Revenue Memorandum Circular No. 22-2024

This Circular is issued to announce the availability of BIR Form No. 1702-EX [Annual Income Tax Return Corporation, Partnership and Other Non-Individual Taxpayers EXEMPT Under the Tax Code, as Amended, {Sec. 30 and those exempt in Sec. 27 (C)} and Other Special Laws, With NO Other Taxable Income] January 2018 (ENCS) v2 in the Electronic Filing and Payment System (eFPS).

The aforementioned BIR Form shall be filed and the tax due thereon paid on or before the 15th day of the 4th month following the close of the taxpayer’s taxable year.

(Originally published in GPP CPAs Website)

 By: Azalea Fayugenia T. Chimmin, CPA

Filing of Income Tax Return (ITR) is a must for everyone, individual and corporate persons, earning income in the Philippines and they are generally classified into two groups – individual taxpayers and corporate taxpayers in Philippines. We discuss below the four basic key points you need to know in filing the correct 2019 Annual ITR in the Philippines.

1. What BIR 2019 ITR Form in Philippines and version to use

There are six (6) Annual ITR Forms in the Philippines and it is important that the taxpayers should be fully aware which annual ITR form to use depending on source of income, method of deduction, and/or taxability such as the following:

Individual taxpayers Philippines:

• BIR Form 1700 – This form is for individual taxpayers earning purely compensation income from an employer-employee relationship.
• BIR Form 1701A – This form is for individual taxpayers earning income from business and/or profession only and are applying the Optional Standard Deduction or the special tax rate of 8% under the TRAIN or Republic Act No. 10963 amendments.
• BIR Form 1701 – This form is for individual taxpayers earning income from business and practice of profession and are applying the itemized method of deduction or individuals who are earning mixed income from business/profession and compensation regardless of method of deduction.

Corporate Taxpayers Philippines:

• BIR Form 1702RT – This form is for corporate taxpayers where all its activities are subject to the Normal Corporate Income Tax, currently at 30%.
• BIR From 1702MX – This form is for corporate taxpayers with activities that are subject to preferential taxes such as 10% for Regional Operating Headquarters, 5% Gross Income Tax for those registered with the Philippine Economic Zone Authority (PEZA) and other special economic zones. The same form shall be used by corporations with activities that are subject to different tax rates.
• BIR Form 1702EX – This form is for corporate taxpayers with activities that are exempt from income tax such as Regional Area Headquarters, Representative Office, charitable institutions, and general professional partnerships.

For 2019, it is important to note that all individual taxpayers are required to file the 2018 version of the returns while corporate taxpayers are required to file the version that is available in their respective filing facilities, i.e. in the Electronic Filing and Payment System (eFPS) or Electronic BIRForms (eBIRForms).

 2. How to file 2019 ITR Philippines

Filing of 2019 ITR in the Philippines would depend on the filing platform the taxpayer is registered into – eFPS, eBIR, or manual filing. Individual and Corporate taxpayers enrolled in the eFPS need to use the same facility in filing the 2019 Annual ITR, except that eFPS facility does not yet contain the 2018 version of BIR Form 1701 and 1701A so taxpayers are advised to file using the eBIRForms and print based on BIR Revenue Memorandum Circular (RMC) No. 37-2020 dated April 06, 2020 (click to view RMC from BIR site). Taxpayers that are mentioned in Section 4 of Revenue Regulations No. 6-2014 and not enrolled in eFPS are required to use the eBIRForms v7.6 facility (downloadable from the BIR’s website) with the 2018 versions. Taxpayers that are not required to use eBIRForms are Senior Citizens, purely compensation income earners, and employees who qualified for substituted filing but are filing for purposes of loans, promotion, scholarship, foreign travel, and the like pursuant to BIR RMC  No. 19-2015 dated April 13, 2015.

To file 2019 ITR in the Philippines via eFPS is to use the EFPS Facility in electronically filing where the Filing Reference Number (FRM) is regenerated as a proof of successful filing. The FRN is automatically indicated at the upper right corner of the ITR after filing.

On the other hand, to file 2019 ITR in the Philippines via eBIR is to use the eBIRForms v7.6 in electronically filing the ITR. After filing, the taxpayer will receive an email from the BIR with the Tax Return Receipt Confirmation (TRRC) as proof of successful filing and this needs to be attached to the 2019 Annual ITR.

3. When to file 2019 ITR in Philippines

For the year-ended December 31, 2019 all Annual ITRs should have been filed last April 15, 2020 and the required attachments of electronically filed returns submitted last April 30, 2020. Due to the COVID-19 pandemic, BIR issued Revenue Regulations No. 11-2020 (click to view RR 11-2020 from BIR site) providing among others that the 2019 Annual ITRs may be filed until June 14, 2020 while the attachments for electronically filed returns until June 30, 2020.

4. How to pay income tax due

Taxpayers that filed 2019 ITR through the eFPS facility need to pay the taxes due through the same facility via electronic payment, while taxpayers who filed through the eBIRForms could electronically pay through the following:

• Landbank of the Philippines’ (LBP) Link.ziz Portal (requires LBP ATM account);
• Development Bank of the Philippines’ (DBP) Pay Tax Online (requires DBP account or Visa/Master credit card);
• Unionbank Online Web and Mobile facility (requires Unionbank account);
• GCash; or,
• Pay Maya.

