Revenue Regulations No. 8-2024

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Implementing Section 21(b) of the National Internal Revenue Code of 1997, as Amended by Republic Act No. 11976, otherwise known as the “Ease of Paying Taxes Act”, on the Classification of Taxpayers

SECTION 1. Scope – Pursuant to the provisions of Sections 244 and 24 of the National Internal Revenue Code of 1997, as amended (Tax Code), in relation to Section 47 of Republic Act (RA) No. 11976, otherwise known as the “Ease of Paying Taxes (EOPT) Act”, these Regulations are hereby promulgated to implement Section 21(b) of the Tax Code on the classification of taxpayers.

SECTION 2 Coverage and Classification of Taxpayers – Taxpayers shall be classified, and be covered by these Regulations, as follows:

• Micro Taxpayer – shall refer to a taxpayer whose gross sales for a taxable year is less than Three Million Pesos (P3,000,000.00).
• Small Taxpayer – shall refer to a taxpayer whose gross sales for a taxable year is Three Million Pesos (P3,000,000.00) to less than Twenty Million Pesos (P20,000,000.00)
• Medium Taxpayer – shall refer to a taxpayer whose gross sales for a taxable year is Twenty Million Pesos (P20,000,000.00) to less than One Billion Pesos (P1,000,000,000.00).
• Large Taxpayer – shall refer to a taxpayer whose gross sales for a taxable year is One Billion Pesos (P1,000,000,000.00) and above.

For purpose of classification of taxpayers under these Regulations, gross sales shall refer to total sales revenue, net of VAT, if applicable, during the taxable year, without and income any other deductions.

Gross Sales shall only cover business income under Sections 24, 25, 27 and 28, and income excluded under Section 32(B), all of the Tax Code.

Business income shall include from the conduct of trade or business or the exercise of a profession.

SECTION 3. Initial Classification of Taxpayers. – Taxpayers who will register to engage in business or practice of profession upon the effectivity of these Regulations shall initially be classified based on its declaration in the Registration Forms starting from the year they registered, and shall remain as such unless reclassified.

The concerned taxpayer shall be reclassified in accordance with the threshold values as stated under Section 2 of these Regulations.

SECTION 4. Notification on the Classification/Reclassification. – Taxpayers shall be duly notified by the BIR if their classification or reclassification, as may be applicable, in a manner or procedure to be prescribed in a revenue issuance to be issued separately.

SECTION 5. Transitory Provisions – Taxpayers registered in 2022 and prior years shall be classified on the basis of their gross sales for taxable year 2022.

For taxpayers registered in 2022 and prior years but without any submitted information on their gross sales for taxable year 2022, and taxpayers registered in 2023 or in 2024 before the effectivity of these Regulations, they shall be classified as MICRO except VAT-registered taxpayers, who shall be classified as SMALL.

SECTION 6. Separability Clause – If any of the provisions of these Regulations is subsequently declared invalid or unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.

SECTION 7. Repealing Clause – All other issuances and rules and regulations or parts thereof which are contrary to and inconsistent with any provisions of these Regulations are hereby repealed, amended or modified accordingly.

SECTION 8. Effectivity. – These Regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR Official website, whichever comes first.

Implementing Sections 113,235,236,268,242,243 of the National Internal Revenue Code of 1997, as Amended by Republic Act No 11976, otherwise known as the “Ease of Paying Taxes Act”, on the Registration Procedures and Invoicing Requirements

Section 1. Scope. – Pursuant to the provisions of Sections 244 and 245 of the National Internal Revenue Code of 1997, as amended (Tax Code), in relation to Section 47 of Republic Act (RA) No. 11976, otherwise known as the “Ease of Paying Taxes (EOPT) Act”, these Regulations are hereby promulgated to Implement the amendments on Registration Procedures and Invoicing Requirements Tax provisions.

Section 2. Definition of Terms, –

1. Invoice – it is a written account evidencing the sale of goods and/or services issued to customers in the ordinary course of trade or business. This includes Sales Invoice, Commercial Invoice, Cash Invoice, Charge/Credit Invoice, Service Invoice, or Miscellaneous Invoice. It is also referred to as a “principal invoice” and is categorized as follows:
   • VAT Invoice – It is a written account evidencing the sale of goods, properties, services and/or leasing of properties subject to VAT issued to customers or buyers in the ordinary course of trade or business, whether cash sales or on account (credit) or charge sales. It shall be the basis of output tax liability of the seller and the input tax claim of the buyer or purchaser,
   • Non-VAT Invoice – it is a written account evidencing the sale of goods, properties, services and/or leasing of properties not subject to VAT issued to customers or buyers in the ordinary course of trade or business, whether cash sales or on account (credit) or charge sales. It shall be the basis of the Percentage Tax Liability of the seller, if applicable.

Invoice may also be serve as a written admission or acknowledgement of the fact that money has been paid and received for the payment of goods or services.

2. Supplementary Document – is a written document, other than sales or commercial invoice, which serves as source of accounting entries in the books of accounts.

This includes but not limited to official receipt, delivery receipt, order slip, debit and/or credit memo, purchase order, acknowledgement or cash receipt, collection receipt, bill of lading, billing statement, statement of account and any other documents, by whatever name it is known or called, whether prepared manually (hand written information) or pre-printed/numbered loose leaf (information typed using spreadsheet program or typewriter) or computerized as long as they are used in the ordinary course of business and being issued to customers or otherwise.

For purposes of VAT, supplementary Documents are not valid proof to support the claim of input taxes by the buyers/puchasers of goods and/or services.

Section 3. Invoicing and Accounting Requirements for Value-Added Tax (VAT) Registered Persons under Section 113 of the Tax Code. –

All VAT-registered persons and those required to register for VAT shall comply with the following:

A. Invoicing Requirements

1. A VAT-registered person shall issue a duly registered VAT Invoice, for every sale barter, exchange or lease of goods or properties, and for every sale, barter or exchange of services regardless of the amount of the transaction.
2. A VAT Invoice shall be issued as evidence of sale of goods and/or properties and sale of services and/or leasing of properties issued to customers in the ordinary course of trade or business, whether cash sales or on account (credit), which shall be the basis of the output tax liability of the seller and the input tax claim of the buyer.

B. Information Contained in a VAT Invoice – The following information shall be indicated in the VAT Invoice:

1. A Statement that the seller is a VAT-registered person followed by the seller’s Taxpayer Identification Number (TIN) and Branch Code (e.g., VAT Reg TIN 12-456-789-00000);
2. The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; provided that;
   • The VAT amount is shown as a separate item;
   • The term “VAT-Exempt Sale” is written or printed, if the sale is exempt from VAT;
   • The term “Zero-Rated Sale” is written or printed, if the sale is subject to zero percent (0%) VAT;
   • If the sale involves goods, properties or services some of which are subject to and some of which are VAT Zero-Rated or VAT-Exempt, the invoice shall clearly indicate the breakdown of the sale price between taxable, exempt and zero-rated components and the calculation of the VAT on each portion of the sale shall be shown on the invoice: Provided, that the seller may issue separate invoices for the taxable, exempt and zero-rated components of the sale.
3. The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service;
4. In the case of sales in the amount of One thousand pesos (P1,000) or more where the sale or transfer is made to a VAT-registered person, the registered name or name, address and TIN of the purchaser, customer or client; and
5. Other Information required under Section 6(B) of these Regulations.

C. Accounting Requirements – All persons subject to VAT under Sections 106 and 108 of the Tax Code shall maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded, in addition to the regular accounting records required.

D. Consequences of Issuing Erroneous VAT Invoice

1. All persons who are not VAT-registered and issued a VAT Invoice showing the person’s TIN followed by the word ‘VAT’ or showing the information under Section 3(B)(1) of these Regulations, shall, in addition to other percentage taxes, be liable to (i) VAT imposed under Section 106 or 108 Tax Code, without the benefit of any input tax credit and (ii) a fifty percent (50%) surcharge under Section 248(B) of the Tax Code.
   
   The VAT shall be recognized as an input tax credit under Section 110 of the Tax Code, to the purchaser, buyer or receiver or erroneous VAT Invoice if all the required information under Section 3(B)(1) of these Regulations are shown on the invoice.
   
2. A VAT Registered person or seller issuing a VAT Invoice for a VAT-Exempt transaction, but fails to display the term ‘VAT-Exempt Sale’ or clearly provide a breakdown of the VAT-Exempt Sale on the invoice as provided for under Section 3(B)(2.4) of these Regulations, shall be liable for the VAT in Section 106 and 108 as if Section 109 of the Tax Code did not apply.
   
3. Lack of information required under Section 3(B) of these Regulations – If a VAT-registered person or seller issues a duly registered VAT Invoice to another VAT-registered person or buyer/purchaser with lacking information required Section 3(B) of these Regulation, the seller or issuer shall be liable for non-compliance with the invoicing requirements. However, the VAT amount shall still be allowed to be used as an input tax credit under Section 110 of the Tax Code, on the part of the purchaser or buyer, except if the lacking information pertains to any of the following:
   • Amount of sales;
   • VAT amount;
   • Registered name and TIN as shown on the Bureau of Internal Revenue (BIR) Certificate of both purchaser or buyer and issuer or seller;
   • Description of goods or nature of services; and
   • Date of transaction.

Section 4. Preservation of Books of Accounts and Other Accounting Records under Section 235 of the Tax Code. –

A. Preservation

1. All Books of Accounts, including the subsidiary books and other accounting records of corporations, partnerships, or persons, shall be preserved by the taxpayer for a period of five (5) years reckoned from the day following the deadline on filing a return, or if filed after the deadline, from the date of the filing of the return, for the taxable year when the last entry was made in the Books of Accounts.

Type	5 years
Manual Books of Accounts and other accounting records	In hard copies
Manual Bound Loose Leaf Books of Accounts and other accounting records	In hard copies
Computerized Books of Accounts and other accounting records	In electronic copies

2. The term “other accounting records” includes the corresponding invoices, receipts, vouchers and returns, and other source documents supporting the entries in the Books of Accounts.

3. The term “last entry” refers to a particular business transaction or an item thereof that is entered or posted last or the latest in the Books of Accounts when the same was closed.

4. The foregoing notwithstanding, if the taxpayer has any pending protest or claim for tax credit/refund of taxes, and the books and records concerned are material to the case, the taxpayer is required to preserve the Books of Accounts and other accounting records until the case is finally resolved in support of their defenses and aid, even beyond the prescribed 5-year retention period.

5. Unless a longer period of retention is required under the Tax Code of other relevant laws, the independent Certified public Accountant (CPA) who audited the records and certified the financial statements of the taxpayer, has the responsibility – similar to that the taxpayer – to maintain and preserve electronic copies of the audited and certified financial statements including the audit working papers for a period of five (5) years form the due date of filing the annual income tax return or the actual date of filing thereof, whichever comes later.

6. Books of Accounts and Other Accounting Records shall be subject to examination and inspection by internal revenue officers; Provided, that for income tax purposes, such examination and inspection shall be made only once in a taxable year, except for the following cases:

• Fraud, irregularity or mistakes, as determined by the Commissioner;
• The taxpayer requests reinvestigation;
• Verification of compliance with withholding tax laws and regulations;
• Verification of capital gains tax liabilities; and
• In the exercise of the Commissioner’s power under Section 5(B) of the Tax Code, to obtain information from other persons, another or separate examination and inspection may be made. Examination and inspection of Books of Accounts and other accounting records shall be done in the taxpayer’s office or place of business or in the office of the BIR. All corporations, partnerships or persons that retire from business shall, within ten (10) days from the date of retirement or within such period of time as may be allowed by the Commissioner in special cases, submit their Books of Accounts, including the subsidiary books and other accounting records, to the Commissioner or any of his deputies for examination, after which they shall be returned. Corporations and partnerships contemplating dissolution must notify the Commissioner and shall not be dissolved until cleared of any tax liability.

7. Any provision of existing general or special law to the contrary notwithstanding, the Books of Accounts and other pertinent records of Tax-exempt, organizations or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liability, if any.

B. Examination and Inspection

1. In general, all books, registers, records, vouchers and other supporting papers and documents prescribed by the BIR and other records kept by the taxpayers shall be preserved intact, unaltered and unmutilated and shall be kept at all times in the place of business of the taxpayer, subject to inspection by any internal revenue officer, and upon demand, the same must be immediately produced and submitted for inspection.
2. The books of accounts and other accounting records may be examined and inspected for purposes of audit, request for exchange of information by a foreign tax authority under Section 6 and 71 of the Tax Code, and in the exercise of the Commissioner’s power to obtain information under Section 5 of the Tax Code, among others.
3. Examination and inspection of Books of Accounts and other accounting records shall be done in the taxpayer’s office or place of business or in the office of the BIR.

Section 5. Registration Requirements under Section 236 of the Tax Code.-

A. Manner and Time of Registration – Every person subject to any internal revenue tax shall register, either electronically or manually, with the Revenue District Office (RDO) as follows:

1. On or before the commencement of business for Self-employed individuals, estates and trusts, corporations, and their branches, if any.
   
