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New year, new law

"HAPPY New Year!" As we stand on the threshold of a new chapter and embrace the possibilities and adventures that 2024 holds for us. We hope this year brings us joy, success and moments that will take our breath away. This 2024 is another year of new adventures and new beginnings to look forward to. The celebration of the Baptism of the Lord ended the Christmas season last January 8. That day also marked the resumption of the Bureau of Internal Revenue's audit and field operations.


Government, public practitioners and taxpayers (individuals and corporate) are continuously adapting to the new trend and culture in this fast-paced environment. One of the recent big moves was when President Ferdinand Marcos Jr. signed into law Republic Act (RA) 11976, also known as "Ease of Paying Taxes Act," last January 5. This is seen to significantly contribute to achieving the administration's 8-point socioeconomic agenda through much improved revenue collection through digitalization initiatives.


The law aims to update the taxation system, replace procedures that are unnecessary for developing the efficiency and effectiveness of tax administration, strengthen taxpayer rights and allow the government to capture as many taxpayers as possible into the tax net by streamlining the system and minimizing the burden on taxpayers, increasing the country's revenue collection in the long run.


With that in mind, following are the salient features of the recently signed law:


The classification of taxpayers. For purpose of responsive tax administration, taxpayers are classified based on gross sales: (1) Micro, companies with less than P3 million; (2) Small, companies with P3 million to less than P20 million; (3) Medium, companies with P20 million to less than P1 billion; and Large, companies with P1 billion and above.


File and pay anywhere mechanism. The individual and corporate tax returns can now be filed and paid, electronically or manually, in any authorized agent bank, revenue district office through the revenue collection officer or authorized tax software provider.


Exemption of OCW and OFW from filing of income tax returns (ITR). Individual citizens of the Philippines who are working abroad as an overseas contract worker (OCW) or overseas Filipino worker (OFW) who do not earn income within the Philippines will be exempted from paying income tax.


Simplified VAT documentation. Invoices shall now be the proof of transaction and the related value-added tax, or VAT, is charged upon issuance of the invoice, adopting the accrual method. Also, business style requirements in invoicing and issuance of official receipts for sale of services have been repealed.


Structure of VAT refund claims. The BIR commissioner shall grant refund for creditable withholding taxes within 90 days from date of submissions of invoices and other documents for this purpose, VAT refunds will be classified into low-, medium- and high-risk claims, which are based on the amount of VAT refund claim, tax compliance history and frequency of filing of VAT refund claims, among others.


Refund claim deadlines. The act provides a 180-day period for the Bureau of Internal Revenue to process the recovery of any national internal revenue tax alleged to have been erroneously or illegally collected.


Increase in issuance threshold. The mandatory issuance of receipts for each sale and transfer of goods and services will be increased from P100 to P500 or more.


BIR digitalization strategy. In order to improve the performance and efficiency of its services, the BIR shall adopt an integrated digitalization strategy providing end-to-end solutions for the benefit of the taxpayers. For this purpose, the BIR shall develop an Ease of Paying Taxes and Digitalization road map to promote and assist taxpayers by streamlining tax processes, reducing documentary requirements and digitalizing its services.


Social concession for micro and small taxpayers. Various reduction of penalties for micro and small taxpayers. (1) Reduced rate of 10 percent for civil penalties; (2) 50 percent reduction on the interest rate imposed under Section 249 of the National Internal Revenue Code (NIRC) as amended reduced fine of P500 as penalty for failure to file certain information returns; (4) reduced compromise penalty rate of at least 50 percent for violations of Section 113, 237 and 238 of NIRC, as amended; the number of ITR pages under Section 51 of individual returns will be reduced from four to two pages only in paper form or electronic form for micro and small taxpayers.


The implementing rules and regulations (IRR) of the newly signed law, RA 11976, are expected to be promulgated within 90 days from the law's effectivity. The law takes effect 15 days after its publication in the Official Gazette or in a newspaper of general circulation, whichever comes first. The IRR will be a big help to fully understand the procedures to be followed in accordance with the provisions of the new law, including the digitalization initiatives mandated for the BIR.


As we traverse the post-pandemic landscape, the accelerated pace of digitalization has left an indelible mark on our lives. The lessons learned and changes witnessed during this period highlight the transformative power of technology. From remote work becoming the norm to the surge in e-commerce, the digital realm has become an integral part of our daily existence. This digital shift not only redefined how we work but also how we connect, learn and access essential services. It brought to the forefront the importance of digital literacy and inclusivity. As we continue this digital journey, we manage to embrace the opportunities it presents for innovation, collaboration and efficiency.


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Ken John B. Asadon, CPA, CTT is the tax partner of Paguio, Dumayas & Associates, CPAs (PrimeGlobal Philippines), an institutional member of the Association of CPAs in Public Practice (Acpapp). The opinion of the writer does not reflect in any way the opinion of these institutions.


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