Notably, BIR eFPS would show penalties for late payments and based on BIR advisory dated March 30, 2020 (click to view Advisory from BIR site), you can simply disregard the penalty and pay the tax due accordingly. On the other hand, taxpayers who want to pay manually must print the 2019 Annual ITR in three (3) copies and proceed to the following for payment:

• the nearest AAB regardless of RDO; or
• the nearest Revenue Collection Officer (RCO) of the nearest RDO even if there are AAB’s for cash payment of not more than PhP20,000.00 or in check of any amount.

Check should be payable to the Bureau of Internal Revenue with or without the IFO, Tax Identification Number of the taxpayer, and the name and branch of the AAB.

5. Attachments to 2019 annual ITR in Philippines

The Philippines follows the pay-as-you-file rule in filing all returns including the 2019 Annual ITR. This includes the required attachments such as Summary Alphalist of Withholding Taxes (SAWT), Creditable Withholding Tax Certificates (BIR Form 2307), and Audited Financial Statements. For 2019 ITR filing and payment in Philippines, BIR issued Revenue Memorandum Circular No. 49-2020 (Click to view RMC from BIR site) giving taxpayers the following options in submitting the required attachments:

• Manually to the Revenue Collection Officer (RCO) of the nearest RDO. The RCO shall stamp the Balance Sheet/ Statement of Financial Position, Income Statement/ Statement of Comprehensive Income, and the Auditor’s Certificate. The RCO shall also stamp the printed copy of the FRN/TRRC of electronically filed ITRs.
• Electronically through the eAFS facility at the BIR’s website after proper enrollment. The documents shall be scanned to PDF and grouped into the following and rename the file accordingly:

Upon submission via the eAFS facility, the taxpayer shall receive a Transaction Reference Number as proof of successful submission. However, the taxpayers are advised to keep the original copies of returns which shall be presented upon request of the BIR.

Finally, BIR also issued Revenue Memorandum Circular No. 42-2020 for 2019 ITR filing and payment guidelines and you may please browse for further reference – RMC 42-2002 from BIR site, and Annex A of RMC No. 42-2020 from BIR site.

About the Author:

Azalea Chimmin is a Certified Public Accountant and is a Principal at the Tax Services Department of G. Pagaspaspas Partner’s & Co. CPAs (a full service arm accounting firm based in Makati City, Metro Manila, Philippines). She has more than 6 years of experience dealing with BIR and PEZA Reporting Compliance, BIR tax audit, Value Added Tax (VAT) Refund, and PEZA Registration for local and foreign corporations, and other related areas of tax and corporate practice in the Philippines such as company registrations with SEC, incentives availment with PEZA and other agency registrations, among others.

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. For comments, you may also please send mail at info(@)taxacctgcenter.ph, or you may post a question at Tax and Accounting Center Forum and participate therein.

Annual income tax return filing not later than April 2015 for 2014 calendar is fast approaching. Early preparation is best encouraged for a better tax compliance and management. As the saying in the movie, “The Mechanic” goes:

“Victory loves preparation.”

Listed below are some items we suggest you to take into account for the April 2015 filing of income tax return and audited financial statements in the Philippines:

Use of new Income Tax Returns in Philippines

For April 2015, June 2013 2011 versions of income tax returns are required to be used, both for manual filing, eBIR Forms filing (eBIR Forms) and electronic filing and payment system (EFPS). Please note of the following new things  on said forms:

BIR Form No. 1701 for self-employed individuals, professionals and freelancers

• Required information in all capital letters using black ink;
• A 12-page annual income tax return requiring more information;
• Details on external auditor/tax agent, if applicable;
• Spouse details for consolidation of returns;
• Schedule of itemized deductions – regular, and special;
• Balance Sheet or Statement of Financial Condition details;
• Supplemental information at the back of the income tax return. For transparency purposes, new annual income tax returns for individuals require disclosure of other income not subject to 5-32% income tax rates such as capital gains subjected to capital gains tax, passive income subjected to final withholding tax, exempt income, and etc. Please to Page 11 of the return and in completing the form, it may require you some details and information that may take you time to provide;
• Supplemental notes to financial statements under Revenue Regulations No. 15-2010 and Revenue Memorandum Orders No. 19-2011. Under the new forms, certain schedules are restored, instead of previously being required on the financial statements;

BIR ITR Form No. 1702 for corporations

• Use of proper BIR Form No. 1702-R for regular corporate income taxpayers, BIR Form No. 1702-EX for exempt corporations, or BIR Form No. 1702-MX for corporation with mixed tax regimes;
• Required information in all capital letters using black ink;
• Details on external auditor/tax agent;
• Spouse details for consolidation of returns;
• Schedule of itemized deductions – regular, and special;
•  Balance Sheet or Statement of Financial Condition details;
• Supplemental information in Schedule 9;
• Supplemental notes to financial statements under Revenue Regulations No. 15-2010 and Revenue Memorandum Orders No. 19-2011. Under the new forms, certain schedules are deleted, and instead, required them on the financial statements.;
• For those with special tax benefits, details on such benefits and comparison with tax implications as if the corporate taxpayer is under normal corporate income tax of 30%

Taxable income items

At this early, check on the components of the gross sales or gross receipts in relation to the . See to it that indeed they are taxable to avoid paying tax on items not yet subject to income tax like unrealized foreign exchange gains. These items are normally under other income. Read more on…Overview of Corporate Income Taxation.

