Tax Articles

Tax Highlights in 2023

By: Atty. Mabel L. Buted

Mabel L. Buted Junior Partner   +632 8403-2001 loc.160 This email address is being protected from spambots. You need JavaScript enabled to view it. View Profile

As the year 2023 is coming to an end, let us take a look back on the significant updates in tax for the whole year.

On January 1, 2023, individual taxpayers started to enjoy lower tax rates on their income. Those who were previously taxed at 20% to 32% are now subject to 15% to 30%, depending on their income brackets. While this is the case for these individuals, starting July 1, 2023, corporate taxpayers and the others who pay the other percentage tax (“OPT”) were back to being subjected to the 2% Minimum Corporate Income Tax (“MCIT”) and 3% OPT, after enjoying the lower 1% MCIT and 1% OPT from July 1, 2020 until June 30, 2023.

Another important update is the extension of the period of availment of the Estate Tax Amnesty. R.A. No. 11956, which lapsed into law on August 5, 2023, extended the deadline to avail of the tax amnesty for another two years, until June 14, 2025. The said law also expanded the coverage of the program to include the estate of decedents who died on or before May 31, 2022, with or without assessments, whose estate taxes have remained unpaid or have accrued as of May 31, 2022, and introduced payment by installment within two (2) years from statutory date of payment without civil penalty and interest. The payment of the amnesty tax shall be made, either electronically or manually, at the time the return is filed. R.A. No. 11956 also limited the documentary requirements to apply for the estate tax amnesty.

In 2023, our tax authorities also issued revenue regulations and circulars to promote ease of doing business in the country.

One of which is RR No. 3-2023 which amended a previous rule in the availment of VAT incentives of business enterprises registered with our Investment Promotion Agencies. Under the said revenue regulation, prior application for the VAT zero-rating or the prior approval from the BIR before the qualified business enterprises can avail of 0% VAT on their local purchases is no longer required.

Another one is RR No. 12-2023 which exempts the agricultural producers from issuing principal and supplementary receipts or invoices on their sale of agricultural food products, provided that their gross sales/receipts for the year do not exceed P1,000,000.00. The Certificate of Income Payment Not Subject to Withholding Tax (BIR Form No. 2304) or Certificate of Creditable Tax Withheld as Source (BIR Form No. 2307) issued by the buyers will be treated as the substituted official receipts/sales invoices of the agricultural producers which will serve to substantiate the purchases made by such buyers from them.

In tax-free reorganizations or exchanges, the Certificate Authorizing Registration (“CAR”) of the properties transferred is now processed at the BIR Revenue District Office (“RDO”) or Large Taxpayers (“LT”) Office having jurisdiction over the place where the transferee/surviving corporation is registered, regardless of the number of real properties and/or shares of stocks involved in a transaction, and whether or not those properties are situated in various locations covered by different RDOs/LT Offices (RMC No. 65-2023). Before this rule, the CAR may be processed with different BIR offices having jurisdiction over the place where the property is located, or where the issuing or transferee corporation is registered, depending on the number and type of the properties involved (real property or personal property).

RMC No. 71-2023 and RMO No. 23-2023 are other welcome developments. They relaxed the requirements and procedures in processing VAT refund claims. In basic, most documents or data which can be culled from the records of the BIR are no longer required to be submitted. Examples of these are copies of the income tax and VAT returns, the General Information Sheet, and the BIR Form No. 1600 (Withholding VAT Return) in case there are input taxes arising from services rendered by non-residents. The contents of the Taxpayer’s Attestation, attesting to the company’s profile, books, and accounting records, and to the completeness and authenticity of the documents submitted, are simplified. Softcopies of the sales invoices, airway bills, official receipts, and billing statements/Statements of Accounts/Service Contracts are no longer required under the new rules and only the original hard copies of these documents are submitted. Some of the previous requirements like the Delinquency Verification Certificate from the BIR Collection Division and Schedule of Property, Plant, and Equipment are also dispensed with. For sale of services to a non-resident foreign corporation, in the absence of the other documents proving its registration, the printed screenshots from the website of the corporate regulatory body of the entity in the country where it is domiciled, may be accepted, to prove that the said entity is not doing business in the Philippines.

On another note, at present, taxpayers are required to prepare and file VAT returns only on a quarterly basis. The monthly filing and payment of VAT became optional (RMC No. 52-2023).

There are also revenue circulars issued by the BIR, clarifying its previous interpretation of our laws as well as certain policies.

In RMC No. 15-2023 and RMC No. 24-2023, it was clarified that ELSE companies (Ecozone Logistics Service Enterprises) are considered export enterprises entitled to VAT-zero rating on local purchases, provided that they must be engaged in both the (a) establishment of a warehouse storage facility; and (b) importation or procurement from local sources and/or from other registered enterprises of goods for resale, or for packing/covering (including marking, labeling), cutting or altering to customers’ specification, mounting and/or packaging into kits or marketable lots for subsequent sale, transfer or disposition for export. In RMC No. 20-2023, it was also explained that the excise tax due on automobiles will be computed based on the total cost of importation and expenses divided by 90% only in cases where the net importer’s selling price is lower than the cost of importation and expenses.

Finally, in RMC No. 43-2023, the BIR prescribed additional procedural requirement in filings of appeal against a Final Decision on Disputed Assessment (FDDA). The taxpayer must furnish a copy of the appeal to the Chief of the Assessment Division for regional cases, or the concerned Head Revenue Executive Assistant (HREA) in the case of taxpayers under the jurisdiction of the LT Service or investigated by the National Investigation Division (NID) under the Enforcement and Advocacy Service, within five (5) days from the date of filing with the Office of the Commissioner of Internal Revenue (CIR) or the Court of Tax Appeals (CTA).