   Commencement of business shall be reckoned from the day when the first sale transaction occurred or upon the lapse of thirty (30) calendar days from the issuance of the Mayor’s Permit/Professional Tax Receipt (PTR)/Occupational Tax Receipt (OTR) by Local Government Unit (LGU), or the Certificate of Business Name Registration(CBRN) issued by the Department of Trade and Industry (DTI), or the Certificate of Registration (COR) issued by the Securities and Exchange Commission (SEC), whichever comes first.
   
   A person shall be considered to have violated by this provision when such person failed to register with the BIR within thirty (30) calendar days from the issuance of the Mayor’s Permit/PTR by the concerned LGU, or COR/CBNR issued by the SEC/DTI or the date of its sales transaction prior to its registration with the BIR.
2. Before payment of any tax due for Corporations (Taxable or Non-taxable)/One Time Transaction (ONETT).
   
   Parties to ONETT transactions who, at the time of their transaction, have not yet been issued a TIN shall apply for issuance thereof at the time of payment of the tax due. Such TIN issued to the party involved shall be permanent and may be updated for future transactions of such persons with the BIR, e.g., subsequent employment, establishing a business, etc.
3. Before or upon filing of any applicable tax return, statement or declaration as required by the Tax Code for Corporations, Partnerships, Associations, Cooperatives, Government Agencies and Instrumentalities (GAIs).
4. Within ten (10) days from date of employment for Employees.
   Newly hired employees with no existing TIN are required to register through their employer via BIR’s online registration system.
5. Application under Executive Order (EO) No. 98, series of 1999.
   Individuals required to secure TIN for their transactions with government agencies shall apply for their TIN online via BIR’s online registration system or from BIR Revenue District Office having over the place of their residence, at any time before they complete their transaction with such government agency. TINs issued under EO No. 98, series of 1999, shall be permanent and may be updated for future transactions of such persons with the BIR (e.g., subsequent employment, establishing a business, etc.).
   In any case, the Commissioner of Internal Revenue of his duly authorized representative may, for meritorious reasons, deny or revoke any application for registration.

B. Place of Registration – the following taxpayers shall be registered either electronically or manually, with the appropriate RDO.

Type	Manner and place of Registration
Self-employed individuals – Single Proprietors – Professional in practice of profession	Online or manual registration at the RDO having jurisdiction over the place of business address In case of professionals do not have a physical place of business, registration shall either be online or manual means at the RDO having jurisdiction over the place of residence.
Corporations, Partnerships, Associations, Cooperatives, Government Agencies and Instrumentalities (GAIs), Non-individuals	Online or manual registration at the RDO having jurisdiction over the place of business address.
Non-resident Filipino Citizens, Non-resident Aliens, Non-resident Foreign Corporations Overseas Filipino Workers (OFW)/ Filipino Overseas Contract Workers (OCW) (not engaged in business)	Online registration or manual registration at RDO No. 39 – South Quezon City     Online or manual registration at the RDO having jurisdiction over the place of residence of the OFW/OCW.
Hired Employees Local Employees Resident Alien Employees Non-resident Alien Employees (NRAE)	Online registration through employer or manual registration at the RDO having jurisdiction over the place of residence.   In case of NRAE, registration shall be online or manual at RDO No. 39 – South Quezon City.
Executive Order (EO) No. 98	Online or manual registration at the RDO having jurisdiction over the place of residence of the applicant.
Non-registered Parties to a One-Time Transaction (ONETT) Donation Estate Sale of real property Sale of shares of stocks	Online or manual registration at the RDO having jurisdiction over the place of residence of the parties or where the corresponding tax return will be filed.
Estate Engaged in business Non engaged in business	RDO having jurisdiction of the place of the Head Office of the business of the decedent. Where the estate tax return will be filed.
Trust	RDO having jurisdiction over the registered address of the Trustee. Provided, however, that in case such Trustee is not registered, registration of the trust shall be made with the RDO having jurisdiction over the business address of the Trustee.
Branch and Facility	RDO having jurisdiction over the place of business address or location of the facility. In case of taxpayers under the jurisdiction of the Large Taxpayers Service, its branches and facilities shall be registered at the concerned Large Taxpayers (LT) Office/Division where the Head Office is registered.

In case of system downtime or technical issues or errors, manual application for registration shall be processed at the concerned BIR Offices. In any case, the Commissioner of Internal Revenue may issue and change the manner of registration through revenue issuances or circulars for tax administration purposes.

The requirement of payment of Annual Registration Fee of Five Hundred Pesos (P500.00) for every separate or distinct establishment or place of business is repealed and shall no longer be applicable effective January 22, 2024.

The place of residence may refer to the taxpayer’s legal residence, principal residence, current residence or permanent residence.

C. Registration of Business Taxpayers – All persons engaged in business or practice of profession, self-employed and professionals not under employer-employee relationships, juridical entities, online sellers/merchants including those engaged in providing digital goods and services, unless otherwise exempted, shall:

1. Register and secure a BIR Certificate of Registration (COR) by the prescribed deadline under Section 5(A) hereof;
2. Comply with the invoicing requirement:
   • For manual issuance of invoice- secure an Authority to Print (ATP) or avail or BIR Printed Invoice;
   • For computer-aided issuance – secure Permit to use loose leaf invoice and ATP;
   • For Computerized Accounting System (CAS) and/or components thereof – secure Acknowledgement Certificate (AC).
3. Comply with the bookkeeping requirements:
   • For manual – register books of accounts;
   • For Loose-leaf and CAS – register books of accounts within the prescribed period.
4. Secure “Notice to Issue Invoices”; and
5. Attend the taxpayer’s initial briefing to be conducted by the respective RDOs to inform newly registered businesses of their rights and obligations.

The concerned RDO shall include the newly registered business taxpayers who registered electronically or manually in their monthly conduct of Tax Compliance Verification Drive (TCVD) after thirty (30) days from the date of business registration to validate declarations in their application and verify their existence.

All online sellers/merchants shall register with the BIR on or before the commencement of business in an e-marketplace platform in accordance with the Section 236 of the Tax Code. Consequently, and in furtherance to the government’s thrust to protect and uphold the interests of the buyers/consumers from trade malpractices, e-marketplace operators shall require from their respective sellers/merchants the submission of their Certificate of Registration (COR) or BIR Form No. 2303, and include the same as part of e-marketplace operators’ minimum seller/merchant accreditation requirements.

D. Registration of Business Name – Each Business Name used, including the “store name” used in any online store or e-commerce platform, shall be registered with the BIR and shall be reflected in the BIR Certificate of Registration, provided, that each Business Name or “store name” is also registered with the Securities and Exchange Commission (SEC) or Department of Trade and Industry (DTI) as evidenced by a valid DTI Certificate of Business Name Registration or SEC Certificate of Registration or Articles of Incorporation or Partnership.

E. BIR Business Registration Date – The BIR Business Registration shall be reckoned form the date when the taxpayer registered its business and/or Business Name as reflected in the BIR Certificate of Registration.

F. Issuance of Certificate of Registration of Head Office, Branch and Facility – Subject to the provisions of Section 5(C) hereof, each Head Office, Branch and Facility shall be issued a Certificate of Registration or Electronic Certificate of Registration within the period/time prescribed in the BIR Citizen’s Charter, upon submission of complete documentary requirements.
Employees, ONETT taxpayers, individuals who have secured a TIN under EO No. 98 and/or non-business taxpayers, non-business Estate and Trust shall not be issued a Certificate of Registration.

A Thirty pesos (P30.00) Documentary Stamp Tax (loose DST) shall be paid upon issuance of BIR Certificate of Registration or Electronic Certificate of Registration.

G. Posting of Certificate of Registration – All persons subject to the provisions of Section 5(C) and (D) hereof shall post or exhibit their original COR/Electronic Certificate of Registration (eCOR) at the place where the business is conducted and at each branch and/or facility in a way that is clearly and easily visible to the public. In case of a peddler or other persons not having a fixed place of business, the COR/eCOR shall be kept in the possession of the holder thereof or at the place of residence or at the Head Office’s address, if applicable, subject to production upon demand of any internal revenue officer.

H. Posting of Proof of Registration on Online Websites, E-Commerce or E-Marketplace Seller/Merchant’s Page and other Platforms – All online businesses, sellers or merchants and service providers operating a business through a website, social media or any digital or electronic means, shall display conspicuously the electronic copy of the BIR Certificate of Registration on their website, seller/merchant’s account or profile pages of the e-commerce platform or mobile application. The displayed proof of registration shall be easily accessible and visible to buyers or customers visiting the seller’s merchant page or online/e-commerce shop.

I. Registration of Each Type of Internal Revenue Tax – Every person who is required to register with the BIR under Section 5(A) hereof, shall register each type of internal revenue tax for which such person is obligated; file a return and pay the tax due thereon either electronically or manually; and updated such registration of any changes thereof.

J. Cancellation of Registration – The registration of any person shall be cancelled upon mere filing, either electronically or manually, of an application for registration information update in a form prescribed therefor with the RDO where such person is registered. However, this shall not preclude the Commissioner of Internal Revenue or his authorized representative from conducting an audit to determine any tax liability.

K. Transfer Registration – In case a registered person decides to transfer the place of business or head office or branch/es, it shall be the person’s duty to update the registration status by merely filing, either electronically or manually, an application for registration information update in the audit investigation, the RDO which initiated the audit investigation shall continue the same.

1. Transfer of Registration of Non-business Taxpayers – Taxpayers not engaged in business may submit their application for transfer of registration, either manually or via BIR online registration system, at the new RDO having jurisdiction over the place of residence if the taxpayer. In case of individuals who are registered as non-business taxpayers and subsequently applies for registration of business, the application for business registration shall be directly submitted to the new RDO having jurisdiction over the business address.
2. Transfer of Registration of Business Taxpayers – Taxpayers engaged in business may submit their application for transfer of registration, either manually or via BIR online registration system at the current RDO where the taxpayer is registered. All open-cases/stop-filer cases shall be settled at the new RDO, except for those who are subject to audit investigations in which case any audit findings including open-cases/stop-filer cases who are not subject to audit investigations shall be transferred to the new RDO within the prescribed period together with its open-cases/stop-filer cases.
   
   The concerned taxpayer shall secure a new BIR Certificate of Registration from its new RDO. The new RDO. The new RDO shall include all newly transferred business taxpayers in its monthly TCVD after thirty (30) days from the issuance of new BIR Certificate of Registration.

L. Unlawful Pursuit of Business – Any person who carries on or engages in any business and is not duly registered with the BIR shall, upon conviction for each act of omission, be punished in accordance with the penalty provided in Sec. 258 of the Tax Code.

SECTION 6. Issuance of Invoices under Section 237 of the Tax Code.

A. Issuance –

1. All persons subject to an internal revenue task shall, at the point of each sale and transfer of merchandise or for services rendered valued at Five hundred pesos (P500.00) or more, issue duly registered invoices, showing the name Taxpayer Identification Number (TIN), date of transaction, quantity, unit cost and description of merchandise or nature of service.
   
   The P500.00 amount shall be adjusted to its present values every three (3) years using the consumer price index, as published by the Philippine Statistics Authority (PSA).
   
2. The seller shall issue Invoice when the buyer so requires regardless of the amount of transaction. Provided, however, that if the sales amount per transaction is below the threshold but the aggregate sales amount at the end of the day is at least five hundred pesos (P500.00), the seller will issue one (1) invoice for the aggregate sales amount for such sales at the end of the day: Provided, finally, that VAT-registered persons shall issue duly registered invoice regardless of the amount of the sale and transfer of merchandise or for service rendered.
   
3. The word ” Invoice” shall be printed on the face of the invoice to be issued to buyers or customers. The term Cash Sales or Charge Sales, at the seller’s option, can be indicated in the Invoice as checkboxes to reflect the type of transactions. However, should the taxpayer opt to have a separate set of invoices for cash sales or change sales, the word “Invoice” maybe printed indicating the transactions that will be issued such invoices. E.g. Cash Invoice, Charge Invoice/Credit Invoice, Billing Invoice, Service Invoice, etc. Provided, that the word “Invoice” is prominently printed or larger than the word describing the transaction.
4. Considering that the Ease of Paying Taxes Act no longer requires the issuance of Official Receipts, it operates to establish the Invoice as the primary evidence for both sales of goods and services. The taxpayer, however, may issue Official Receipt, Collection Receipt or Payment receipt as supplementary document showing proof of payment. To promote ease of doing business, the remaining unused Official Receipts can still be used at the option the taxpayer, pursuant to Section 8(2) of these Regulations.

