The tax filing system in the Philippines has changed dramatically over the past few years. We are now moving toward an online filing system that has created some confusion for taxpayers. To clear up some of the issues, and in anticipation of the upcoming tax deadline, here are reminders relative to the submission of the Philippine Annual Income Tax Returns (ITR) for taxable year 2016.
Use the prescribed ITR forms
Under the tax filing system in the Philippines, individuals deriving purely compensation income and who do not qualify for substituted filing are required to file and pay their income tax using BIR Form No. 1700.
Individuals engaged in trade/business or in the practice of a profession, including those earning mixed income, are required to file and pay their income tax using BIR Form No. 1701.
For corporations, partnerships, and other non-individual taxpayers, income tax must be filed using BIR Form No. 1702-EX for those exempted under the Tax Code; BIR Form No. 1702-MX for those with mixed incomes subject to multiple income tax rates or with income subject to special/preferential rate; or BIR Form No. 1702-RT for those subject only to the regular income tax rate.
Method of filing the ITRs
There are three avenues available for filing the income tax return: 1) optional manual filing, 2) electronic Filing and Payment System (eFPS), and 3) electronic BIR Forms (eBIRForms).
Revenue Memorandum Circular (RMC) 19-2015, dated 13 April 2015, reiterated the types of taxpayers who are mandated to use the eFPS and eBIRForms in filing their respective tax returns. Moreover, taxpayers other than those enumerated in the aforesaid issuance may file using existing manual procedures but are encouraged to use the eBIRForms.
Taxpayers who opt to file manually shall use the forms available through the revenue district office (RDO), the BIR website, and computer-generated ITR forms printed on A4 size bond paper from the eBIR Forms Package.
RMC 28-2017 allows optional manual filing of “No Payment Returns” for the following individuals:
a) Senior citizens or persons with disabilities filing their own return
b) Employees deriving purely compensation income from two or more employers, concurrently or successively at any time during the taxable year, or from a single employer, whose income has been correctly subjected to withholding tax but whose spouse is not entitled to substituted filing
c) Employees qualified for substituted filing under RR 2-98 Sec. 2.83.4, as amended, but who opted to file for an ITR and are filing for purposes of promotion, loans, scholarship, foreign travel requirement, etc.
Taxpayers who are enrolled and activated in eFPS will be prompted to log in to the eFPS portal and follow the existing steps in submitting the tax returns through the eFPS.
Taxpayers mandated to use the eBIRForms shall 1) download the latest version of the Offline eBIRForms Package; 2) fill out the ITR; 3) validate the ITR; 4) click submit to online eBIRForms and select “Submit/Final Copy.” The system will then automatically send an e-mail to the BIR and the taxpayer shall receive a notification that the return has been successfully filed.
Taxpayers may download version 6.2 of the Offline eBIRForms Package through these websites: www.knowyourtaxes.ph or www.bir.gov.ph.
In the case of tax payment, taxpayers mandated to use the eBIRForm have to take the additional step of manually filing and paying the return through authorized agent banks (AABs) of their respective RDOs, Revenue Collection Officer (RCO) in places where there are no AABs, or mobile payment using GCash. However, mobile payment using GCash is temporarily unavailable due to an ongoing system update. This is the same procedure for taxpayers who opt to file manually.
Taxpayers may opt to pay in cash, manager’s check, or cashier’s check. Revenue Regulations (RR) No. 3-2016, dated 23 March 2016, also allows the use of Philippine-issued credit/debit/prepaid cards under the name of the taxpayer-cardholder in payment of tax liabilities.
Required attachments to ITR
Annexes B1 to B5 of RMC 28-2017 provide the list of required attachments and accompanying schedules to be submitted to the Large Taxpayer Office (LTO)/RDO or AABs.
Similar to eFPS filers, taxpayers using the eBIRForms shall also submit the accompanying schedules and manual attachments (i.e., Financial Statements, Statement of Management Responsibility, DVD-R with sworn declaration) within 15 days after they accomplish the electronic filing of their return at the concerned LTO/RDO where they are registered or from the deadline of filing, whichever comes later.
