Special InTAX: April 2024 Issue 1 | Volume 3

Department of Finance

The Department of Finance (DOF) issued the following issuances:

Revenue Regulations (RR) No. 3-2024, 11 April 2024, to implement the amendments introduced by Republic Act (RA) No. 11976 or the "Ease of Paying Taxes Act" (EoPT Law) on Value Added Tax (VAT) and Percentage Tax provisions of the National Internal Revenue Code of 1997, as amended (Tax Code)

Salient points of RR No. 3-2024 are as follows:

• Section 2 of the RR provides that the amendments on the following words, phrases or actions shall now be uniformly applied to the provisions affected under RR No. 16-2005, as amended (Consolidated VAT Regulations):

a. Gross Sales

b. Invoice

c. Billings for sales of service on account

d. VAT-exempt threshold

e. Filing and payment

• Section 3 incorporates into RR No. 16-2005, as amended, the specific amendments to provisions on sale of services under Section 108 of the Tax Code.
• Section 4 incorporates into RR No. 16-2005, as amended, the specific amendments to provisions on VAT-exempt transactions under Section 109 of the Tax Code.
• Section 5 provides for the addition of Section 4.110-9 of RR No. 16-2005, as amended, for the output VAT credit on uncollected receivables, what are the uncollected receivables being referred to and the requisites to be entitled to said VAT credit. In case of recovery of the uncollected receivables, the output VAT pertaining thereto shall be added to the output VAT during the period of recovery. The RR clarified that these rules should not affect the conditions on the deductibility of bad debts expenses for income tax purposes under RR No. 25-02.
• Section 6 incorporates into RR No. 16-2005, as amended, the specific amendments to provisions on VAT refund claims under Section 112 of the Tax Code.
• Section 7 provides for the following transitory provisions that are applicable to transactions that transpired upon effectivity of this RR:

a. For billed but uncollected sale of services that are rendered prior to the effectivity of this RR, the corresponding output VAT shall be declared once it has been collected and shall be supported with an invoice following the transitory provisions in RR No. 7-2024 or the new BIR-approved set of invoices, whichever is applicable.

b. For uncollected receivables from sale of goods as of the effectivity of this RR, the claim of output VAT credit on uncollected receivables shall only apply to transactions that transpired upon the effectivity of this RR.

RR No. 3-2024 shall take effect 15 days following its publication in the Official Gazette or the BIR official website, whichever comes first.

(R.G. Manabat & Co. Note:  The RR was posted in the BIR website on 12 April 2024)

RR No. 4-2024, 11 April 2024, to implement the amendments introduced by the EoPT Law on the following:

• filing of tax returns and payment of taxes to be made electronically or manually, regardless of venue or jurisdiction of the Revenue District Office (Section 3);
• removal of civil penalty in case of filing of return at the wrong venue (Section 4);
• non-filing of income tax return by an Overseas Contract Worker (OCW) or Overseas Filipino Worker (OFW) (Section 5); and
• removal of the withholding tax requirement for deductibility of certain payments for income tax purposes upon effectivity of the EoPT Law (Section 6)

Other salient points of RR No. 4-2024 are as follows:

• Section 7 provides that Section 2.57.4 of RR No. 2-98, as amended, on the timing of withholding shall read as follows:

The obligation of the payor to deduct and withhold the tax under Section 2.57 of [RR No. 2-98, as amended] arises at the time an income becomes payable. The term “payable” refers to the date the obligation becomes due, demandable and legally enforceable. The obligation of the payor to deduct and withhold the tax arises at the time an income 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 provides that the income upon which any creditable tax is required to be withheld at source shall be included in the return of the income recipient but the excess of the amount of tax withheld over the tax due of the income recipient shall be refunded subject to the provision of Section 204 of the Tax Code.

RR No. 4-2024 shall take effect 15 days following its publication in the Official Gazette or the BIR official website, whichever comes first.

(R.G. Manabat & Co. Note:  The RR was posted in the BIR website on 12 April 2024)

RR No. 5-2024, 11 April 2024, to implement the amendments introduced by the EoPT Law on the following:

• 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 on 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 and this RR includes policies for the processing of income tax credit/refund of taxpayers who have chosen the option to apply for tax credit/refund the excess income tax in their Annual Income Tax Returns (AITRs)
• 204(C) of the Tax Code that introduced the 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.

Other salient points of RR No. 5-2024 are as follows:

• This RR shall cover tax credit/refund claims that are filed starting 1 July 2024 onwards and do not cover processing of tax refund/credit claims pursuant to the final and executory judgment by courts.
• Section 3 provides for the specific rules relative to the risk-based approach to verification of VAT refund claims.
• Section 4 provides for the liability of taxpayer-claimants in VAT refund claims and BIR officials/employees in case of COA disallowances.
• Section 5 provides for the specific rules relative to the credit/refund of unutilized excess income tax credits under Section 76(C) of the Tax Code.
• Section 6 provides for the rules on processing of tax credit/refund claims under Sections 204(C) and 229 of the Tax Code.
• Section 7 provides for the rules on judicial claim for credit/refund under Section 229 of the Tax Code.