B. Information Contained in the Invoice – The Invoice shall contain the following information:

1. Taxpayer (Seller) Registered name as shown in BIR BIR Certificate of Registration;
   
   At the option of the taxpayer, in addition to its BIR-registered name, the taxpayer may choose to add its DTI Registered Business Name or Trade Name in SEC Articles of Incorporation/Partnership/Certificate Of Incorporation of the taxpayer (seller).
2. A Statement that the seller is a VAT or Non-VAT registered person followed by the seller’s Taxpayer Identification Number (TIN) and Branch Code (e.g., VAT Reg TIN 123-456-789-0000, Non-VAT Reg TIN 987-654-321-0000);
3. Registered business address where the invoice shall be used;
4. The term Invoice is printed or included (e.g. Sales Invoice, Commercial Invoice Cash Invoice, Charge Invoice, Credit Invoice, Service Invoice or any similar description followed by the word “Invoice”);
5. Date of transaction;
6. Space provided for the registered name, registered business address and TIN of the buyer. If the sale of goods or services are directly between a business and consumers [Business-to-Consumer (B2C)] who are the end-users of its products or services, the business address and TIN of the buyer are not required to be included;
7. Serial number printed prominently;
8. Quantitiy;
9. Unit cost;
10. Description of the goods or properties or nature of the service;
11. Total amount of sale. If the VAT-registered, VAT is included in the total amount;
12. The VAT amount shall be shown as a separate item;
13. If the VAT taxpayer is engaged in mixed transactions, the sales involved shall be broken down into: VATable Sales, VAT Amount, Zero Rated Sales, and VAT Exempt Sales.
14. If the VAT taxpayer opts to issue separate invoice for the VATable sale, exempt and zero-rated components of the sale, the term ‘VAT-Exempt Sale’ is written or printed if the sale is exempt from VAT; or term ‘Zero-rated Sale’ is written or printed if the sale is subject to zero percent (0%) VAT.
15. For supplementary documents such official receipts, delivery receipts, order slips, purchase orders, acknowledgement receipts, collection or cash receipts, credit/debit memo, job orders and other similar documents that form part of the accounting records of the taxpayer and/or issued to their customers, it is required, in addition to the above-enumerated applicable information, that the phrase “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX.” in bold letters, be conspicuously printed at the face of such supplementary documents.
16. Taxpayers whose transactions are not subject to VAT or “percentage tax shall issue Non-VAT Invoice indicating at the face of such invoice the word “EXEMPT”.
17. If the taxpayer is not VAT-registered and is subject to percentage tax under Title V of the Tax Code, but sells goods/services under Section 109 (A) to (CC) except (E) of the same Section, then the Non-VAT Invoice shall indicate the breakdown of Sales Subject to Percentage Tax (SSPT) and Exempt Sales.
18. For taxpayers transacting with (1) Senior Citizen/s (SC/s) and/or Person/s with Disability (PWD) pursuant to RA No. 1432, as amended and RA No. 7277, as amended, respectively; (2) National Athletes and Coaches (NAAC) pursuant to RA No. 106699; (3) Solo Parent pursuant to RA No. 8972, as amended; and (4) Medal of Valor (MOV) Awardee or his/her dependents pursuant to RA No. 9049, it is required that – in addition to the information enumerated above, a space for the following be provided:
    • SC ID No. or any other government issued OD showing the name, picture, date of birth and nationality/PWD ID No. /Philippine National Sports Team (PNSTM) ID No./Solo Parent ID No./MOV ID or MOV Dependent ID No.;
    • Amount of discount showing detailed breakdown of the 5% or 20% discount and 12% VAT Exemption, whichever is applicable;
    • Signature of the Senior Citizen/PWD/NAAC/Solo Parent/MOV Awardee or his/her qualified dependent: Provided, that for qualified purchases made by Senior Citizens/PWDs online or through mobile application, their physical signatures in the Invoice are not required.
19. The following information shall be printed at the bottom portion of the manual Invoices:
    • ATP Number/Outbound Correspondence Number (OCN), date issued;
    • BIR Permit Number (if loose leaf Invoice);
    • Approved inclusive serial numbers of Invoice;
20. The following information shall be printed at the top or bottom portion of the Invoices generated from Cash Register Machine (CRM)/Point of Sale Machine(POS)/Other Similar Machines or Software:
    Top Portion
    • Machine Identification Number (MIN);
    • Serial Number of the CRM/POS machine (if branded machine) and/or the Serial Number of the Hard Disk Drive and/or Software License Number (if cloned machine);
    • For reprinting of invoice, the word “REPRINT” should be prominently indicated;
      
      Bottom Portion
    • BIR Final Permit to Use (PTU) Number.
21. The following information shall be printed at the top of or bottom portion of the Invoices of the system-generated from Computerized Accounting System (CAS), Computerized Books of Accounts (CBA) with Accounting Record and/or its Components and Other Similar System:
    
    Top portion
    • For reprinting invoice, the word “REPRINT” should be prominently indicated;
      
      Bottom portion:
    • BIR Permit to Use (PTU) Number or Acknowledgement Certificate Control Number (ACCN);
    • Series range to be used; and
    • Date Issued (mm/dd/yyyy).

C. Tickets and other Similar Forms as Invoice – Tickets, such as transportation tickets, event tickets, amusement tickets, movie tickets, parking tickets, raffle tickets, gaming/gambling tickets, electronic tickets, and other similar tickets, regardless of form or name, including those issued by ticketing machines, shall serve as both an invoice and proof of payment, if the word “Invoice” is printed therein and it contains all the required information outlined in Section 6(B) hereof. Otherwise, the same shall be considered as supplementary document and as separate invoice shall still be issued therefor.

SECTION 7. Printing if Invoices under Section 238 of the Tax Code.

1. All persons, whether private or government, who are engaged in business and will use manual invoices shall secure/apply from the BIR an Authority to Print (ATP) principal and supplementary documents free of charge, before an Accredited Printer of Invoices can print the same.
   
   National Government Agencies (NDAs), Government Owned and Controlled Corporation (GOCCs) and Local Government Units (LGUs) engages in proprietary functions shall apply for ATP in the printing of their principal and supplementary documents.
   
2. No authority to print invoices shall be granted unless the invoices to be printed are serially numbered and shall show, among other things, the name, TIN and business address of the person or entity to use the same, and such other information set forth under there Regulations.
   
3. All persons or Accredited Printers who print invoices shall maintain a logbook/register of taxpayers who availed of their printing services. The logbook/register shall contain the followng information:
   • Names, TIN of the persons or entities for whom invoices were printed; and
   • Number of booklets, number of sets per booklet, number of copies per set and the serial numbers of the invoices in each booklet.

SECTION 8. Transitory Provisions. –

1. Certificate of Registration (COR) reflecting the Registration Fee – Business taxpayers are not required to replace its existing BIR Certificate of Registration that includes Registration Fee. The COR shall retain its validity although the Registration Fee is shown therein, and taxpayers are no longer required to pay the Annual Registration Fee. Updating the COR is only necessary if there are changes to the registration information, excluding the Registration Fee, reflected on the COR.
2. Unused Official Receipts –
   • Taxpayer to continue the use of remaining Official Receipts as supplementary document. – All unused or unissued Official Receipts may still be used supplementary document until fully consumed, provided that the phrase “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX.” is stamped on the face of the document upon effectivity date of these Regulations. The Official Receipt, along with other equivalent documents such as Collection Receipt, Acknowledgement Receipt and Payment Receipt are all the same, serve as proof of payment that cash has been received or that payment has been collected/made for goods and/or services
   • Taxpayer to convert and use the remaining Official Receipts as Invoice. – For ease of doing business, taxpayers shall be allowed to strikethrough the word “Official Receipt” [e.g. Official Receipt] on the face of the manual and loose leaf printed receipt and stamp “Invoice”, “Cash Invoice”, “Credit Invoice” “Billing Invoice”, “Service Invoice”, or any name describing the transaction, and to be issued as primary invoice to its buyer/purchaser until December 31, 2024. These documents shall be valid for claim of input tax by the buyer/purchaser for the period issued form January 22 to December 31, 2024, provided that the invoice to be issued bears the stamped “Invoice” and contains information required under Section 6(B) of these Regulations. The converted Invoice as defined in Section 2 hereof can serve as proof of sales transaction and proof of payment at the same time. Any Official Receipts, whether stamped with “Invoice” or unstamped, issued after December 31,2024, will be considered supplementary documents as provided in Section 8(2.1) of hereof and ineligible for input tax claims.
     
     the stamping of official receipts as invoices by taxpayers does not require approval form any Revenue District Offices/LT Offices/LT Divisions but must comply with Section 8(2.3) hereof. Taxpayers should obtain newly printed invoices with an Authority to Print (ATP) before fully using or consuming the converted Official Receipts or before December 31, 2024, whichever comes first.
     
   • Reportorial Requirement of Unused Official Receipts to be Used as Invoice Upon Effectivity of these of these Regulations – All unused manual and loose leaf Official Receipts to be converted as Invoice shall be reported by submitting an inventory of unused official receipts, indicating the number of booklets and corresponding serial numbers within thirty (30) days upon effectivity of these Regulations, to the RDO/LT Office/LT Division where the Head Office or Branch Office is registered, in duplicate original copies. The receiving Branch RDO shall transmit the Original copy to the Head Office RDO and retain the duplicate copy.
     
3. Cash Register Machines (CRM) and Point-of-Sales (POS) Machines and E-receipting or Electronic Invoicing Software – Taxpayers using CRM/POS/E-receipting/E-invoicing may change the word “Official Receipt (OR)” to “Invoice”, “Cash Invoice”, “Charge Invoice”, “Credit Invoice”, “Billing Invoice”, “Service Invoice”, or any name describing the transaction, without the need to notify the Revenue District Office(s) having jurisdiction over the place of business of such sales machines, since the reconfiguration shall be considered as minor system enhancement which shall not require the reaccreditation of sales software/system on the part of the taxpayer-user. Provided further, that the serial number of the converted Invoice to the RDO/LT Office/LT Division where the machines are registered, in duplicate original copies. the receiving Branch RDO shall transmit the duplicate copy of the Head Office RDO.
   
   Taxpayers that are using duly registered Computerized Accounting System (CAS) or Computerized Books of Accounts (CBA) with Accounting Records need to revisit their system to comply with the provisions of the EOPT Act. Since the system reconfiguration will have direct effect on the financial aspect, it shall be considered as major enhancement which will require taxpayer to update their system registration following the existing policies and procedures of filing a new application. The previously issued Acknowledgement Certificate (AC) or Permit to Use shall be surrendered to the RDO where the concerned taxpayer is registered, and a new AC shall be issued to the Head Office/Branch(es). The required Annex of the AC shall indicate all the branches (if applicable) that are using the said system/software and sets of series of accountable forms (Invoice) to be used by each of the branches, if applicable.
   
   In order to provide ample time in reconfiguring machines and systems, adjustments shall be undertaken on or before June 30, 2024. Any extension due to enhancements of system shall seek approval from the concerned Regional Director or Assistant Commissioner of the Large Taxpayers Service which shall not be longer than six (6) months form the effectivity of these Regulations.
   
   Documents issued by CRM/POS, e-receipting or electronic invoicing software containing the word “Official Receipt” beginning the effectivity of these Regulations shall not be considered as valid for claim of input tax by the buyer/purchaser.
   
   Issuance of “Official Receipt” for the sale of goods or services after June 30, 2024 will not be considered as evidence of sales of goods or services and shall be tantamount to failure to issue or non-issuance of Invoice required under Section 6(A) hereof subject to penalty of not less than One Thousand Pesos (Php 1,000.00) but not more than Fifty Thousand Pesos (Php 50,000.00) and suffer imprisonment of not less than two (2) years but not more than four (4) years pursuant to Section 264(a) of the Tax Code.

SECTION 9. Separability Clause. – If any of the provisions of these Regulations is subsequently declared invalid or unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.

SECTION 10. Repealing Clause. – All other issuances and rules and regulations or parts thereof which are contrary to and inconsistent with any provisions of these Regulations are hereby repealed, amended, or modified accordingly.

SECTION 11. Effectivity. – These Regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR Official Website whichever comes first.

Implementing Section 45 of Republic Act No. 11976, otherwise known as the “Ease of Paying Taxes Act”, on Imposition of Reduced Interest and Penalty Rates for Micro and Small Taxpayers

SECTION 1. Scope – Pursuant to the provisions of Sections 244 and 245 of the National Internal Revenue Code of 1997, as amended (Tax Code), in relation to Section 47 of Republic Act (RA) No. 11976, otherwise known as the “Ease of Paying Taxes (EOPT) Act”, these Regulations are hereby promulgated to implement Section 45 of the EOPT Act on the imposition of reduced interest and penalty rates for micro and small taxpayers.

SECTION 2. Coverage – These Regulations shall cover micro and small taxpayers as classified under Section 21 (B) of the Tax Code, as amended by the EOPT Act, to wit:

• “Micro Taxpayer” – shall refer to a taxpayer whose gross sales for a taxable year is less than Three Million Pesos (P3,000,000.00).
• “Small Taxpayer” – shall refer to a taxpayer whose gross sales for a taxable year is Three Million Pesos (P3,000,000.00) to less than Twenty Million Pesos (P20,000,000.00).

