The Salient Features of the EOPT Act

03 May 2024
The Bureau of Internal Revenue (BIR) introduces the implementing rules and regulations for the Ease of Paying Taxes Act (EOPT)

The Ease of Paying Taxes (EOPT) Act or RA 11976 was signed into law on January 5, 2024, by President Ferdinand Marcos Jr.  The Ease of Paying Taxes Act (RA 11976) aims to incentivize taxpayer compliance by simplifying procedures and reducing burdens, consequently boosting government revenue collection.  

Significant Amendments to the Tax Code by the EOPT Act  

The EOPT Act, through various implementing rules and regulations, has added various amendments to the existing laws prescribed in the tax code through several Revenue Regulations (RR) and Revenue Memorandum Circulars (RMC). These include:  

Classification of Taxpayers – RR No. 8-2024  

RR No. 8 – 2024 provides more details on the taxpayer classifications in the Philippines which was first introduced in the EOPT Act:  

Classification  

Taxpayer threshold for a taxable year  

Micro Taxpayers  

With Gross Sales of less than Three Million Pesos (PHP 3,000,000.00) 

Small Taxpayers  

With Gross Sales of Three Million Pesos (PHP 3,000,000.00) but less than Twenty Million Pesos (PHP 20,000,000.00) 

Medium Taxpayers  

With Gross Sales of Twenty Million Pesos (PHP 20,000,000.00) but less than One Billion Pesos (PHP 1,000,000,000.00) 

Large Taxpayers  

With Gross Sales of One Billion Pesos (PHP 1,000,000,000.000) and above  

It should be noted that the RR states that for classification, gross sales shall refer to total sales revenue, net of VAT, without any other deductions. Moreover, the gross sales will only cover business income, excluding compensation income earned under an employer-employee relationship.  

Additionally, any taxpayer who will register to engage in business or practice of profession upon the RR’s effectivity will be initially classified based on its declaration in the Registration Forms starting from the year they registered and will remain the same unless reclassified.  

Special Concessions for Micro and Small taxpayers – RR No. 6-2024  

BIR’s RR No. 6 -2024 introduced the following special concessions for both small and micro taxpayers: 

  • Simplified Income Tax Return – Maximum of two (2) pages (*new BIR Form not yet released as of date)  
  • Reduced rate of 10% for the civil penalties under Section 248 of the Tax Code, as amended 
  • 50% reduction on the interest imposed (interest imposable shall be 6%) under Section 249 of the Tax Code, as amended   
  • Reduced fine of PHP 500.00 as the penalty for failing to file information required by Section 250 of the tax code, as amended. In no case shall the aggregate amount to be imposed for all such failures during a calendar year exceed Twelve Thousand Five Hundred Pesos (P12,500.00). 
  • Reduced compromise penalty rate of 50% for violation of Sections 113, 237, and 238 of the Tax Code, as amended  
     

File-and-Pay Anywhere System RR No. 4 – 2024  

RR No. 4 – 2024 clarifies that taxpayers can file tax returns and pay their taxes either electronically or manually if the first option is not available with any Authorized Agent Bank, Revenue District Office (RDO) via its Revenue Collection Officers or Authorized Tax Service providers. This process is said to help taxpayers be more flexible when filing and paying their taxes without worrying about incurring penalties for filing at the wrong venue.  

Under the EOPT, the civil penalty of 25% of the amount due in the case of filing a return with an internal revenue officer other than those with whom the return is required to be filed shall no longer be imposed. 

Ease of Registration – RR No.7 -2024  

BIR’s RR No. 7 – 2024 explains that Registration Facilities will now be made available to all taxpayers, even those who are not currently taking residence in the Philippines. It also explained that the PHP 500.00 Annual Registration Fee is effectively removed under the EOPT Act. This would give financial relief to taxpayers engaged in business, especially small and micro taxpayers, by lessening their administrative expenses.  

