In the past four years, two major tax reform measures – the TRAIN law and the CREATE law – have been enacted. TRAIN entered into law in December 2017 and CREATE in March 2021. The reforms reduced personal and corporate tax rates.
How prepared are we to implement the reforms as soon as they come into effect?
One of the important reforms of the CREATE law is the retroactive reduction of the corporate tax rate from 30% to 25% or 20%, depending on the company’s net taxable income and the total assets for the company. taxation year. Taxpayers needed guidance on how the retroactive mid-year reduction should be implemented, given that the CREATE law was passed near the 2020 Annual Tax Return (AITR) filing deadline. of the taxpayers of the calendar year. Additionally, for the new tax rates to be applied, income tax returns must be updated by the Bureau of Internal Revenue (BIR).
EXPIRED RETURNS IN THE eFPS
On April 8, 2021, a few days before the April 15 filing deadline, the BIR issued Tax Circular (RMC) 50-2021, setting guidelines for the filing and payment of AITR by non-taxpayers. – natural or legal persons. for the tax year ending July 31, 2020 to June 30, 2021, which were affected by the passage of the CREATE law. RMC confirmed the lower / transitional income tax rates that would apply. In addition, the BIR has done a good job in making the statements more concise. Unfortunately, feedback was not available on the eFPS installation. Thus, non-individual taxpayers (whether or not they are registered in the BIR electronic declaration and payment system) were invited to use the eBIRForms offline version 7.9 or eBIRForms package to file their AITR. The eBIRForms package includes the updated BIR forms 1702RT, 1702MX and 1702EX, with a function of editing the applicable rates according to the transitional tax rates applicable to the taxpayer.
For eFPS filers, the payment process was slightly different. After submitting the returns using the eBIR forms, they had to fill in the BIR 0605 form in the eFPS and then proceed to electronic payment. In a regular deposit and payment scenario, eFPS filers click the “Proceed to Payment” button after online filing of returns. Convenient, isn’t it? Unfortunately, at the time of this writing, updated AITRs are still not available in eFPS. Indeed, apart from the AITRs, the latest versions of the revised withholding tax returns, the percentage tax and the documentary stamp duty are still not available in the eFPS: 1602Q, 1603Q, 1604-C, 1604- F, 1604-E, 2000, and 2551Q. This is rather disappointing given that these became available in eBIRForms as early as 2018 and 2019 as part of the implementation of the TRAIN law.
This begs the question: what is causing the delay in updating the returns in eFPS? Specifically, for the AITR, can we expect the BIR to update them in the eFPS for taxpayers filing for the fiscal year July 30, 2021 and beyond, or will the BIR issue another RMC, asking taxpayers to also use eBIR forms?
Going back to the implementation of the TRAIN Act, the BIR has also issued RMC 36-2021, prescribing guidelines for filing Value Added Tax (VAT) returns / returns (BIR forms 2550M and 2550Q ) in connection with the transition from the final version to the final version. credible system on VAT withheld on government sales from January 1, 2021. Due to this change, new versions of VAT returns / returns need to be developed. However, the BIR has not yet published them on the eFPS and eBIRForms platforms.
In addition, the updating of VAT returns / returns should also take into account the expiration of the input VAT depreciation requirement on capital goods exceeding 1 million pesos. As of January 1, 2022, any unamortized input VAT must be fully recognized and can be claimed as an input tax credit against the output tax. I expect the BIR to want to have a separate row to reflect this change to facilitate verification during tax audits.
PAYMENT OPTIONS FOR eFPS REPORTERS
One of the reasons some taxpayers voluntarily choose to enroll in eFPS is the convenience and speed of payment with a single click after completing the return, thus eliminating the need to physically pay at a bank of authorized agent (AAB) or use other payment methods. outside of eFPS which require separate fund accounts.
Considering that the BIR is still catching up in terms of updating declarations, it should, at a minimum, consider authorizing the same payment process for the other declarations it authorized under RMC 50-2021 i.e. pay in eFPS using Form BIR 0605 after submitting the corresponding declaration via eBIRForms.
Currently, the various payment options provided under a previous issue (RMC 4-2021) do not include the eFPS payment option under RMC 50-2021. According to RMC 4-2021, in case of newly created tax returns that are not available in the eFPS function but already accessible in eBIRForms, the taxpayer must file these returns using the eBIRForms program. Payment must be made through one of the following channels: 1) OTC payment to AABs; 2) revenue collectors (RCOs) in areas where there is no AAB; 3) electronic payment to selected banks, which will require the taxpayer to open an account; or 4) mobile payment channels like GCash or PayMaya.
Tax reform programs aim to make the tax system simpler, fairer and more efficient. While the policy changes introduced by the new legislation achieve this goal, the delay in updates to the eFPS, for me, takes away from the full realization of the benefits of these reforms. I hope the government will stop catching up soon enough.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only and should not be used as a substitute to specific advice.
Christian Grimaldo is Director of the Tax Services Group of Isla Lipana & Co., the Philippine company that is a member of the PwC network.
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