Section 3 Imposition of Civil Penalties – There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to ten percent (10%) of the amount due, in the following cases:

• Failure to file any return and pay the tax due thereon as required under the provisions of the Tax Code or rules and regulations, on the date prescribed.
  
  Provided, that no penalty shall be imposed to an amendment of a tax return if the covered taxpayer filed the initial tax return and paid the tax due thereon, on or before the prescribed due date for its filing.
  
  Provided, further, that in case of a deficiency tax assessment as a result of a tax audit, a penalty shall be imposed on the tax deficiency if the particular tax return being audited was found to have been filed beyond the prescribed period or due date;
  
• Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or
  
• Failure to pay the full part of the amount of tax shown on any return required to be filed under the provisions of the Tax Code or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment.

In case of a wilful neglect to file a return within the period prescribed by the Tax Code or by rules and regulations, or for false or fraudulent filing of return, a penalty at the rate of fifty percent (50%) of the tax, or deficiency tax in case of payment made before the discovery of the falsity or fraud, shall be imposed. Provided, that a substantial under-declaration of taxable sales or income, or a substantial overstatement of deductions as determined by the Commissioner of Internal Revenue pursuant to the rules and regulations promulgated by the Secretary of Finance, shall continue prima facie evidence of a false or fraudulent return.

For this purpose, “substantial under-declaration of taxable sales or income” shall mean failure to report sales or income in an amount exceeding thirty percent (30%) of the declared per return; while “substantial overstatement of deductions” shall mean a claim of deductions in an amount exceeding thirty percent (30%) of actual deductions.

SECTION 4. Impositions of Interest – There shall be assessed and collected on any unpaid amount of tax by the covered taxpayers, an interest at the reduced rate of fifty percent (50%) of the interest rate mandated in Section 249 of the Tax Code.

For this purpose, the legal interest imposable to covered taxpayers shall be six percent (6%). In case a new legal interest rate is prescribed, the Commissioner of Internal Revenue shall issue a separate Circular thereof.

SECTION 5. Imposition of Penalty for failure to file certain information returns. – In case of failure to file an information return, statement or list, or keep any record, or supply any information as may be required, on the date prescribed thereof, a penalty of Five Hundred Pesos (P500.00) shall be paid for each such failure by the covered taxpayer, upon notice and demand by the Commissioner of Internal Revenue.

In no case shall aggregate amount to be imposed for all such failures during a calendar year exceed Twelve Thousand Five Hundred Pesos (P12,500.00).

SECTION 6. Compromise Penalty. – In case of criminal violation by covered taxpayers of Section 113, 237, and 238 of the Tax Code, not involving fraud, a reduced compromise penalty rate of fifty percent (50%) of the applicable rate or amount of compromise under Annex “A” of Revenue Memorandum Order No. 7-2015 and its subsequent amendments, if any, shall be applied.

For this purpose, the compromise penalty shall be collected in lieu of criminal prosecution for violation committed, where payment is based on a compromise agreement validly entered into between the covered taxpayer and the Commissioner of Internal Revenue.

Provided, that, in no case shall the compromise penalty differ in amount from those specified in these Regulations, except when duly approved by the Commissioner of Internal Revenue, or his duly authorized representatives.

Provided, further, that the compromise penalty herein prescribed shall not prevent the Commissioner of Internal Revenue, or his duly authorized representatives, from accepting a compromise amount higher than what is provided hereof.

Provided, lastly, that a compromise offer lower than the prescribed amount may be accepted after approval by the Commissioner of Internal Revenue, or his duly authorized representatives.

SECTION 7. Applicability. – These Regulations shall apply prospectively in accordance with Section 51 of RA No. 11976.

SECTION 8. Separability Clause. – If any of the provisions of these Regulations of subsequently declared invalid or unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.

SECTION 9. Repealing Clause. – All other issuances and rules and regulations or parts thereof which are contrary to and inconsistent with any provisions of these Regulations are hereby repealed, amended, or modified accordingly.

SECTION 10. Effectivity – These Regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR official website, whichever comes first.

Implementing Sections 76(C), 112(C), 112(D), 204(C), 229, and 269(J) of the National Internal Revenue Code of 1997, as amended (Tax Code), in relation to Section 47 of Republic Act (RA) No. 11976, otherwise known as the “Ease of Paying Taxes Act”, on Tax Refunds

SECTION 1. Scope. – Pursuant to the provisions of Sections 244 and 245 of the National Internal Revenue Code of 1997, as amended (Tax Code), in relation to Section 47 of Republic Act (RA) No 11976, otherwise known as the “Ease of Paying Taxes (EOPT) Act”, these Regulations are hereby promulgated to implement Section 112(C) of the Tax Code on the Risk-based approach in verifying VAT refund claims, Section 112(D) of the Tax Code on the liabilities in case of disallowance by the Commission on Audit (COA), Section 76(C) of the Tax Code on the refund of unutilized excess income tax credit in case of dissolution or cessation of business, Section 204(C) of the Tax Code on the processing of tax refund, and Section 229 of the Tax Code on the policies for judicial claims.

SECTION 2. Coverage. – To provide ample time for the taxpayer and BIR to adjust to the new requirements and procedures to be prescribed pursuant to the amendments introduced by the EOPT, these Regulations shall cover tax credit/refund claims that are filed starting 01 July 2024 onwards.

• Section 112(C) of the Tax Code that introduced the risk-based approach to verification of VAT refund claims;
• Section 112(D) of the Tax Code which clarified the liability of the taxpayer-claimant and the BIR in case of disallowance by the Commission of Audit (COA);
• Section 76(C) of the Tax Code allowing the application for refund of unutilized excess income tax credit in case of dissolution or cessation of business. For purposes of these Regulations, the entire provision of 76(C) of the Tax Code shall be covered to include policies for the processing of income tax credit/refund of taxpayers who have chosen the option to apply for tax credit or refund the excess income tax in their Annual Income Tax Returns (AITR);
• Section 204(C) of the Tax Code that introduced the one hundred eighty (180)-day processing of claims for tax refund except for VAT Refunds under Section 112 of the Tax Code; and
• Section 229 of the Tax Code that outlined the policies for judicial claims and repealed the supervening clause provision thereof.

These Regulations do not cover processing of tax refund/credit claims pursuant to the final and executory judgement by the courts.

SECTION 3. Risk-Based Approach to Verification of VAT Refund Claims. – The EOPT Act introduced the risk-based approach to verification and processing of VAT refund claims under Section 112(C) of the Tax Code including the recourse of the taxpayer in case the ninety (90)-day processing period expires the BIR has not yet rendered its decision on the claim. The following rules shall be followed:

• VAT refund claims filed pursuant to Section 112(A) of the Tax Code shall be classified into low-, medium-, and high-risk claims. Provided, that, medium- and high-risk claims shall be subject to audit or other verification processes in accordance with the BIR’s national audit program for the relevant year or with the current policies and procedures applicable to the year of application of the VAT refund.
• The scope of verification in accordance with the identified risks as follows:

Risk Level	Submission of Complete Documentary Requirements Prescribed by BIR*	Scope of Verification of Sales	Scope of Verification of Purchases
Low	Yes	No Verification	No Verification
Medium	Yes	At least 50% of the amount of sales and 50% of the total invoices/receipts issued including inward remittance and proof of VAT zero-rating	At least 50% of the total amount of purchases with input tax claimed and 50% of suppliers with priority on “Big Ticket” Purchases
High	Yes	100%	100%

The following are the limitations to the above matrix:

1. Claims filed by first-time claimants shall be automatically considered as high-risk and shall remain as such for the succeeding three (3) VAT refund claims.
2. In case of full denial of a claim, the succeeding claim filed shall be classified as high-risk.
3. For medium-risk claims, verification shall be adjusted to 100% if the assigned Revenue Officer found at least 30% disallowance of the amount of VAT refund claim.
4. Claims classified as low-risk for the three (3) consecutive filing of VAT refund claims shall be subject to mandatory full verification on the fourth (4th) VAT refund claim regardless of the risk classification.
5. VAT credit/refund for any unused input tax pursuant to Section 112(B) of the Tax Code filed by a VAT – Registered person whose registration has been cancelled sue to retirement from or cessation of business, or due to changes in or cessation of status under Section 106(C) of the Tax Code shall be classified as high-risk and will require full verification thereof.
6. For taxpayer-claimants filing on quarterly basis, the risk classification shall be made for every filing.
7. Other limitations that may be identified by the Commissioner of Internal Revenue through revenue issuances.

• The following are the limitations to the above matrix:
  • Claims filed by first-time claimants shall be automatically considered as high-risk and shall remain as such for the succeeding three (3) VAT refund claims.
  • In case of full denial of a claim, the succeeding claim filed shall be classified as high-risk.
  • For medium-risk claims, verification shall be adjusted to 100% of the assigned Revenue Officer found at least 30% disallowance of the amount of VAT refund claim.
  • Claims classified as low-risk for the three (3) consecutive filing of VAT refund claim shall be subject to mandatory full verification on the fourth (4th) VAT Refund claim regardless of the risk classification
  • VAT credit/refund claims for any unused input tax pursuant to Section 112(B) of the Tax Code filed by a VAT-registered person whose registration has been cancelled due to retirement from cessation of business, or due to changes in or cessation of status under Section 106(C) of the Tax Code shall be classified as high-risk and will require full verification thereof.
  • For taxpayer-claimants filing on a quarterly basis, the risk classification shall be made for every filing.
  • Other limitations that may be identified by the Commissioner of Internal Revenue through revenue issuances.
• The following are the main risk factors that will be used as guide by the BIR in establishing the risk-level of each claim:
  • Amount of VAT refund claim;
  • Frequency of filing VATT refund claims;
  • Tax compliance history; and
  • Other risk factors that may be identified.
    The BIR may expand the above list into sub-categories and assign weights to each category to arrive at a more comprehensive and accurate risk classification of the claim.
• The verification and processing of VAT refund claims shall be separate from the regular audit, if any, of internal revenue taxes particularly VAT conducted by the appropriate BIR office that has jurisdiction over the taxpayer-claimant. Any-findings during the verification of VAT refund claim that has no effect to the amount to be refunded shall be:
  • Endorsed for further verification and/or consolidation with the existing audit if the processing is conducted by an Officer other than the BIR office that has jurisdiction over the claimant; or
  • Incorporate to the existing audit for the taxable year covered by the claim if processed within the same BIR office that has jurisdiction over the claimant.
• All documentary requirements mandated by the BIR for purposes of VAT refund under Section 112 of the Tax Code shall be submitted by the taxpayer regardless of the identified risk level. These documents will be subject to post-audit by COA should this result in approval thereof, as contemplated under section 112(D) of the Tx Code.
• Evaluator/s of the VAT refund claim shall include to their respective working papers the matrix on how the risk level of the claim was arrived at, including justifications and documentations if any;
• The processing offices shall furnish DOF, the BIR Management and COA a monthly report on the VAT refund claims processed to include the risk level identified for each taxpayer claimant.
• BIR may utilize sales and/or purchases data available in the Electronic Invoicing/Receipting and Sales Transmission System (EIS) pursuant to Revenue Regulations (RR) Nos 8-2022 and 9-2022, if applicable.
• he 90-day period to process and decide shall start from the filing of the claim/application for VAT refund with complete documentary requirements up to the release of the payment thereof. Provided, that the application is considered to have been filed only upon submission of the invoices or receipts, whichever is applicable, and other documents in support of the application as prescribed under pertinent revenue issuances.
• In case of full or partial denial of the claim for VAT refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals (CTA).
• In case the VAT refund is not acted upon by the Commissioner within the 90-day period the taxpayer-claimant may opt to:
  • Appeal to the CTA within the 30-day period after the expiration of the 90-days required by law to process the claim; or
  • Forego the judicial remedy and await the final decision of the Commissioner on the application of VAT refund claim.
    
    When the BIR failed to render a decision within the 90-day period and the taxpayer-claimant opted to seek for a judicial remedy within 30-days from such period, the administrative claim for refund shall be considered moot and shall no longer be processed.
• The BIR official, agent or employee who was found to have deliberately caused the delay in the processing of the VAT refund claim may be subjected to penalties imposed under Section 269(J) of the Tax Code.

SECTION 4. Liability of the Taxpayer-claimants and BIR Officials/Employees in Case of COA Disallowances.

• Refund shall be made upon warrants drawn by the Commissioner of Internal Revenue or by his duly authorized representative without the necessity of being countersigned by the COA Chairman, the provisions of the Revised Administrative Code to the contrary notwithstanding.
• Approved VAT refunds under Section 112 of the Tax Code shall be subject to post audit by the COA following the risk-based classification above-described.
• In case of disallowance by the COA, only the taxpayer shall be liable for the disallowed amount without prejudice to any administrative liability on the part of any employee of the BIR who may be found to be grossly negligent in the grant of the refund.
• Procedures for the recovery of the disallowed amount will be in accordance with the procedures or guidelines that may be prescribed by COA for this purpose.

