Tax Articles

The Ease of Paying Taxes Act, In A Nutshell

By: Atty. Rodel C. Unciano

Atty. Rodel C. Unciano Partner   +632 8403-2001 loc.380 This email address is being protected from spambots. You need JavaScript enabled to view it. View Profile

Let me highlight some of the significant changes in our tax rules pursuant to the recently enacted law, Republic Act No. 11976 or the Ease of Paying Taxes Act (EOPT).

For value-added tax (VAT) compliance, one significant amendment is the uniform use of VAT invoice for both sale, barter, exchange, or lease of goods or properties, and for every sale, barter or exchange of services. So, for VAT compliance and for the purpose of claiming input tax credit, only VAT invoice is the acceptable proof to substantiate the claim for input tax credit, whether it is a purchase of goods or purchase of services.

On the deductibility of expenses for the purpose of determining taxable income, withholding of taxes is no longer a requirement for the deductibility of income payments. As you know, under the current rules, income payments are allowed as deduction only if it is shown that the appropriate withholding tax has already been withheld by the income payor. Very often, in tax investigation cases, taxpayers under investigation are sometimes left without option but to pay the withholding tax in question just to be able to get the benefit of deductibility of the corresponding income payments under question.

On the refund of excess input tax, EOPT already made clear that in case of failure on the part of the Commissioner to act on the taxpayer’s application within the ninety (90)-day period from filing of the application, the taxpayer affected may already appeal the Commissioner’s inaction with the Court of Tax Appeals (CTA).

On the refund of taxes erroneously or illegally collected, claims for refund shall be decided by the Commissioner within one hundred eighty (180) days from the date of submission of complete documents in support of the application filed. In case of the failure on the part of the Commissioner to act on the application for refund within the one hundred eighty (180)-day period, the affected taxpayer may already appeal the inaction with the CTA.

To recall, the issue on the non-exhaustion of administrative remedies has been a source of dispute in some refund cases brought before the CTA as some claimants would file claims for refund before the CTA shortly after filing the administrative claim with the Bureau of Internal Revenue (BIR). Apparently, with this amendment, in case the Commissioner does not act on the claim for refund, the claimant-taxpayer can no longer appeal its claim for refund with the CTA without waiting for the expiry of the one hundred eighty (180)-day period for the Commissioner to act on the claim for refund.

On the registration and de-registration compliance with the BIR, cancellation of registration may now be effected by mere filing of a prescribed form for an application for registration information update with the BIR Revenue District Office (RDO) where the taxpayer is registered, and this may be done electronically or manually. This shall not, however, preclude the Commissioner from conducting an audit to determine the taxpayer’s liability, if any. And in case a registered person decides to transfer its place of business, this may also be effected by mere filing, either electronically or manually, an application for information update.

Under the current rules, transferring of registration has become too burdensome to transferring taxpayers, especially in cases where the taxpayer has pending tax investigation cases in the RDO where it is registered. Taxpayer’s pending tax investigation cases used to be a cause of delay in the taxpayer’s attempt to transfer its BIR registration to another RDO. With the amendments introduced by EOPT, taxpayers may now easily transfer to another RDO even in cases where the taxpayer has ongoing tax investigation cases. But if the transferring taxpayer is subject of an audit investigation, the RDO which initiated the audit investigation shall continue the investigation.

On filing of returns and payment of taxes, these may already be done manually or electronically to any RDO, authorized agent bank, or software provider. So, this means that taxpayers may now file tax returns and make the necessary tax payments in any accredited payment channels in any BIR RDO other than the RDO where they are registered.

Finally, let me highlight that while the focus of the EOPT is for ease of paying taxes for the benefit of taxpayers and for ease of tax administration, the law also introduced some minor changes on the imposition of civil penalties and interest depending upon the taxpayer’s classification.

Under the law, taxpayers are now classified into micro, small, medium and large taxpayers, depending upon the taxpayer’s gross sales. And for micro and small enterprises, EOPT has granted them special concessions including a reduced rate of ten percent (10%) for civil penalties under Section 248 of the Tax Code and a fifty percent (50%) reduction on the interest rate imposed under Section 249 of the Tax Code, among others.

The Department of Finance is yet to issue the Implementing Rules and Regulations, and hopefully, it will be able to fill in the details necessary for the successful implementation of the law and consistent with the objective set to be achieved, which is embodied in the title of the law itself, ease of paying taxes.