3 REASONS why you should NOT pay your BIR taxes . . . Yet!
Taxes are lifeblood of our government. Without it, the government will be paralyzed and cannot do its functions to the public. However, as taxpayers, we should be aware and knowledgeable of the tax information relevant to our businesses before paying taxes to the Bureau of Internal Revenue (BIR). This will help us not only to comply correctly but to avoid unnecessary tax penalties.
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1. The Income Tax Regime
Individual taxpayers, except employees, can save huge taxes by choosing the correct income tax regime in the filing of their quarterly and annual income tax returns (ITR) to the BIR. There are three (3) available income tax regimes to these taxpayers; namely: 8% ITR Option, 40% OSD Option, and Allowable Itemized Deductions (AID) Option. For corporate taxpayers, only 40% OSD and AID Options are available. The 8% ITR Option is not applicable to these corporate taxpayers.
However, a taxpayer should choose only one (1) of these options as income tax regime for the entire taxable year. And the option is irrevocable during the same year of choice. The choice shall be made in the first quarter or initial quarter of the same taxable year. Taxpayers can avail one of these income tax regime options by filing BIR Form No. 1701Q, 1702Q, and/or 2551Q, as may be applicable.
Take Note: Not all individual taxpayers are entitled to choose 8% ITR Option. For example, under RMO 23-2018, VAT-registered or registrable individual taxpayers and VAT-exempt subject to Percentage Tax under Sec. 117 individual taxpayers are exempted from availing this 8% ITR Option. Moreover, individual taxpayers who are entitled and availed the 8% ITR Option are exempted from three percent (3%) quarterly percentage tax during the entire taxable year of choice.
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2. File and Pay Anywhere
With the effectivity of Ease of Paying Taxes Act (R.A. No. 11976) on January 22, 2024, taxpayers can now file and pay their taxes anywhere without committing wrong venue violations. In this regard, the BIR issued Revenue Regulations No. 4-2024 (RR 4-2024). Under RR 4-2024, taxpayers can now file electronically their tax returns in any of the available electronic platforms, eFPS or eBIRForms. Moreover, taxes can be paid manually to any AABs and RCOs or electronically in any of the available electronic platforms. In other words, file and pay anywhere.
However, while manual payment of taxes to any AABs and RCOs is allowed, manual filing of the applicable tax returns is expressly prohibited, unless allowed by the BIR using Tax Advisory. This means that a taxpayer may be subject to tax penalties arising from violations of manual filing of tax returns.
Take Note: eFPS-user taxpayers can now use eBIRForms for the electronic filing of any tax returns which can be paid manually to any AABs and RCOs or electronically to any electronic platforms. This is a source of great relief to these taxpayers because sometimes the eFPS cannot be accessed due to down system or other problems. As a result, some eFPS-user taxpayers incur violations and penalties before.
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3. New Invoicing Requirements
One of the amendments of Ease of Paying Taxes Act (R.A. No. 11976) is the removal of the use of Official Receipts as written documents evidencing sales transactions. Effective April 27, 2024, all business taxpayers, including self-employed professionals, should issue Invoices as proof of sale of goods and services.
Relevant to this amendment, the BIR issued Revenue Regulations No. 7-2024 (RR 7-2024) as amended by Revenue Regulations No. 11-2024 (RR 11-2024) to implement the new invoicing requirements. Under Section 8 of RR 7-2024, as amended, taxpayers can still use the remaining unused Official Receipts (ORs) either as Supplementary Document or Invoice. And this choice is not subject to the approval of the Revenue District Office/Large Taxpayer Service (RDO/LTS) where the taxpayers are registered.
Supplementary Document means proof of collections only, but not sales. In this case, the taxpayers should apply for the new Authority to Print (ATP) for the new set of Invoices or use existing Invoices, if any, as written documents for sales transactions. It must be emphasized that ORs as supplementary documents are not valid Invoices as proof of sale of goods and services. Further, taxpayers should stamp “This document is not valid for claim of input tax” in the original and duplicate copies of unused ORs.
Invoice means conversion of unused ORs to become valid Invoices which can be used as proof of sales transactions of goods and services sold. For manual and loose-leaf ORs, conversion shall made by striking out the word “Official Receipt” in the original and duplicate copies. Stamp “Invoice” or any other applicable name, like “Sales Invoice”, and submit Inventory Report to the RDO/LTS where the taxpayers are registered on or before July 31, 2024. But the effectivity of the conversion is April 27, 2024. The newly converted ORs can now be used until fully consumed by the taxpayers-sellers.
Take Note: Using ORs as primary Invoices without conversion shall result to violations of failure to issue invoices with the corresponding compromise penalties ranging from Php 1,000.00 to Php 50,000.00.
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Learn more about BIR tax compliance for MSMEs
We would like to invite you to our RWB Books, with exclusive ATC online tutorial videos to explain and discuss its contents, and to learn more about how to comply with the BIR tax compliance. Kindly click the photo below to learn more about each of these RWB Books.