SECTION 5. Credit/Refund of Unutilized Excess Income Tax Credit Under Section 76(C). – In order to properly implement Section 76(C) of the Tax Code, the following rules shall apply:

• Regular Claims. – This applies to claims for income tax credit/refund of taxpayers of “going-concern” status who have chosen the option to apply for tax credit or refund the excess income tax in their AITRs.
  • Pursuant to Section 58(E) of the Tax Code that was amended under Section 9 of the EOPT Act, income upon which any creditable tax is required to be withheld at source under Section 57 of the Tax Code shall be included in the AITR of its recipient but the excess of the amount of tax so withheld over the tax due on the AITR shall be refunded subject to the provisions of Section 204 of the Tax Code.
  • In case the taxpayer is entitled to a tax credit or refund of the excess income tases paid during the year, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the said excess income taxes paid against the income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate (TCC) shall be allowed therefor.
  • In case the taxpayer chose the option to be issued TCC or refund but carried forward the said amount sought to be refunded/issued TCC in the AITE filed for their succeeding year, this shall be a ground for denial of the claim for tax credit or refund. However, the carried over amount may be allowed as credit against future income tax liabilities of the taxpayer-claimant.
  • Requisites in claiming tax credit or refund of unutilized excess income tax:
    • The filing of claim for TCC/refund must be a made within two (2) years from the date of filing of the AITR.
    • The income upon which the taxes where withheld must be included as part of the gross income declared in the income tax return of the recipient.
    • The fact of withholding is established by a copy of the withholding tax certificate duly issued by the payor (withholding agent) to the payee showing the amount of income payment and the amount of tax withheld. The taxpayer-claimant must be clearly identified as the payee in the withholding tax certificate.
• Dissolution or Cessation of Business. – As an exception to the irrevocability rule, the taxpayers who chose the option to “carry-over” may claim a refund provided that they have permanently ceased operations as also contemplated under Se4ction 76(C) of the Tax Code.
  • In case the taxpayer cannot carry-over the excess income tax credit due to dissolution or cessation of business, the taxpayer shall file an application for refund of any unutilized excess income tax credit
  • As clearly provided for in Section 10 of the EOPT Act, amending Section 76 of the Tax Code, the processing office/s of the Bureau of Internal Revenue (BIR) shall decide on the application and refund the excess taxes within two (2) years from the date of the dissolution or cessation of business. This is an exception to the 180-day processing of TCC/refund under Section 204(C) of the Tax Code.
  • For the purposes of these Regulations, the 2-year period to decide and refund the excess taxes shall commence from the submission of the “Application for Registration Information Update/Correction/Cancellation” (BIR Form No. 1905) together with the complete documentary requirements set by the BIR for the closure of business and the refund of excess income taxes due to cessation or dissolution of business and the refund of excess income taxes due to cessation or dissolution of business under Section 76 of the Tax Code.
  • The approved refund, if any, shall be released only after completion of the mandatory audit of all internal revenue tax liabilities covering the immediately preceding year and the short period return and full settlement of all tax liabilities relative to cessation or dissolution of the business and any existing tax liabilities prior to the cessation or dissolution of the business.

SECTION 6. Processing of Tax Credit/Refund Claims Under Sections 204(C) and 229 of the Tax Code. –

• The Commissioner may credit/refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, at the Commissioner’s discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction.
• No credit/refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty as provided under Section 229 of the Tax Code: Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit/refund. Provided, further, that for purposes of 180-day processing period, the counting shall begin upon submission of complete documents in support of the application that will be prescribed by the BIR for this purpose and should be within the 2 -year prescriptive period.
• Sections 204(C) and 229 of the Tax Code mandate that the time-frame to process and decide the tax process and decide the tax credit/refund shall be 180 days from the date of submission of the complete documents in support of the application as prescribed by the BIR up to the payment of the approved refund or receipt of the TCC.
• Processing of income tax credit/refund under Section 76(C) for a taxpayer whose operations is a “going concern” requires checking of the books of accounts and thorough audit to properly establish the propriety of the refund. To comply with the 180-day processing required under Section 204(C) of the Tax Code, all offices concerned shall prioritize the processing of income tax credit/refund claim/x filed under Section 76(C), in relation to Section 204(C) and 229 of the Tax Code.
  
  For purposed of these Regulations, the processing of income tax credit/refund shall be prioritized and should not be held in abeyance pending the completion of the audit for all internal revenue tax liabilities.
• Claim/s for tax credit/refund under Sections 2024(C) and 229 of the Tax Code must conform with the following essential requirites:
  • The tax credit/fund claim pertains to erroneously or illegally received or collected taxes or penalties imposed without authority.
  • Filing of a claim for tax credit/refund must be done within two (2) years after payment of the tax or penalty.
  • The erroneously or illegally received or collected taxes must be supported with a copy of the duty filed tax return with the corresponding payment remitted to the BIR.
• Should the Commissioner deny, in full or in part, the claim for credit/refund, the Commissioner shall state the legal and/or factual basis for the denial.
• The result of the investigation of the claim, whether approval or denial, shall be communicated to the taxpayer-claimant signed by the authorized revenue official.
• In case of full or partial denial of the claim dor credit/refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals (CTA).
• In case the tax refund/credit is not acted upon by the Commissioner within the 180-day period, the taxpayer-claimant may opt to:
  • Appeal to the CTA within the 30-day period after the expiration of the 180days required by law to process the claim; or
  • Forego the judicial remedy and await the final decision of the Commissioner on the application of VAT refund claim.
    
    When the BIR failed to render a decision within the 180-day period and the taxpayer-claimant opted to seek for a judicial remedy within thirty (30) days from such period, administrative claim for refund shall be considered moot and shall no longer be processed.
• Deliberate failure on the part of any official, agent, or employee of the BIR to process and decide on the application within the prescribed 180-day period shall be punishable under Section 269(J) of the Tax Code.
• A TCC validly issued under the provisions of the Tax Code may be applied against any internal revenue tax liability, excluding withholding taxes, for which the taxpayer is directly liable. Any request for conversion into refund of unutilized TCC may be allowed, subject to provisions of Section 230 of the Tax Code: Provided, That the original copy of the TCC showing a creditable balance is surrendered to the appropriate revenue officer for verification and cancellation. Provided, further, that in no case shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made.

SECTION 7, Judicial Claim for Credit/Refund Under Section 229 of the Tax Code.

• No suit or proceeding shall maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, of any sum alleged to have been excessively or in any manner wrongfully collected without authority, or any sum alleged to have excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.
• In any case, no such suit or proceeding shall be filed unless there is a full or partial denial of the claim for credit/refund by the Commissioner or there is a failure on the part of the Commissioner to act on the claim within the 180 – day period under Section 204(C) of the Tax Code.
• Judicial claim for tax credit/refund must be made within thirty (30) days from full or partial denial by the Commissioner or failure on the part of the Commissioner to act on the claim within the one hundred eighty (180)-day period under Section 204(C) of the Tax Code.
• For tax refund claims of excess income taxes of taxpayers undergoing cessation or dissolution of business pursuant to Section 76(C) of the Tax Code, judicial claim for tax credit/refund must be made within thirty (30) days from full or partial denial by the Commissioner.

SECTION 8. Separability Clause. – if any of the provisions of these Regulations is subsequently declared invalid or unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.

SECTION 9. Repealing Clause. – All other issuances and rules and regulations or parts thereof which are contrary to and inconsistent with any provisions of these Regulations are hereby repealed, amended, or modified accordingly.

SECTION 10. Effectivity. – These Regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR official website, whichever comes first.

Implementing Sections 22,34,51(A)(2)(e), 51(B), 51(D), 56(A)(1), 58(A), 58(C), 58(E), 77, 81 ,90, 103, 114, 128, 200 and 248 of the National Internal Revenue Code of 1997, as Amended by Republic Act No. 11976, Otherwise Known as the “Ease of Paying Taxes Act”, on the Filing of Tax Returns and Payment of Taxes and Other Matters Affecting the Declaration of Taxable Income.

SECTION 1. Scope – Pursuant to the provision of Sections 244, 245, of the National Internal Revenue Code of 1997 (Tax Code), as amended, in relation to Section 47 of Republic Act (RA) No. 11976, Otherwise Known as the “Ease of Paying Taxes Act” (EOPT), these Regulations are hereby promulgated to implement Sections 22, 34, 51(A)(2)(e), 51(D),56(A)(1), 58(A), 58(C), 58(E), 77,81,90, 91, 103, 114, 128, 200 and 248 of the Tax Code on:

• Filing of tax returns and payment of taxes to be made electronically or manually, regardless of venue or jurisdiction of the revenue District Office (RDO);
• Removal of civil penalty in case of filing of return at the wrong venue;
• non-filing of income tax return by an Overseas Contract Worker (OCW) or Overseas Filipino Worker (OFW);
• Removal of additional requirements for deductibility of certain payments; and
• Withholding tax at source and declaration of income on receipient.

SECTION 2. Definition of Terms. – When used in these Revenue Regulations, the following terms shall have the following meaning:

• “Filing of Return” shall refer to the act of accomplishing and submitting the prescribed tax return, electronically or manually, to the Bureau of Internal Revenue (BIR), or through any Authorized Agent Bank (AAB) or Authorized Tax Software Provider (ATSP) for specific tax returns as approved by BIR.
• “Payment of Tax or Remittance of Tax” shall refer to the act of delivering the amount of tax due or withheld, either electronically or manually, to the BIR, or through any AAB or ATSP for specific tax returns as approved by BIR.
• “Authorized Agent Banks (AABs)” shall refer to financial institutions that are accredited to collect the payment of internal revenue taxes on BIR’s behalf.
• “Revenue Collection Officers (RCOs)” shall refer to the BIR officers tasked to accept tax payments from taxpayers under certain limitations and remit the tax collected within the prescribed period.
• “Authorized Tax Software Provider (ATSP)” shall refer to an individual or organization whose business is to render electronic tax filing and/or tax payment services to taxpayer-clients by offering third-party and/or payment solution.
• “Overseas Filipino Worker (OFW)” refers to a Filipino who is to be engaged, is engaged, or has been engaged in remunerated activity in a country of which he or she is not an immigrant, citizen or permanent resident or in not awaiting naturalization, recognition or admission, whether land-based or sea-based regardless of status; excluding a Filipino engaged under a government-recognized exchange visitor program for cultural and educational purposes. For purposes of this provision, a person engaged in remunerated activity covers a person who has been contracted for overseas employment but has yet to leave Philippines, regardless of status and includes “Overseas Contract Workers” (OCWs). The term OFW is synonymous to the term “Migrant Worker” pursuant to Section 3[G] of RA No. 11641 or the “Department of Migrant Workers Act”.

SECTION 3. Modes of Filing Tax Returns and Payment of Internal Revenue Taxes. – The filing of tax returns shall be done electronically in any of the available electronic platforms. However, in case of unavailability of the electronic platforms, manual filing of tax returns may be allowed.

For tax payments, the same shall be made either electronically in any of the available electronic platforms or manually to any AABs and RCOs.

The terms “electronically” and “manually” means

• Electronically – when the filing of tax return and payment of tax return and payment of tax is done through electronic means using the BIR’s electronic platform (Electronic Filing and Payment System//eBIRForms), ePayment Channels of AABs (e.g. LinkBiz, PesoNet, UPay, MyEG, etc.).
• Manually – when the tax return is accomplished by writing through the aid of electronic equipment by the act of submission and payment is done through over-the-counter with any AAB or RCO of the BIR. The RCO can accept payment in cash up to P20,000.00, while for check payment, regardless of the amount.

In the case of filing of Income Tax Return (ITR) by married individuals, the husband and wife, whether citizens, resident or non-resident aliens, who are both self-employed, either engaged in business or practice of profession, shall file the said return for the return, such as in the case of spouses to file one return, such as in the case of spouses whose businesses are registered under two different RDOs, each spouse shall file separately their respective ITRs.

AABs and RCOs shall only accept tax payments manually after the taxpayers have already electronically filed their tax returns, unless an advisory is issued allowing manual filing.

SECTION 4. Removal of Civil Penalty in Case of Filing of Return at the Wrong Venue. – With the repeal of Section 248(A)(2) of Tax Code, as amended, under the EOPT, the civil penalty of 25% of the amount due in case of filing a return with an internal revenue officer other than those with whom the return is required to be filed, shall no longer be imposed.