Deductible expenses and supporting documents

As a rule, allowable deductions are ordinary and necessary business expenses and would tend to lower down income tax liability. No specific enumeration has been provided for as long as they were incurred in the conduct of trade or business  and complies the following basic requirements for deductibility:

• Must be supported with documents such as official receipts, and sales invoices;
• Must be withheld, if subject to withholding tax;
• Not contrary to law, public morals, policy or order.

 Creditable withholding tax certificates – BIR Form No. 2307

Creditable withholding tax certificates are advance income tax payments so that every peso withheld is a peso tax credits deductible from annual income taxes. Claims of withholding tax credits should be supported by certificates (BIR Form No. 2307) issued by clients or customers. As such, it might be a good move to summarize income subjected to creditable withholding taxes and the related certificates. If the clients or customers had not provided the certificates, then, this maybe the best early time to remind them to issue one for the amounts they withheld.

Tax planning 

Perhaps at this time (after the third quarter), the taxpayers may already have an estimate of its tax position at the end of 2012. Based on its tax position and its income tax component, it may be worth a while to re employ tax planning strategies. One some expenses might be deductible at year end, so taking serious thought about it and documenting them would be good. Here are some examples of year-end expenses:

• Accrual of salaries, bonuses, and other forms of compensation. Note however, that this would require a withholding tax to be deductible;
• Bad debts for worthless accounts based on supporting documents;
• Making charitable contributions to accredited donee institutions for full deductible donations

In applying the above, you might need the help of a professional for an effective and efficient implementation.

Improperly accumulated earnings tax (IAET)

Another most common errors of taxpayers is on the level of free retained earnings in relation to paid-up capitalization. Under Section 43 of the Corporation Code, unappropriated retained earnings are not allowed to exceed paid-up capital. Revised Securities Regulation Code requires a note to the audited financial statements with a concrete plan on the excess retained earnings. Section 29 of the Tax Code imposes a 10% penalty tax on improper accumulations so that a double check on the level of free retained earnings at the end of the year is highly recommended to determine implications and avoid the penalties. Read more on…Overview of 10% IAET in the Philippines.

Disclaimer: This article is for general conceptual guidance only 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. For comments, you may please send mail at in**@************er.org.

By: Tax and Accounting Center Philippines

Few months prior to the last day of filing calendar year annual income tax return for taxable year 2013, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 2-2014 dated 24 January 2014 entitled “New Income Tax Forms”.

New Annual Income Tax Returns Philippines

Starting the taxable year 2013, the following new income tax returns in the Philippines shall be used by those taxpayers who are mandatorily required to file annual income tax returns, and those not required to file but opted to file the same:

1. Individual Income Tax Returns Philippines

• BIR Form No. 1700 version June 2013 – Annual income tax return for individuals earning purely compensation income; and,
• BIR Form No. 1701 version June 2013 – Annual income tax returns for Self-employed individuals, estates, and trusts.

2. Corporate Income Tax Returns Philippines

• BIR Form No. 1702-RT version June 2013 – Annual income tax return for corporations, partnerships, and other non-individual taxpayers subject ONLY to REGULAR income tax rate of 30%;
• BIR Form No. 1702-EX version June 2013 – Annual income tax return for use ONLY by corporations, partnerships, and other non-individual taxpayers EXEMPT under the Tax Code and other special laws, with NO other taxable income; and,
• BIR Form No. 1702-MX version June 2013 – Annual income tax return for corporations, partnerships and other non-individuals with mixed income subject to multiple income tax rates or with income subject to special or preferential rate.

Please be guided on the proper annual income tax returns to be used for filing not later than April 15 of the following year for individual taxpayers (employees, freelancers, sole proprietorship, and the likes), and corporate taxpayers on calendar year, or not later than the 15th day of the fourth month following the end of fiscal year for corporate taxpayers on fiscal year basis.

How to get copies of the 2013 new income tax returns Philippines?

You have the following options to get new BIR forms for use in the filing of the annual income tax returns Philippines:

1. Through a download from the Bureau of Internal Revenue (BIR) website – http://www.bir.gov.ph/birforms/form_itr.htm#;
2. Through a pre-printed forms  from the Bureau of Internal Revenue office of registration (e.g. Revenue District Office);
3. For electronic filers under elctronic filing and payment system (EFPS), then, through the BIR EFPS facility upon availability; or
4. Through the eBIR returns upon availability.

Please be guided accordingly and happy filing season!

Disclaimer: This article is for general conceptual guidance only 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. For comments, you may also please send mail at info(@)taxacctgcenter.org, or you may post a question at Tax and Accounting Center Forum and participate therein.