RR No. 5-2024 shall take effect 15 days following its publication in the Official Gazette or the BIR official website, whichever comes first.

(R.G. Manabat & Co. Note:  The RR was posted in the BIR website on 12 April 2024)

RR No. 6-2024, 11 April 2024, to implement the amendments introduced by the EoPT Law on the imposition of reduced interest and penalty rates for micro taxpayers (those with annual gross sales of less than Php3,000,000) and small taxpayers (those with annual gross sales of Php3,000,000 to less than Php20,000,000).

Salient points of RR No. 6-2024 pertain to the following special concessions to mircro and small taxpayers:

• Reduced rate of 10% for civil penalties as provided under Section 248 of the Tax Code (i.e., 25% surcharge penalty for all non-micro and small taxpayers); the RR provides that the 50% surcharge penalty is still applicable to micro and small taxpayers
• 50% reduction on the interest penalty rate imposed under Section 249 of the Tax Code.
• Reduced fine of PHP500 as penalty for failure to file certain information returns as provided under Section 250 of the Tax Code
• Reduced compromise penalty rate of at least 50% for violations of Sections 113, 237, and 238 of the Tax Code.

RR No. 6-2024 shall apply prospectively and shall take effect 15 days following its publication in the Official Gazette or the BIR official website, whichever comes first.

(R.G. Manabat & Co. Note:  The RR was posted in the BIR website on 12 April 2024)

RR No. 7-2024, 11 April 2024, to implement the amendments introduced by the EoPT Law on the registration procedures and invoicing requirements.

Salient points of RR No. 7-2024 are as follows:

• Section 3 provides for the rules on the latest invoicing requirements for all VAT-registered persons which provides that a VAT invoice shall be issued and will serve as evidence of sale of every sale of goods and services. It also provides for the information required in a VAT invoice, the accounting requirements for VAT-registered persons and the consequence of issuing erroneous VAT invoice.
• Section 4 provides for the rules on the preservation of books of accounts and other accounting records under Section 235 of the Tax Code, including their examination and inspection for purposes of audit, request for exchange of information by a foreign tax authority and in the exercise of the Commissioner’s power to obtain information, among others.
• Section 5 provides for the rules on the registration requirements under Section 236 of the Tax Code including the manner and time of registration; place of registration; registration of business taxpayers; registration of business name; BIR business registration date; issuance of the Certificate of Registration (COR) to Head Office, Branch and Facility; posting of the COR and/or proof of registration on online websites, e-commerce, e-marketplace seller/merchant’s page and other platforms; registration of each type of internal revenue tax; cancellation of registration; transfer of registration; and unlawful pursuit of business.
• Section 6 provides for the rules on the issuance of invoices under Section 237 of the Tax Code (not limited to VAT-registered persons), including the information required in the invoice, and when tickets and other similar forms can be considered as an invoice and proof of payment.
• Section 7 provides for the rules on the printing of invoices under Section 238 of the Tax Code.
• Section 8 provides for the following transitory provisions as follows:

a. The COR reflecting the Registration Fee shall retain its validity although the Registration Fee is shown therein and taxpayers are no longer required to pay the Annual Registration Fee. The updating of the COR is only necessary if there are changes to the registration information, excluding the Registration Fee, reflected on the COR.

b. Taxpayers may opt to continue the use of the remaining Official Receipts (ORs), either:

 — As “Supplementary document” until fully consumed, with the phrase “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX” stamped on the face of the document upon effectivity of this RR; or

 —  As “Invoice” with the word OR strikethrough (i.e., Official Receipt) on the face of the manual and loose leaf printed receipt and stamp “Invoice”, “Cash Invoice”, “Charge Invoice”, “Credit Invoice” or any name describing the transaction which can be issued as primary invoice until 31 December 2024 (valid for claim of input tax from 22 January to 31 December 2024). Any ORs whether stamped with “Invoice” or unstamped, issued after 31 December 2024 will be considered supplementary documents and ineligible for input tax claims.

The stamping does not require approval from any RDO/Large Taxpayers (LT) Office/LT Divisions but must comply with Section 8(2.3) of this RR.

Taxpayers shall obtain newly printed invoices with an Authority to Print (ATP) before fully consuming the converted ORs or before 31 December 2024, whichever comes first.