SECTION 5. Individuals Not Required to File Income Tax Return. – Section 9 of Revenue Regulations No. 8-2018 is hereby amended to read as follows:

“SECTION 9. INDIVIDUALS NOT REQUIRED TO FILE INCOME TAX RETURN

• An Individual earning purely compensation income whose taxable income does not exceed Two Hundred Fifty Thousand Pesos (P250,000.00) – the Certified List of Employees Qualified for Substituted Filing of Income Tax Return, reflecting the amount of income payment, the tax due and tax withheld, if any, filed by the respective employers, duly stamped “Received” by the Bureau, shall be tantamount to the substituted filing of income tax returns by said employees;
• an individual whose income tax has been correctly withheld by his employer, provided that such individual has only one employer for the taxable year – the Certified List of Employees Qualified for Substituted Filing of Income Tax Return, reflecting the amount of income payment, the tax due and tax withheld, if any, file by the respective employers, duly stamped “Received” by the bureau shall be tantamount to the substituted filing of income tax returns by said employees;
• An individual whose sole income has been subjected to final withholding tax;
• A minimum wage earner as defined in these regulations – The Certified List of Employees Qualified for Substituted Filing of Income Tax Return, reflecting the amount of income payment, the tax due and tax withheld, if any, filed by the respective employers, duly stamped “Received” by the Bureau shall be tantamount to the substituted filing of income tax returns by said employees; and
• An individual citizen of the Philippines who is working and deriving income solely form broad as an “Overseas Contract Worker (OCW)” or “Overseas Filipino Worker” as defined under Section 3(G) of RA No. 11641, or the “Department of Migrant Workers Act”.
  
  In all cases, all individuals deriving compensation income, regardless solely of the amount from two (2) or more concurrent or successive employers at any time during the taxable year, are not qualified for substitued filing. Thus, they are still required to file a return.”

SECTION 6. Removal of the Additional Requirement of Deductibility of Certain Payments. – The entire provision of Section 34(K) of the Tax Code, as amended, on “Additional Requirements for Deductibility of Certain Income Payments” is repealed by EOPT, Section 2.58.5 of RR No. 2-98, as amended, is hereby repealed: Provided, however, that the obligation to withhold tax on certain income payments and remit the same remains.

SECTION 7. Withholding of Tax at Source. Section 2.57.4 of RR No. 2-98, as amended, shall now read as follows:

“Sec. 2.57.4. Time of Withholding. – The obligation of the payor to deduct and withholding the tax under Section 2.57. of these Regulations arises at the time an income has become payable. The term “payable” refers to the date the obligation of the payer to deduct and withhold the tax arises at the time an oncome payment is accrued or recorded as an expense or asset, whichever is applicable, in the payor’s books, or at the issuance by the seller of the sales invoice or other adequate document to support such payable, whichever comes first.”

SECTION 8. Income of Recipient. – Income upon which any creditable tax is required to be withheld at source under Section 57 of the Tax Code, as amended, shall be included in the return of its recipient but the excess of the amount of tax so withheld over the tax due on his return shall be refunded subject to the provision of Section 204 of the same Code.

SECTION 9. Separability Clause. – If any of the provisions of these Regulations is subsequently declared invalid or unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.

SECTION 10. Repealing Clause. – Any other issuances and rules and regulations, issuances or parts thereof which are contrary to or inconsistent with the provisions of these Regulations are hereby repealed, amended, or modified accordingly.

SECTION 11. Effectivity. – These Regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR official website, whichever comes first.

Implementing the amendments Introduced by Republic Act No. 11976, Otherwise Known as the “Ease of Paying Taxes Act”, on the Relevant Provisions of Title IV – Value-Added Tax (VAT) and Title V – Percentage Tax of the National Internal Revenue Code of 1997, as amended (Tax Code)

Amendments – The following words, phrases, or actions shall now be uniformly applied to the provisions affected under Revenue Regulations (RR) No. 16-2005 and its subsequent amendments:

• Gross Sales – The EOPT Act adopts the accrual basis of recognizing sales for both sales of goods and services, including transactions to government or any of its political subdivisions, instrumentalities or agencies, and government-owned or – controlled corporations (GOCCs). Hence, all references to “gross selling price”, “gross value in money”, and “gross receipts” shall now be referred to as the “GROSS SALES”, regardless of whether the sale is for goods under Section 106 or for services under Section 108 if the Tax Code.
• Invoice – Inasmuch as there is a shift from cash basis to accrual basis for sale of service, the EOPT Act mandates a single document for both sales of goods and services. Hence, all references to Sales/Commercial Invoices or Official Receipts shall now be referred to as “INVOICE”.
• Billings for sales of service on account. – With the shift from cash basis to accrual basis fro sale of service, all references to receipts or payments which was previously the basis for the recognition of sales of service under Title IV (Value-Added Tax) and Title V (Percentage Tax) of the Tax Code, shall now be referred to as “BILLING” or “BILLED”, whichever is applicable.
• VAT-exempt threshold. – The EOPT Act re-introduced the regular updating of the VAT-exempt threshold every three (3) years pursuant to Section 109(CC), in relation to Section 116 of the Tax Code. Hence, all provisions mentioning the VAT-exempt threshold of three million pesos (P3,000,000.00) shall now be read as “the amount of VAT threshold herein stated shall be adjusted to its present value every three (3) years using the Consumer Price Index (CPI), as published by the Philippine Statistics Authority (PSA)”.
• Filing and Payment. – The filing of tax return shall be done electronically in any of the available electronic platforms. However, in case of unavailability of the electronic platforms, manual filing of tax returns shall be allowed. For tax payment with corresponding due dates, the same shall be made electronically in any of the available electronic platforms or manually to any AABs and RCOs.

Specific Amendments to Sale or Exchange of Service Under Section 108 of the Tax Code. – Section 4.108-1, 4.108-4, and 4.108-6 of RR No. 16-2005, as amended, shall now be read as follows:

“SEC. 4.108-1. VAT on the Sale of Services and Use or Lease of Properties. – Sale or exchange of services, as well as the use or lease of properties, as defined in Section 108(A) of the Tax Code shall be subject to VAT, equivalent to twelve percent (12%) of the gross sales (excluding VAT).”

“SEC. 4.108-4. Definition of GrossSales. – ‘Gross sales’ refers to the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services during the taxable period for the services performed for another person which the purchaser pays or is obligated to pay to the seller in consideration of the sale, ,barter, or exchange of services that has already been rendered by the seller and the use or lease of properties that have alredy been supplied by the seller, excluding VAT and those amounts earmarked for payment to third (3rd) party or received as reimbursement for payment on behalf of another which do not redound to the benefit of the seller as provided under relevant laws, rules or regulations: Provided, that for long-term contracts for a period of one (1) year or more, the invoice shall be issued on the month in which the service, or use or lease of properties is rendered or supplied.”

“SEC 4.108-6. Allowable Deductions from Gross Selling Price. – In computing the taxable base during the quarter, the following shall be allowed as deductions from gross sales:

• The value of services rendered for which allowances were were granted by a VAT-registered person during the quarter in which a refund is made or a credit memorandum of refund is issued.
• Sales discount granted anf indicated in the invoice at the time of sale and the grant of which is not dependent upon the happening if a future event may be excluded from the gross sales within the same quarter it was given.”

Specific Amendments to VAT-Exempt Transactions – Section 4.109(B)(cc) of RR No. 16-2005, as amended, shall now be read as follows:

“SEC. 4.109. VAT-Exempt Transactions.

• Exempt Transactions – The following transactions shall be exempt from VAT:
  • Sale or lease of goods or properties or the performance of services other than the transactions mentionsed in the preceeding paragraphs, the gross annual sales do not exceed the amount of Three Million Pesos (P3,000,000.00); provided, that the amount herein stated shall be adjusted to its present values using the CPI, as published by the PSA every three (3) years.
    
    Self-employed individuals and professionals availing of the 8% tax on gross sales and other non-operating income, under Section 24(A)(2)(b) and 24(A)(2)(c)(2)(a) if the Tax Code shall also be exempt from the payment of twelve (12%) VAT.

Specific Amendments to Tax Credits. – Section 4-110-9 of RR No. 116-2005, as amended, is hereby added for the output VAT credit on uncollected receivables:
“SEC 4.110-1. Credits for Input Tax –
SEC. 4.110-9. Output VAT Credit on Uncollected Receivables – A seller of goods or services may deduct the output VAT pertaining to uncollected receivables from its output VAT on the next quarter, after the lapse of the agreed upon period to pay: Provided that, tthe seller has fully paid the VAT on the transaction: Provided further, that the VAT component of the uncolleted receivables has not been claimed as allowable deduction under Section 34(E) of the Tax Code.

Uncollected Receivable refers to sales of goods and/or services on account that transired upon the effectivity of these Regulations which remain uncollected by the buyer despite the lapse of the agreed period to pay.

To be entitled to VAT credit, the following requisites must be present:

1. The sale or exchange has taken place after the effectivity of these Regulations;
2. The sale is on credit or on account;
3. There is a written agreement on the period to pay the receivable, i.e. credit term is indicated in the invoice or any document showing the credit term;
4. The VAT is separately shown on the invoice;
5. The sale is specifically reported in the Summary List of Sales covering the period when the sale was made and not reported as part of “various” sales;
6. The seller declared in the tax return the corresponding output VAT indicated in the invoice within the period prescribed under existing rules;
7. The period agreed upon, whether extended or not, has elapsed; and
8. The VAT component of the uncollected receivable was not claimed as a deduction from gross income (i.e. bad debt).

In case of recovery of uncontrolled receivables, the output VAT pertaining thereto shall be added to the output VAT of the Taxpayer during the period of recovery.

These rules do not amend the conditions on the deductibility of bad debts expenses in the income tax returns as provided in RR No. 25-02.”

SECTION 6. Specific Amendments to Claims for Refund/Tax Credit Certificate of Input Tax – The entire Section 4.112-1 of RR No. 16-2005, as amended, is hereby amended to read as follows:

“SEC. 4.112-1. Claims for Refund/Tax Credit Certificate of Input Tax. –

• Zero-rated and Effectively Zero-rated Sales of Goods, Properties or Services
  
  A VAT-registered person whose sales of goods, properties or services are zero-rated or effectively zero-rated many apply for the issuance of a tax refund of input tax attributable to such sales. The input tax that may be subject of the claim shall exclude the portion of input tax that has been applied against the output tax. The application should be filed within two (2) years after the close of the taxable quarter when such sales were made.
  
  In case of zero-rated sales under Secs, 106(A)(2)(a)(1) and (3), Secs. 108(B)(1) and (2) of the Tax Code, the payments for the sales must have been made in acceptable foreign currency duly accounted for in accordance with the BSP rules and regulations.
  
  Where the taxpayer is engaged in both zero-rated or effectively zero-rated sales and in taxable (including sales subject to final withholding VAT) or exempt sales of goods, properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any zero-rated or effectively zero-rated sales can be claimed for refund or issuance of a tax credit certificate.
  
  In the case of a person engaged in the transport of passenger and cargo by air or sea vessels from the Philippines to a foreign country, the input taxes shall be allocated ratably between his zero-rated sales and non-zero-rated sales (sales subject to regular rate, subject to final VAT withholding and VAT-exempt sales).
  
• Cancellation of VAT registration
  
  A VAT-registered person whose registered has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Sec. 106(C) of the Tax Code may, within two (2) years from the date of cancellation, apply for the issuance of tax credit certificate or cash refund for any unused input tax which he may use in payment of his other internal revenue taxes or apply for refund for any unused input tax: Provided, however, that the taxpayer-claimant shall be entitled to a refund if it has no internal revenue tax liabilities against which the tax credit certificate may be utilized: Provided, further, that for purposes of dissolution or cessation of business, the date of cancellation being referred hereto is the date of issuance of BIR Tax Clearance.
  
• Where to file the claim for refund/credit
  
  Claims for tax credits/refunds shall be filed with the appropriate BIR Office that will be designated by the Commissioner of Internal Revenue for this purpose.
  
• Period within which refund/credit of input taxes shall be made
  
  In proper cases, the Commissioner of Internal Revenue shall grant refund for creditable input taxes within ninety (90) days from the date of submission of the invoices and other documents in support of the application filed in accordance with subsections (a) and (b) hereof: Provided that, should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial.
  
  The 90-day period to process and decide shall start from the filing of the claim up to the release of the payment of VAT refund: Provided that, the claim/application is considered to have been filed only upon submission of the invoices and other documents in support of the application as prescribed under pertinent revenue issuances.
  
  In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals (CTA); or in case the VAT refund is not acted upon by the Commissioner within the 30-day period after the expiration of the 90 days required by law to process the claim or (2) forego the judicial remedy and await the final decision of the Commissioner on the application of VAT refund claim: Provided that, failure on the part of any official, agent or employee of the BIR to act on the application within the ninety (90)-day period shall be punishable under Section 269(J) of the Tax Code: Provided further that, in the event that the 90-day period has lapsed without having the refund released to the taxpayer-claimant, the VAT refund claim may still continue to be processed administratively. However, the BIR official, agent or employee who has found to have deliberately caused the delay in the processing of the VAT refund claim may be subjected to penalties imposed under said Section.
  
• Risk-based approach in the verification and processing of VAT refund claims
  
  VAT refund claims shall be classified into low-, medium-, and high-risk, with the risk classification based on the amount of VAT refund claim, tax compliance history, frequency of filing VAT refund claims, among others: Provided, that medium- and high-risk claims shall be subject to audit or other verification processes in accordance with the BIR’s national audit program for the relevant year.
  
