Philippines: New law includes income tax, business tax, and VAT measures

The Ease of Paying Taxes (EOPT) Act was signed into law by the president on 5 January 2024, published in the official gazette on 7 January 2024, and will take effect 15 days after its publication on 22 January 2024.

The EOPT Act (formerly Senate Bill No. 2224) introduces various measures to facilitate tax compliance, including the following income tax, business tax, value added tax (VAT) measures:

• Classification of the taxpayers into micro, small, medium, and large with special concessions for micro and small taxpayers (i.e., maximum of two pages for income tax returns and reduced penalties)
• Electronic or manual filing of returns and payment of taxes to the Bureau of Internal Revenue (BIR), or through any authorized agent bank or authorized tax software provider
• Removal of the requirement that tax be deducted/withheld from income payments and remitted to the BIR for deductibility of income payments to apply
• Withholding of taxes  to apply when income payments become payable
• Imposition of value-added tax (VAT) on services to be based on gross sales
• Requirement to issue a VAT invoice for every sale of goods and services
• Use of a VAT invoice to substantiate input VAT claim from purchases of goods and services
• Classification of VAT refund claims into low, medium, and high-risk
• Tax base of percentage taxes imposed under the following sections of the tax law now based on gross sales (no longer on gross receipts) or on “amount billed” (no longer “amount paid”) or on “gross sales or earnings” (no longer “gross sales, receipts, or earnings”)
  • Section 116 (persons exempt from VAT)
  • Section 117 (domestic carriers and keepers of garages)
  • Section 118 (international carriers)
  • Section 119 (franchises)
  • Section 120 (overseas dispatch, message or conversation originating from the Philippines)
  • o    Section 128 (provision on returns and payment of percentage taxes)
• Refund claims of erroneously-paid taxes to be acted upon by the BIR within 180 days from submission of complete documents and appeal to the Court of Tax Appeals to be made within 30 days from receipt of the decision or from expiration of the 180-day period
• Application for registration with the appropriate Revenue District Office to be made manually or electronically
• Business style not being required in the VAT invoicing and registration requirements
• Removal of the annual registration fee requirement of Php500
• Cancellation of BIR registration upon mere manual or electronic filing of an application for the same
• Preservation of books for a period of five years

The president vetoed a provision in the EOPT Act exempting micro taxpayers from the obligation to withhold taxes.

The implementing rules and regulations (IRR) are required to be issued within 90 days from the effectivity of the EOPT Act. Taxpayers are given six months from the effectivity of the IRR to comply with the amendments on VAT and percentage taxes.

Read a January 2024 report prepared by the KPMG member firm in the Philippines

Read a February 2024 report prepared by the KPMG member firm in the Philippines

Read a February 2024 report prepared by the KPMG member firm in the Philippines