All unused manual and loose leaf ORs to be converted as Invoice shall be reported by submitting an inventory of unused ORs within 30 days upon effectivity of this RR to the RDO/LT Office/LT Division where the Head Office or Branch is registered, in duplicate original copies.

c. Taxpayers using Cash Register machines, Point-of-Sales machines and e-receipting/e-invoicing software may change the word “Official Receipt” to “Invoice”, “Cash Invoice”, “Charge Invoice”, “Credit Invoice”, “Billing Invoice”, “Service Invoice”, or any name describing the transaction, without the need to notify the RDOs having jurisdiction over the place of business of such sales machines, since the reconfiguration shall be considered as minor system enhancement. Provided that, the serial number of the renamed Invoice shall start by continuing the last series of the previously approved OR and shall submit notice, indicating the start of the serial number of the renamed Invoice to the RDO/LT Office/LT Division where the machines are registered, in duplicate original copies. Documents by said machines issued containing the word “Official Receipt” shall not be valid for claim of input tax by the buyer/purchaser from the effectivity of this RR.

Taxpayers that are using duly registered Computerized Accounting System or Computerized Books of Accounts with Accounting Records need to revisit their system to comply with the provisions of the EoPT Law. Since the system reconfiguration will have a direct effect on the financial aspect, it shall be considered a major enhancement which will require taxpayer to update their system registration following the existing policies and procedures of filing a new application where the previously issued Acknowledgment Certificate or Permit to Use shall be surrendered. System adjustments shall be undertaken on or before 30 June 2024 without prejudice to seeking approval of up to 6 months extension (reckoned from the effectivity of this RR) from the concerned Regional Director or Assistant Commissioner of the LT Services. The issuance of OR for the sale of goods or services after 30 June 2024 will not be considered as evidence of sales of goods or services and shall be tantamount to non-issuance of Invoice as required under Section 6(A) of this RR subject to a penalty of Php1,000 up to Php50,000 and suffer imprisonment of 2 years to 4 years pursuant to Section 264(a) of the Tax Code.

RR No. 7-2024 shall take effect 15 days following its publication in the Official Gazette or the BIR official website, whichever comes first.

(R.G. Manabat & Co. Note:  The RR was posted in the BIR website on 12 April 2024)

RR No. 8-2024, 11 April 2024, to implement the amendments introduced by the EoPT Law on the classification of taxpayers:

 

Classification	Annual Gross Sales*
Micro Taxpayer	Less than Php3,000,000
Small Taxpayer	Php3,000,000 to less than Php20,000,000
Medium Taxpayer	Php20,000,000 to less than Php1,000,000,000
Large Taxpayer	Php1,000,000,000 and above

* Total sales revenue, net of VAT (if applicable), during the taxable year, without any other deductions; cover only business income, excluding compensation income earned under employer-employee relationship, passive income under Sections 24, 25, 27 and 28 of the Tax Code, and exclusions from gross income under Section 32(B) of the Tax Code.

Other salient points of RR No. 8-2024 are as follows:

• Taxpayers who will register to engage in business or practice of profession upon effectivity of this RR 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 in accordance with the above threshold value.
• Taxpayers shall be duly notified by the BIR of their classification or reclassification, as may be applicable, in a manner to be prescribed in a separate revenue issuance.
• Taxpayers registered in 2022 and prior years shall be classified on the basis of gross sales for taxable year 2022.
• 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 this RR shall be initially classified as follows:

a. Non-VAT registered – MICRO taxpayer

b. VAT registered – SMALL taxpayer

RR No. 8-2024 shall apply prospectively and shall take effect 15 days following its publication in the Official Gazette or the BIR official website, whichever comes first.

(R.G. Manabat & Co. Note:  The RR was posted in the BIR website on 12 April 2024)

 

Bureau of Internal Revenue

The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 55-2024, dated 15 April 2024, providing for the extension of the 90-day transitory period for the actual imposition of withholding tax (i.e., expanded withholding tax or EWT) on gross remittances made by electronic marketplace (e-marketplace) operators and digital financial services providers (DFSPs) to sellers/merchants prescribed under Revenue Regulations (RR) No. 16-2023.

RMC No. 55-2024 extended the initial transitory period under RMC No. 8-2024 for another 90 days, giving e-marketplace operators and DFSPs until 14 July 2024 to comply and adjust to the requirements under RR No. 16-2023 and other government agencies (if any).

[R.G. Manabat & Co. Note:  The initial transitory period provided in RMC No. 8-2024 was 90 days from the date of issuance of the RMC or until 14 April 2024. The additional 90-day extension appears to be reckoned from the date of issuance of RMC No. 55-2024 (15 April 2024)].

Here are the links to the full texts of the issuances: RR No. 3-2024, RR No. 4-2024, RR No. 5-2024, RR No. 6-2024, RR No. 7-2024, RR No. 8-2024, and RMC No. 55-2024.