• Manner of giving refund
  
  Refund shall be made upon warrants drawn by the Commissioner of Internal Revenue or by his duly authorized representative without the necessity of being countersigned by the Chairman, Commission on Audit (COA), the provision of the Revised Administrative Code to the contrary notwithstanding: Provided that, refunds under this paragraph shall be subject to post audit by the COA following the risk-based classification above-described: provided, further, that in case of disallowance by the COA, only the taxpayer shall be liable for the disallowed by the COA, only the taxpayer shall be liable for the disallowed amount without prejudice to any administrative liability on the part of any employee of the BIR who may be found to be grossly negligent in the grant of refund.
  
• Automatic Appropriation
  
  An amount equivalent to five percent (5%) of the VAT collection of the BIR and the BOC from the immediately preceding year shall be automatically appropriated annually and shall be treated as a special account in the general fund or as trust receipts for the purpose of funding claims for VAT refund: Provided that, any unused fund, at the end of the year shall revert to the general fund.
  
• Quarterly Report
  
  The BIR and BOC shall be required to submit to the Congressional Oversight Committee on the Comprehensive Tax Reform Program (COCCTRP) a quarterly report of all pending claims for refund and any unused fund.”

SECTION 7. Transitory Provisions.

• Billed but uncollected sale of services. – These Regulations shall apply to sale of services that transpired upon its effectivity. Hence, for outstanding receivables on services on account that are rendered prior to the effectivity of these Regulations, the corresponding output VAT shall be declared once it has been collected. In case of collection, the sales and corresponding output VAT therefrom shall be declared in the quarterly VAT return when the collection was made and shall be supported with an Invoice following the transitory provisions contained in the RR intended for invoicing requirements to implement the EOPT Act or the new BIR-approved set of Invoices, whichever is applicable.
  
• Uncollected receivables from sale of goods as of the effectivity of these Regulations – For purposes of Section 4.11-9 of these Regulations, claim of output tax credit on uncollected receivables shall only apply to transactions that transpired upon the effectivity of these Regulations. No output tax credit shall be allowed for outstanding receivables from sale of goods on account prior to the effectivity of these Regulations

SECTION 8. Administrative Provision. – Separate RR shall govern the provisions of the EOPT Act covering Sections 113, 235, 236, 237, 238, 242 and 243 of the Tax Code particularly invoicing requirements, bookkeeping and accounting requirements, registration, filing, and payment including period to be given to the taxpayers to reconfigure machines and systems adjustments as a result of the shift from cash to accrual basis pursuant to the EOPT Act.

SECTION 9. Separability Clause. – If any of the provisions of these Regulations is subsequently declared invalid or unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.

SECTION 10. Repealing Clause. – All other issues and rules and regulations or parts thereof which are contrary to and inconsistent with any provisions of these Regulations are hereby repealed, amended, or modified accordingly.

SECTION 11 Effectivity. – These Regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR official website whichever comes first.

By: Garry Pagaspas, CPA

In an effort to streamline and facilitate tax compliance, Philippine government has been initiating numerous tax reforms. With the end view to ease the burden and make it more comfortable for taxpayers to file and pay their taxes along with related reports, Republic Act No. 11976 otherwise known as Ease of Paying Taxes” in the Philippines has been signed into law last January 5, 2024 and made effective last January 22, 2024 or within 15 days from publication last January 7, 2024.

 Under Republic Act No. 11976 otherwise known as “Ease of Paying Taxes” in the Philippines or “RA 11976 EOPT Ph”, the following are new Philippines Value Added Tax (VAT) rules being implemented by the Bureau of Internal Revenue (BIR) that taxpayers should be aware of:

1. Eased VAT registration and updates under RA 11976 EOPT Ph

Prior to RA 11976 EOPT Ph, taxpayers are required to file and pay PhP500.00 Annual Registration Fee (ARF) every year not later than January of each calendar year. Under RA 11976 EOPT Ph, such PhP500.00 Annual Registration Fee has been discontinued effective January 22, 2024 and so, taxpayers who have not yet paid for 2024 as of January 22, 2024 and for subsequent years are no longer required to file and pay PhP500.00 Annual Registration Fee. Further, under RA 11976 EOPT Ph, filing of registration update could be made either manually or online so it would become easier to effect changes on taxpayers’ registration, but this will not preclude BIR from conducting an audit to determine tax liability. VAT threshold of PhP3,000,000 is likewise bound to be adjusted every three (3) years based on Consumer Price Index of Philippine Statistics Authority so taxpayers could just watch out for such changes and determine impact for them accordingly.

2. Eased filing and payment of VAT under RA 11976 EOPT Ph

Prior to RA 11976 EOPT Ph, taxpayers are required to pay taxes strictly at the BIR Revenue District Office of registration and if registered under electronic filing and payment system (EFPS), the same should be filed and paid electronically. Should the taxpayer fail to do so, a surcharge of 25% of the basic tax shall be imposed as “wrong venue” filing and payment.

Under RA 11976 EOPT Philippines, filing and payment of taxes has been made easier. First, it provides that taxes in Philippines could be filed and paid either manually or electronically with the authorized agent bank (AAB), revenue collection officer (RCO) of the BIR office, or through a tax software provider. Secondly, it provided a “filing and payment anywhere”, not just within the coverage of BIR Revenue District Office of registration, but in any BIR Revenue District Office coverage. Thirdly, the 25% surcharge on the wrong venue has been abolished.

3. Eased VAT Invoicing under RA 11976 EOPT Ph

Prior to RA 11976 EOPT Philippines, sellers of goods are required to issue an Invoice while sellers of service are quired to issue an Official Receipts as basis for 12% VAT, and this becomes confusing at times resulting to disallowances of claims for tax credits on input VAT. To simplify VAT invoicing in Philippines, RA 11976 EOPT Ph came up with a uniform invoicing for both sellers of goods and sellers of services through issuance of a “VAT Invoice” as basis in Philippines for 12% Output VAT of the seller and Input VAT credit of the buyer effective April 27, 2024 upon the effectivity of RR 3-2024. Supplementary documents (e.g. delivery receipt, official receipt, acknowledgment receipt, billing statement, etc.) could also be used to document the transaction but will not become a valid proof of support for 12% Input VAT claim.

On transition, unused manual and loose leaf VAT Official Receipts in Philippines of sellers of services could still be used for 12% VAT transactions until December 31, 2024 but they have to strike “Official Receipts” and stamp as VAT Invoice (see Section 8(2), RR 7-2024), and submit an Inventory of such unused receipts within 30 days from effectivity of RR 7-2024 or until May 27, 2024. Alternatively, they could use such unused manual and loose leaf Official Receipts in Philippines until fully consumed as supplementary document with the phrase stamped on its face – “This document is not valid for claim of Input VAT’.

Certain information shall be contained in the VAT Invoice in Philippines under RA 11976 EOPT Ph and should the seller fail to indicate specific information, the seller could be held liable for such failure while the buyer could still claim the Input VAT from such VAT Invoice, despite being incomplete in details. For transactions of PhP1,000.00 or more, the rules previously require indicating “business style” and this rule has also been removed by RA 11976 EOPT Ph.

4. Simplified 12% VAT base and new input VAT on receivables under RA 11976 EOPT Ph

With the adoption of uniform VAT invoice for VATable sales in Philippines, RA 11976 EOPT Ph effectively adopted accrual basis of accounting for sellers of service making them liable for 12% based on billings for services rendered, instead of previously being liable for 12% VAT based on collections from services. Simply stated, sellers of services will now be liable for 12% VAT based on VAT Invoice in Philippines for services rendered, regardless of whether or not the customer or client pays them during the quarter. Should the customer or client fail to pay the VAT Invoice during the quarter, 12% VAT on such receivable/s from transactions that transpired upon the effectivity of the implementing rules (RR No. 3-2024) or starting April 27, 2024 could be allowed as VAT credit, provided such receivables has not yet been actually written off as worthless accounts for income tax purposes. In the event of recovery of such receivables, VAT portion will be added to the VAT liability on the quarter of recovery.

5. Enhanced VAT refund rules under RA 11976 EOPT Ph

Refund of excess Input VAT from zero-rated transactions will be acted upon by the BIR based on risk-level assessment: low risk requiring no further verification of duly submitted documents; medium risk requiring verification of at least 50% of its purchases and sales documents; and high-risk that would require 100% verification of duly submitted documents. Under RA 11976 EOPT Ph, if post-audit by the Commission on Audit (COA) resulted to disallowances, taxpayer should be made to account for such funds received based on COA rules for disallowances.

Previously, VAT refund process for excess Input VAT from zero-rated transactions should be completed by the BIR Philippines within 120 days from filing the application with complete documents and should the BIR fail to act (approve or deny) within such period, the taxpayer could file an appeal with the Court of Tax Appeals (CTA). This 120-day period was made 90 days in the previous amendment of the Tax Code but the 30-day appeal for inaction was removed. This appeal to CTA for BIR inaction is now restored under RA 11976 EOPT Ph.

For refund of VAT that was erroneously or illegally collected, the previous attempt to impose a processing period for BIR has been vetoed. Under RA 11976 EOPT Ph, it provides that the same should now be processed by the BIR within 180 days from submission of complete documents and inaction of the BIR is appealable to CTA within 30 days from lapse of the 180 days. Should BIR personnel/officer deliberately failed to act on such application, they could be held liable upon conviction under Section 269(J) of the Tax Code, as amended, for a penalty of PhP50,000 to PhP100,000 and/or an imprisonment of 5 to 10 years, among other penalties.

6. Reduces penalties for micro and small taxpayers under RA 11976 EOPT Ph

Under RA 11976 EOPT Philippines, certain concessions were made to micro (up to P3M gross sales) and small taxpayers (up to PhP 20M gross sales) such as the following:

• surcharge of 10% of basic tax instead of 25% surcharge on failure to file and pay in full, unless for willful neglect or filing a false or fraudulent tax returns intent to evade taxes where 50% surcharge applies;
• 6% interest instead of 12% interest on unpaid taxes;
• compromise penalty of PhP 500 for every failure to file and pay information returns, statements, or list, or keep any record, or supply any information as may be required but not to exceed PhP12,500 for all such failure during a calendar year.

While this seems a good thing, the author suggest micro and small taxpayers to focus on ensuring compliance instead of relying on these reduced penalties.

7. Enhanced period for keeping books of accounts

Prior to RA 11976 EOPT Ph, books of accounts and other accounting records are required to be kept within a period of ten (10) years and subsequent BIR issuance allowed keeping hard copies for first five (5) years and online copies for the next five (5) years.

Under RA 11976 EOPT Ph, books of accounts and other accounting records will only be required to be kept for a period of five (5) years reckoned from the day following the deadline in filing a return or from the date of late filing for the taxable year when the last entry was made in the Books of Accounts.  Under the implementing rules (see Section 4, RR 7-2024), they should be kept in hard copies for those under manual books of accounts and manual bound loose leaf books of accounts while those under computerized books of accounts, they could be kept in electronic copies.        

Profile:

Garry Pagaspas, CPA is a currently the Managing and Tax Partner of G. Pagaspas Partners & Co. CPAs (independent member firm of Allinial Global, 2^nd largest accounting association worldwide based on International Accounting Bulletin’s 2023 released survey) based in Makati City with Global Outsourcing offices in Kalibo, Aklan. Views in this article is personal to the author, not equivalent to a professional opinion and does not represent that of the organizations he is connected with.

Non-stock corporations or foundations in the Philippines may be formed for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, such as trade, industry, agricultural, and like chambers, or any combination thereof. 

Certain accredited non-stock, non-profit corporations in the Philippines are exempt from income tax on donations, grants, and gifts provided they are: 

1. Organized “exclusively” for one or more of the following purposes: religious, charitable, scientific, athletic, social welfare, cultural purposes, or for the rehabilitation of veterans and; 

2. No part of their net income or asset belongs to or inures to the benefit of any member, organizer, officer, or any specific person. 

To set up a non-stock non-profit corporation in the Philippines, you must first be registered with different government agencies. This article might be a help to your generous and big heart, having in mind the welfare of the less fortunate, or just want to start a non-stock non-profit corporation. 

Incorporators 

Incorporators shall be not less than five (5) in number but not more than fifteen (15) and the majority of whom are residents of the Philippines. Resident or non-resident aliens (foreigners) can be incorporators of a non-stock corporation, provided that the majority of the incorporators are residents of the Philippines. 

Basic requirements for registration with the Securities and Exchange Commission (SEC) 

The documentary requirements of the Securities and Exchange Commission (SEC) in the Philippines are as follows: 

1. Name Verification Slip 

2. Articles of Incorporation and By-laws; 

3. Joint affidavit of two incorporators to change the corporate name; 

4. List of members certified by the corporate secretary, unless already stated in the Articles of Incorporation; and 

5. List of the names of contributors or donors and the amounts contributed or donated certified by the treasurer 

There is no fixed amount of contribution required but only such reasonable amount as the incorporators and trustees may deem sufficient to enable the corporation to start operation, except in the case of foundations which must have a minimum contribution of at least One Million Pesos (P1,000,000.00). 