The case is different for manual filers as they would need to submit the attachments upon filing.
In case a taxpayer requests a certified true copy of the audited financial statements (AFS) from the BIR, a certification fee of P100 per set of AFS and documentary stamp tax (DST) of P15 shall be paid for each set of AFS certified as true copy by the BIR. The BIR officer shall stamp the words “Certified True Copy” and affix his/her signature on every page of the photocopied ITR and AFS.
Electronically filed and/or paid ITRs using eBIRForms or eFPS without any attachments required need not submit printed copies of the e-filed tax returns to the LTO/RDO.
Other attachments to ITR for PEZA and BOI enterprises
RMC 14-2012, dated 4 April 2012, requires enterprises registered with the Philippine Economic Zone Authority (PEZA) to submit their certificate for entitlement to income tax holiday (ITH) or preferential treatment within 30 days from the filing of their ITRs for them to enjoy ITH or preferential tax privileges.
On the other hand, Board of Investment (BOI) enterprises are required to submit a Certificate of Entitlement for ITH issued by the BOI or BOI-ARMM (Autonomous Region in Muslim Mindanao) stating that the BOI-entity is a bona fide BOI/BOI-ARMM-registered enterprise entitled to ITH incentives.
The BOI enterprise must secure from the BOI Supervision and Monitoring Department (SMD) a Certificate of ITH Entitlement (CoE) prior to filing its ITR with the BIR. Otherwise, the ITH for that particular year without CoE shall be forfeited. (BIR Ruling No. 333-14 dated 15 August 2014)
Tax filing deadline for 2017
The most important reminder is for all taxpayers to file and pay taxes on time. The deadline for the filing and payment of ITRs for the taxable year 2016 is on or before April 15, 2017, which is a Black Saturday, and therefore, a holiday.
RMC 28-2017 has moved the deadline for the filing and payment of ITRs to April 17, 2017.
Supplemental information on BIR Forms No. 1700 and 1701
RMC 28-2017 states that the disclosure of supplemental information on BIR Forms No. 1700 and 1701 is optional on the part of the individual taxpayer filing ITR covering and starting calendar year 2016 due for filing on or before 17 April 2017.
Rules on acceptance and stamping of ITR
The BIR and AABs shall only accept three copies of the ITR, including the attachments, which shall be stamped “RECEIVED” using the official receiving seal or stamp on the space provided in the tax returns.
BIR—Two copies of the ITR, including attached AFS
Taxpayer—One copy of the ITR and accompanying AFS
Any copies of the ITR in excess of three copies shall not be stamped “RECEIVED.”
However, in the case of corporations and juridical persons, they may request the BIR to stamp “RECEIVED” on at least two extra copies of the AFS for filing with the Securities and Exchange Commission (SEC).
The BIR and AAB shall stamp “RECEIVED” only on the page of the Audit Certificate, Balance Sheet, and Income Statement. The other pages of the financial statements and its attachments shall not be stamped “RECEIVED” by the BIR.
SEC filing schedule
Non-individual taxpayers must also file their AFS with the SEC, as provided in SEC Memorandum Circular No. 1 Series of 2017, depending on the last numerical digit of their SEC registration or license number:
eFPS enrollment suspension
RMC 14-2017, dated 17 February 2017, temporarily suspended enrollment to the eFPS from 1 March to 30 April of every year in order to concentrate resources on the filing of annual ITRs.
However, the suspension does not apply to taxpayers who are required to secure the BIR Importer’s Clearance Certificate (ICC), the Broker’s Clearance Certificate (BCC), and the Government Bidders Tax Clearance. Hence, these taxpayers may still proceed with their eFPS enrollment during the period of suspension by presenting their duly accomplished and notarized application form to the RDO.
eFPS enrollment shall resume on 1 May 2017.
Taxpayers are encouraged to file their ITRs ahead of the deadline in order to avoid system congestion on the last day of filing and the incurrence of penalties. Non-filing or late filing of ITRs on the prescribed deadline shall result in the imposition of penalties.
The author is a manager with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.