Additionally, the registration of taxpayers will be cancelled or transferred upon the 
the mere filing of an application for cancellation/transfer with the RDO where the taxpayer is currently registered.  

Deductions from Gross Income RR No. 4 – 2024 

RR No.4-2024 stated that the withholding of taxes as a requirement for deductibility of expenses (per Section 34(K) of the Tax Code) is repealed. Thus, non-withholding taxes in certain payments will no longer be grounds for disallowance of claims for deductible expenses.  

Simplified Timing of Withholding – RR No. 4 – 2024  

The BIR RR No. 4 -2024 states that the obligation to deduct and withhold the tax arises when the income is payable. The term "payable" refers to the date the obligation becomes due, demandable, or legally enforceable.  

Invoicing Requirements – RR No. 7 – 2024   

RR No. 7 – 2024 explains that “business style” has been removed as mandatory information to be contained in the invoice. Contrary to the previous law, where a taxpayer’s claims for deductions and VAT credit/refund have been disallowed for non-compliance with invoicing requirements, particularly with the “business style”.  

Furthermore, the RR mentions that the threshold for mandatory issuance of invoices is PHP 500.00, which will be adjusted to its present value every five (5) years based on the Consumer Price Index, as published by the Philippine Statistics Authority.  

If a VAT-registered person fails to give complete information in the invoice, the issuer shall be liable for non-compliance. However, the VAT will still be allowed as an input tax credit on the part of the purchaser if the following details are properly presented: 

  • Amount of Sales; 
  • Amount of VAT; 
  • Name and TIN of both the purchaser and issuer/seller; 
  • Description of goods or nature of services, and; 
  • Date of transaction. 

The transitory provisions on the Unused Official Receipts, which is a common concern among taxpayers, state that the taxpayers have the following options: 

To convert and use the remaining Official Receipts as Invoice. For ease of doing business, taxpayers shall be allowed to strikethrough the word "Official Receipt'' (e.g. Official Receipt) on the face of the manual and loose leaf printed receipt and stamp "Invoice", "'Cash Invoice", "Charge Invoice", "'Credit Invoice", "Billing Invoice", "Service Invoice", or any name describing the transaction, and to be issued as primary invoice to its buyer/purchaser until December 31, 2024. These documents shall be valid for claim by the buyer/purchaser for the period issued from January 22 to December 31, 2024, provided that the invoice to be issued bears the stamped "Invoice" and contains the abovementioned required information. 

All unused manual and looseleaf Official Receipts to be converted as Invoice shall be reported by submitting an inventory of unused official receipts, indicating the number of booklets and corresponding serial numbers within thirty (30) days upon effectivity of these Regulations, to the RDO/LT Office/LT Division where the Head Office or Branch Office is registered. 

To print new booklets of VAT invoices with an Authority to Print (ATP) and continue the use of remaining Official Receipts as supplementary documents, provided that the phrase "THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX." is stamped on the face of the document upon effectivity of these Regulations. 

Value Added Tax (VAT) – RR No. 7 – 2024  

Regarding the VAT, BIR’s RR No. 7 - 2024 explains that the rule of the VAT treatment of sales of goods and services is now harmonized, thus needing the issuance of sales invoice for both. The EOPT act notes that the VAT invoice is the sole supporting document required in declaring output taxes and claiming input taxes. Furthermore, “Gross Sales” will now be the sole basis for the sale of goods or properties, sale of services, and lease of properties, aligning the accrual basis of accounting for both Income Tax and VAT.  

The RR also requires that the PHP 3,000,000.00 VAT threshold will now be adjusted every three (3) years following the Consumer Price Index as published by the PSA.  