Additional requirements: 

1. Endorsement/clearance from other government agencies, if applicable; 

2. For Foundations: Notarized certificate of bank deposit of the contribution which shall not be less than P1,000,000.00 and statement of willingness to allow the Commission to conduct an audit; 

3. For Religious corporations: Refer to Sections 109-116 of the Code, and an affidavit of affirmation or verification by the chief priest, rabbi, minister, or presiding elder; 

4. For Federations: Certified list of member associations by the corporate secretary or president; 

5. For Condominium corporations/associations: Master Deed with the primary entry of the Register of Deeds and Certification that there is no other existing similar condominium association within the condominium project. 

Once an application was submitted, the SEC evaluator will review the initial drafts for seven (7) working days and will email that the application is preapproved. After signing and uploading the generated forms, SEC will send another email if the application was approved and qualified for payment and you will receive a payment assessment form that should be paid within 45 days. Once paid, the digital COI will be received, and the original documents together with proof of payment will be submitted to the SEC office within 60 days from the date of incorporation in order to claim the original Certificate of Incorporation. 

Registration with the BIR 

The non-stock non-profit corporation must be registered with the BIR within 30 days from the date of Incorporation and obtain a Tax Identification Number (TIN), registration of book of accounts, and official receipts or invoices. Certain registration fees and taxes will be paid.  

If you wish to be tax-exempt, non-stock non-profit corporations in the Philippines are required to secure a BIR Tax Exemption Ruling.  

Business Permits and Licenses 

Non-stock non-profit corporations must also be registered in the Local Government unit (LGU) where the principal office address of the company is located and secure the business permit, barangay clearance, sanitary permit, fire safety inspection certificate, and other clearances in order to go operational. Certain registration fees will be paid. 

Employer Registration 

Employers for non-stock non-profits are required to be registered with Social Security System, Philippine Health Insurance Corporation, and Home Development Mutual Fund for the benefit of their employees. 

A Corporation is a legal entity that is separate and distinct from its owner or incorporators. It has legal rights and obligations similar to an individual. It can enter into contracts, loans, hire employees, pay taxes, etc. The ownership of a corporation is divided into shares of stock.

A Corporation issues the stock to individuals or other businesses, who then become owners or stockholders, of the corporation.

Advantages of a Corporation

• The risk and liability is limited only to the corporation. Owners are not personally liable.
• It is easy to increase capital through the issuance of stocks to investors
• It can be passed on to different owners
• It can exist indefinitely
• It has the capacity to act independently similar to individual
• The management or decision-making is shared by the board of directors, not the sole individual.

Disadvantages of a Corporation

• More costly to set up than a sole proprietor
• It is mandated by more government reportorial requirements and laws
• Higher capital requirements and operating cost
• Higher tax rates

Where to Register a Corporation?

Here are the government agencies where the corporation are required to register in the Philippines:

• Securities and Exchange Commission (SEC)
• Local Government Units (LGU) where your business is located:
  • Barangay
  • Mayor’s Office
• Bureau of Internal Revenue (BIR)
• If you have employees, you need to register with the following:
  • Social Security System (SSS)
  • Philippine Health Insurance Corporation(PHIC)
  • Home Development Mutual Fund(HDMF)
  • Department of Labor and Employment(DOLE)

Who may form a Corporation?

Any person, partnership, association, or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes. Provided, that natural persons who are licensed to practice a profession, and partnerships or associations organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation unless otherwise provided under special laws. Incorporators who are natural persons must be of legal age.

Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock.

How much is the Capitalization?

Stock corporations shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law. However, some highly regulated companies or corporations are required to have a minimum capitalization based on the industry or equity of that certain entity.

Some domestic corporations with more than 40% foreign equity are required to have at least U$200,000.00 minimum paid-up capital if the registering corporation intends to operate as a Domestic Market Enterprise

Basic Documentary Requirements

• Name Verification Slip (may be secured online or at SEC Name Verification Unit)
• Articles of Incorporation (AI) and By-laws (BL)
• Treasurer’s Affidavit
• Joint affidavit of two incorporators to change the corporate name (not required if already stated in AI)

Additional Requirements

• Endorsement/clearance from other government agencies, if applicable
• Clearance from other Department of the Commission*
• For Corporations with more than 40% foreign equity: Application Form for registration under the Foreign Investments Act of 1991 (R.A. 7042, as amended)
• Endorsement/clearance from (a) Philippine Economic Zone Authority (PEZA) for the applicant under R.A. 7916, (b) Subic Bay Metropolitan Authority (SBMA) or Clark Development Corporation (CDC) for the applicant under R.A. 7227 and (c) Cagayan Economic Zone Authority (CEZA) for the applicant under R.A. 7922

References:
Republic Act 11232 or Act of Providing for the Revised Corporation Code
Republic Act No. 7042, as amended, also known as the Foreign Investment Act of 1991 (FIA)

By: Garry S. Pagaspas, CPA. December 14, 2020

In dealing with the COVID-19 Pandemic, the Philippine legislature passed into law Republic Act No. 11469, otherwise known as “Bayanihan To Heal As One Act” and along with other matters contained therein are tax rules and implications in related dealings. Below are 10 new notable tax rules in the Philippines under COVID-19 Pandemic based on recent issuances (e.g. Revenue Regulations (RR), Revenue Memorandum Circulars (RMC), and Revenue Memorandum Orders (RMO) of the Bureau of Internal Revenue (BIR):

1. Filing extensions under various BIR issuances (RR Nos. 7/8/10/11/12-2020)

With the imposition of quarantine since mid-March 2020, work in private and government offices were suspended and mobility was limited prompting the BIR to come up with issuances extending filing deadlines during quarantine. These extensions during the quarantine period cover periodic tax returns and reports filings in Philippines – monthly and quarterly; filing of time-bound applications/ processes – tax refunds, registrations, etc.; and legal processes – filing of reply/protest to assessment notices of BIR, so take note of these BIR issuances for future reference on issues related to late filing and/or failure to file allegations. Notably, while the rest of extensions have been regularized by now, Tax Amnesty on Delinquency under Republic Act No. 11213 in Philippines as implemented by RR No. 4-2019 has been further extended until  December 31, 2020 under RMC No. 61-2020.

2. Import Exemptions on equipments, supplies, etc. for COVID-19 under RR 6-2020 dated Mar. 27,2020 and RR 28-2020

Relative to the Philippine government’s response to COVID-19, the importation of critical or needed healthcare equipment or supplies intended to combat COVID-19 such as personal protective equipment (PPE); laboratory/ medical/ surgical equipments/ devices/ supplies/ tools/ consumables; testing kits;  other supplies or equipment as may be determined by the Department of Health (DOH); and materials needed to make health equipment and supplies deemed as critical or needed to combat COVID-19 in Philippines was accorded tax exemption from value added tax (VAT), excise tax, and other fees.

Importation of these equipments, supplies, etc. are relatively exempted from the issuance of Authority to Release Imported Goods (ATRIG) under RMO 35-2002 subject to BIR post investigation/ audit. Donations of these imported articles to the government was likewise exempted from donor’s tax and subjected to ordinary rules on deductibility of charitable contributions.

Relatively, RR 28-2020 also provides for exemption from 12% VAT, excise tax, and other fees along with ATRIG, importation from June 25, 2020 to December 19, 2020 of certain goods (e.g. PPE), equipments duly approved (e.g. DENR, DOH, etc.) for waste management, and inputs/ raw materials/ equipment necessary for the manufacture of essential goods related to containment or mitigation of COVID-19.

3. IPO tax exemptions under RR 23-2020 dated Sept. 14, 2020

Normally, initial public offering (IPO) of shares of stock of closely held corporations in Philippines are subject to percentage tax under Section 127(B) of the Tax Code of 1997, as amended, at the rates ranging from 1% to 4% (Sec. 127(B), NORC, as amended) depending on volume of IPO shares to outstanding shares. Under RA 11469, Section 127(B) of the Tax Code of 1997, as amended, has been repealed so no IPO taxes will then be imposed.

4.DST exemptions on restructuring under RR 24-2020 dated Sept. 14, 2020

With the unfortunate adverse economic impact of COVID-19 where some borrowers are losing capacity to pay, loans/ credits/ amortization/ lease payment dates are allowed to be restructured and/ or extended. These are normally subject to Documentary Stamp Tax (DST) in Philippines under the Tax Code, as amended, but was exempted by RA 11469 for those made on/or before December 31, 2020, except interbank loan and bank borrowings.

5. NOLCO deduction to 5 years from usual 3 years under RR 25-2020 dated Sept. 30, 2020

Again, with the severe adverse economic impact of COVID-19, operational loss could be imperative for some businesses. Under the regular rules (Section 34(H)/ RR No. 14 – 2001), taxpayer’s operational loss is allowed recoupment within the next 3 consecutive years following the year of loss as allowable deduction from gross income. Under RA 11469, the three (3) year period for 2020 and 2021 taxable years are extended and made 5 consecutive years or until 2025 for 2020 losses, and 2026 for 2021 losses, subject to NOLCO reporting requirements in the income tax return and financial statements.

6. Donor’s Tax exemption on donations under RR 9-2020 dated Apr. 6, 2020, and to schools under RR 26-2020

Under the Tax Code of 1997, as amended, donors are taxed at 15% of taxable net gift and donations to accredited done-institutions and government for NEDA priority projects are fully deductible from gross income for income of the donor tax purposes while other donations are under limited deductibility – 5%/10% of taxable net income before donations. Relative to RA 11469, certain donations  (cash, critical and needed healthcare equipments/ supplies, relief goods, and use of property) made during the state of national emergency geared towards the sole and exclusive purpose of combatting COVID-19 in Philippines to government (even if not under NEDA priority project) and to accredited done-institutions are exempted from donor’s tax and fully deductible from gross income for income tax purposes, subject to proper documentation, as indicated in RR 9-2020. Donation of items deemed sale for value-added tax (VAT) purposes are likewise exempted from 12% VAT. These however are subject to BIR’s power to examine documentation to determine qualification.

With the resumption of classes in schools under online/ alternative learning system, donations (local or foreign – importation) of personal computers, laptops, tablets, or similar equipment (i.e. mobile phone, printers, etc.) for use in teaching and learning in public schools from September 15, 2020 up to December 19, 2020 are exempted from donor’s tax, fully deductible for income tax purposes, and exempted from 12% VAT under deemed sale rules, subject to proper documentation as indicated in RR 26-2020.  

7. Income tax exemptions on Covid-19 hazard/ allowance/ retirement under RR 29-2020 dated Oct. 15, 2020

While compensation for employer-employee relationship is taxable at 20-35% under the Tax Code, as amended, certain income payments relative to employment are exempted under COVID-19 pandemic: retirement benefits from June 5, 2020 to December 31, 2020, the amount of which is in accordance with the retirement plan duly-registered with BIR; COVID-19 special risk allowance to health workers; actual hazard duty pay to human resource for health personnel; and, compensation given or to be given from February 1, 2020 and during state of national emergency as declared by the President, to health workers who contacted COVID-19 in line of duty or dies fighting COVID-19 (P15,000 for mild/ moderate cases, P100,000 in case of severe or critical sickness, or P1M in case of death). Such income payments are required to be included in the Alphabetical List of Employees/ Payees to be filed by employers along with a one-time list of recipients not later than January 15, 2021.

8. Registration of online sellers under RMC 60-2020 dated June 1, 2020

During lockdowns under COVID-19, online selling had surged prompting the BIR to give due notice to all persons doing business and earning online in any manner or form, specially those who are into digital transactions through the use of any electronic platforms and media, and other digital means to ensure that their business is registered and tax compliant in accordance with the rules – issuance of receipts/invoices, keeping of books of accounts, withholding of applicable taxes, and paying correct taxes. Registration as set until July 31, 2020, extended until August 31, 2020, then finally extended until September 30, 2020. Sales made prior to registration voluntarily declared within the registration period are without penalty for late payment, and penalties apply beyond September 30, 2020.

Summary

Notably, COVID-19 pandemic has brought new tax rules that taxpayers should be aware of for their BIR tax compliance in Philippines. Some of these rules are time bound (co-terminus with the effectivity of RA 11949) while some extends beyond the expiration of the law such as the NOLCO. For specific details of the application, full reading of the cited BIR issuances in the Philippines is highly suggested to avoid missing out the nitty gritty of the new tax rules under COVID-19 pandemic in Philippines.

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Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for almost two (2) decades now helping further taxpayers on securing BIR Rulings, appeal of BIR Ruling denials, company registrations in Philippines, tax compliance, tax savings, tax assessments, tax refunds, and other related professional tax services. He has likewise been helping out local and foreign investors/clients determine the most appropriate legal entity to register in the Philippines based on intended operations, the eventual registration of such legal business entity and other related professional services such as securing Ph Visa, payroll, and business consultancy. He was formerly with the academe and is presently a frequent speaker of Tax and Accounting Center, Inc. and other seminar entities.

Disclaimer: This is for purposes of academic discussions only as personally summarized by the author, not of Tax and Accounting Center, Inc. and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances.