In recent times, the realm of Philippine taxation has witnessed a dynamic metamorphosis fueled by groundbreaking legislation. Examples of these revolutionary tax changes are the Tax Reform for Acceleration and Inclusion (TRAIN) Law and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
Now, on the horizon, the Ease of Paying Taxes (EOPT) Act, encapsulated in the most recent Senate Bill 2224, promises to revolutionize the taxation landscape. Since this is set to be signed into a new law, it promises to foster a more business-friendly environment for both local entrepreneurs and foreign investors. Check out its pertinent details below:
Simplified Transactions: Manner of Registration, Filing, and Payment
Under the EOPT Act, registering, filing, and paying taxes are set to become seamless processes. The bill introduces both manual and electronic options for registration, transfer, and cancellation, providing flexibility to resident and non-resident taxpayers. Filing and payment, too, can be done either manually or electronically through various channels, eliminating the hassles of visiting specific venues. The annual registration fee of P500 and the requirement to provide information about the business style in the registration process will be eliminated.
Invoice Evolution: Printing and Issuance Simplified
With EOPT, the invoicing process undergoes a significant transformation. Taxpayers can obtain Authority To Print invoices at no cost from the Bureau of Internal Revenue (BIR). The elimination of official receipts as a document for service sales signifies that only invoices will be issued for both goods and services transactions.
Additionally, the obligatory inclusion of business style information in the invoice will be waived. The mandatory issuance threshold is raised from P100 to P500, adapting to the consumer price index every three years. VAT-registered sellers must issue duly registered invoices, irrespective of the amount, ensuring a standardized and efficient invoicing system.
Income Taxes Unleashed: Repealing Withholding and Embracing Credits
EOPT waves goodbye to withholding tax as a prerequisite for deductible payments from gross income. It also redefines the criteria for granting claims for creditable income tax, which must be tied to ist inclusion in gross income. This allows for the carryover of unused credits (when declared when income is reported) to the succeeding period. The bill emphasizes the obligation to deduct and withhold tax when the income becomes payable, offering clarity to businesses.
Revamping Business Taxes: Shifting to Gross Sales Basis
Gross sales take center stage in business taxes, marking a shift from cash to accrual basis. EOPT introduces adjustments to the P3,000,000 threshold, ensuring it aligns with the present value every three years. Notably, accounting services in the Philippines pointed out that these VAT-related changes simplify the process, allowing purchasers to claim input tax even with incomplete invoice information.
Refund Realities: A Transparent VAT Refund System
EOPT brings transparency to VAT. The requirement for invoices to “prominently” display VAT-exempt or zero-rated transactions is eliminated. Purchasers are now permitted to claim input tax even if certain invoice details are missing, excluding information related to sales and VAT amounts, the names and TINs of the purchaser and seller, transaction descriptions, and dates.
Moreover, deductions for sales allowances and discounts from VAT-registered individuals are allowed, along with the option to deduct output VAT paid on uncollected receivables from the subsequent quarter, with recovery adjustments incorporated when necessary. VAT refund claims will be categorized based on risk, with the commissioner mandated to respond within 90 days. Appeals, in case of denial, can be made within 30 days, and if disallowed, only the taxpayer is held liable, ensuring a fair and accountable system. Additionally, the quarterly threshold for domestic carriers and garage keepers under the percentage tax (OPT) is eliminated.
Towards Digital Taxation: BIR Services Digitalization
Senate Bill 2224 emphasizes the digitalization of BIR services, urging the adoption of an automated system and the creation of a digitalization roadmap. Small and micro entities are considered in this move, reflecting a commitment to inclusivity. The BIR’s accountability is reinforced with the obligation to submit an annual report on EOPT and the digitalization roadmap.
Empowering Small and Micro Entities: Special Concessions
Tax services in Manila state that small and micro entities are granted special considerations under EOPT, including simplified income tax returns, reduced penalties and interest rates, and a streamlined compromise penalty rate. These provisions underscore the commitment to supporting the growth of smaller businesses.
Future-Forward: BIR's Commitment to Digital Transformation
SB 2224, having passed both houses, awaits the President’s approval. As we stand on the brink of a new era in taxation, it is crucial for taxpayers, be it individuals or large corporations, to stay informed. You must regularly check the BIR’s website and official platforms to ensure compliance. This shall empower you to plan strategically for the future.
The imminent enactment of Senate Bill 2224 ushers in a new era of simplicity, transparency, and efficiency in taxation. As you prepare to navigate this transformative landscape, staying informed is the key to unlocking the benefits of these progressive reforms. If you need assistance, reach out to our accounting services in Pasig. Our team can help you embrace change, plan ahead, and step confidently into the future of taxation in the Philippines.