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Transformative tax compliance requirements

In the last two years, the world has witnessed how an unforeseen event can bring about a major shift in the business environment, forcing governments and business leaders to make drastic changes. Accountants and tax practitioners became economic frontliners for a struggling economy during the pandemic. Fast-forward to 2022. Businesses are slowly reopening and their operations are recovering. Offices are transitioning to either 100% face-to-face or hybrid set-ups. Simultaneously, the Bureau of Internal Revenue (BIR) is also keen to implement transformative changes to adapt to these developments to ease the process of paying taxes and comply with administrative requirements. By streamlining these processes, the government is effectively helping taxpayers meet the social responsibility of paying their tax obligations. These can pave the way for changes in policy that are sustainable and, at the same time, environment-friendly, resilient against unforeseen events, with the potential for reducing the financial burden on taxpayers. 

In this regard, the BIR issued Revenue Regulations (RR) No. 6-2022 to remove the five-year validity of receipts and invoices. This RR covers manual receipts and invoices with Authority to Print, those that are generated by Computerized Accounting Systems (CAS) and related components, and those issued from Cash Register Machines (CRM) and Point of Sale (POS) Machines with Permit to Use. This removal took effect on July 16, 2022. The implementation of this RR will reduce the burden on taxpayers to comply with the BIR’s administrative requirements when the receipts and invoices expire. This may also reduce the cost of doing business, allowing taxpayers to improve their financial performance.

This initiative is also in line with the BIR’s adoption of the Electronic Invoicing/Receipting System (EIS). This requires certain taxpayers to electronically report their sales data to the BIR, which should be implemented within five years from the effectivity of the TRAIN Law, and upon establishment of a system capable of storing and processing the required data used by electronic point of sale systems. This will be mandatory for taxpayers engaged in the export of goods and services, those engaged in e-commerce, and taxpayers under the jurisdiction of the Large Taxpayers Service. The EIS is capable of storing and processing the data that taxpayers must transmit using the taxpayers’ Sales Data Transmission System (SDTS).

Now, taxpayers are required to issue electronic receipts and invoices, and the related sales data should be transmitted to the BIR within three calendar days from the date of transaction, which is almost real time. With this, taxpayers are no longer required to issue hard copies of receipts and invoices with ATP, or print those that are generated from the CAS, CRM, and POS machines. The soft copies of these documents are considered valid for tax purposes. Relative to sales data transmission, taxpayers are required to develop a BIR-certified SDTS. Moreover, taxpayers are required to submit an application for the issuance of the Permit to Transmit to allow transmission of sales data to the EIS. The SDTS will effectively link the taxpayers’ accounting system with the BIR’s EIS.

The implementation of the EIS may result in long-term cost savings in doing away with the cost of paper and supplies, mailing, handling, archiving, storage, and labor, among others. While refining the administrative aspect of the business processes, this may also result in improved financial performance for taxpayers. To add, this change is environment-friendly and more sustainable in the long run. However, taxpayers will have to incur costs at the start, particularly the cost of developing the SDTS. Nonetheless, this is a forward-looking investment and the benefits from implementation may eventually outweigh the related costs.

Another important change implemented by the BIR is the removal of the 25% surcharge in amending tax returns. This is to ensure consistency with the rules applicable when paying deficiency taxes and penalties during a BIR audit. To provide context, in 2018, the BIR set the rule that a 25% surcharge will be imposed on additional tax payments arising from the amendment of tax returns. However, no 25% surcharge is imposed if the additional tax payments are made in the course of a tax assessment. In effect, taxpayers are being unduly penalized for voluntarily amending their tax returns to pay their taxes correctly. Under this recent RMC, the 25% surcharge for amending tax returns will be removed, provided that the original tax returns were filed on time. With this new rule, taxpayers may be encouraged to voluntary amend their tax returns to address any errors or corrections in their original filings.

Given the economic agenda of the new administration, investors and business owners would do well to closely monitor the government’s efforts to rationalize tax policies to ensure not only compliance, but to also take advantage of any beneficial changes to the tax filing and payment process. Prudent business entities would be wise to consult experienced tax professionals as early as possible to better transform their tax compliance efforts, and by doing so, more effectively support the resurgence of our country’s economy.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

Marivic M. Rebulanan is a tax senior director of SGV & Co.

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