitted the
taxes withheld to the BIR for its claim for tax credit or refund of
creditable income taxes to be given due course. The above amendment
codifies the decisions of the courts on this issue.
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