Risk-Based Classification of VAT Refund – RR No. 5 – 2024  

RR No. 5 – 2024 highlights how VAT refund claims were classified into the following:  

  • Low-risk;  
  • Medium-risk, and;  
  • High-risk;  

All three above are based on the VAT refund claim amount, history of tax compliance, and the frequency of filing VAT refund claims among others. The scope of verification is shown as follows: 

Risk Level 

Submission of Complete Documentary Requirements Prescribed by BIR 

Scope of Verification of Sales 

Scope of Verification of Purchases 

Low 

Yes 

No verification 

No verification 

Medium 

Yes 

At least 50% of the amount of sales and 50% of the total invoices/receipts issued including inward remittance and proof of VAT-zero rating 

At least 50% of the amount of purchases with input tax claimed and 50% of suppliers with priority on "Big-Ticket" Purchases 

High 

Yes 

100% 

100% 

 This updated process will result in a faster resolution of applications for refund of creditable input taxes.  

 Output VAT on Uncollected Receivables – RR No. 3 – 2024  

RR No. 3 – 2024 states that any Output VAT related to uncollected receivables are deductible in the next quarter once the agreed-upon pay period has lapsed, so long as the seller has fully paid the VAT on the transaction and the VAT component of said uncollected receivables wasn’t yet claimed as an allowable deduction. 

If the uncollected receivables have been recovered, then the output pertaining thereto will be added to the output VAT of the taxpayer upon the recovery period. 

Tax Refund of Erroneously Paid Taxes – RR No. 5 -2024  

EOPT Act now mandates a definite period for the Commissioner to process and decide on the claims for erroneously paid taxes. It adds amendments prescribing the period to decide applications for the refund of erroneously paid taxes to be within 180 days from the submission of complete documents. Ensuring that an immediate resolution for the taxpayer’s claim for refund of erroneously paid taxes.  

Clarifying certain Tax Code provisions – RR No. 7 – 2024  

RR No. 7 – 2024 showcases clearer Tax Code provisions to help institutionalize its existing policies, these include:  

  • Filing of Returns by OFW – Exemption from filing of Income Tax Returns for OFWs and OCWs on income solely derived from abroad.  
  • Authority to Print – A clearer provision that the issuance of Authority to Print (ATP) shall be free of charge.  
     

Preservation of Books of Accounts – RR No. 7 – 2024 

RR No. 7 – 2024 also prescribed the period for the preservation of taxpayer's books. Taxpayers must now retain their books of accounts and other accounting records for five (5) years reckoned from: 

  • The day following the deadline for filing their tax return for the year the last entry was made, or 
  • The date they filed their return if filed after the deadline. 
     

Publication of All Tax Related Provisions – RR No. 2-2024  

RR No. 2 – 2024 mandates the publication of all tax-related information that are under any rules, law, and regulations that may be published electronically in the Official Gazette, or the BIR’s official website. Thus, all matters that need to be published relating to taxpayers must now be found at the BIR website (www.bir.gov.ph). 

Other Tax Code Changes – RR No. 6 2024  

The EOPT Act has also introduced certain changes to the tax code that both modify and even remove certain procedures, these include:  

  • Removing the “wrong venue” penalty in Sec. 248 of the Tax Code 
  • Codification of “filing of return” and “payment of tax”  
  • Rules on a claim for a refund due to dissolution of business. 
     

Digitalization of BIR Services - RA 11976 

The BIR has issued the adoption of an integrated digitalization strategy that provides automated end-to-end solutions to the taxpayer’s benefit. This was done to help improve both the performance and delivery of their services. 

EOPT and Digitalization Roadmap - RA 11976 

The BIR was tasked to develop an EOPT and Digitalization Roadmap to help ensure ease of compliance with tax laws, rules, and regulations, such as the adoption of simplified tax returns, streamlining of tax processes, reduction of tax or documentary requirements, digitization of BIR services.  

Tax Services in Mazars

Keeping up to date with the constant changes and amendments to tax laws can become quite tedious to manage. At Mazars, we work closely with clients – offering solutions that simplify their compliance and help them navigate complex tax situations with confidence.

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