Law Summary
Classification of National Internal Revenue Taxes and Taxpayers
- Taxes included: income, estate, donor’s, VAT, percentage taxes, excise taxes, documentary stamps, and future BIR-imposed taxes.
- Taxpayer groups based on gross sales:
- Micro: Below ₱3 million.
- Small: ₱3 million to < ₱20 million.
- Medium: ₱20 million to < ₱1 billion.
- Large: ₱1 billion and above.
Definitions: Filing and Payment of Taxes
- "Filing of return": submission (manual or electronic) of prescribed tax returns to BIR or authorized agents.
- "Payment or remittance of tax": delivery (manual or electronic) of due tax to BIR or authorized agents.
Individual Income Tax Return Filing Requirements
- Filing required except for certain exemptions including Overseas Filipino Workers earning solely abroad.
- Returns filed at authorized agent banks, Revenue District Offices, or authorized tax software providers.
- Married couples may file jointly or separately; BIR consolidates returns for verification.
Payment and Assessment of Income Tax for Individuals and Corporations
- Tax payment due upon filing; electronic or manual payment accepted.
- Special provisions for tramp vessels to ensure tax payment before departure.
Withholding Tax
- Periodic reviews of withholding processes by Department of Finance every three years.
- Micro taxpayers exempt from withholding taxes.
Returns and Payment of Withholding Taxes
- Quarterly returns and payments required; electronic or manual submission allowed.
- Tax must be withheld at the time income becomes payable.
- Input and credit tax rules apply with refund provisions for excess withholding.
- Taxes withheld treated as trust funds and maintained separately.
Corporate Income Tax Returns
- Final adjustment returns filed electronically or manually.
- Excess corporate tax credits can be carried over or refunded after business cessation.
- Quarterly and final returns filed with authorized bodies; payment simultaneous with filing.
VAT-Related Provisions
- VAT imposed at 12% on sales of goods, properties, services, and leases.
- Definitions of gross sales adjust for exclusions like VAT itself, third-party reimbursements.
- VAT exemptions apply to sales not exceeding adjusted ₱3 million threshold.
- Credit and refund mechanisms for input taxes specified, including process timelines and audit procedures.
- Invoicing requirements mandate clear information, separate handling of taxable, exempt, and zero-rated sales.
- Penalties for erroneous invoicing and noncompliance detailed.
Tax Filing and Payment Procedures
- Filing and payment of other taxes (estate, donor, documentary stamp, percentage taxes) required with clear timelines.
- Returns may be filed and payments made electronically or manually.
Tax Registration and Updates
- Mandatory registration at Revenue District Offices with electronic/manual options.
- Obligations include registration for each tax type, updates on changes like business transfer.
- Cancellation processes detailed, especially for VAT registrants.
- Optional VAT registration for certain taxpayers with binding commitment period.
Invoice Issuance and Printing Requirements
- Sales or commercial invoices required for transactions of ₱500 or more; VAT-registered persons must issue regardless of amount.
- Printing of invoices subject to BIR authorization with logbook requirements for printers.
Exhibition and Continuation of Business
- Tax payment certificates must be conspicuously displayed.
- Business continuance upon death or relocation allowed without additional tax payment for the term paid.
Civil Penalties and Enforcement
- 25% surcharge for failure to file returns or pay taxes on time.
- Government officers who fail to act on refund applications face penalties including fines, imprisonment, and disqualification.
- Special penalties for improper issuance of VAT invoices and noncompliance.
BIR Digitalization and Ease of Paying Taxes Initiatives
- BIR mandated to adopt integrated digital systems for registration, filing, payments, and communications.
- Streamlining of procedures prioritized, especially for micro and small taxpayers.
- Annual reporting to congressional oversight on digitalization and taxpayer service improvements.
Special Concessions for Micro and Small Taxpayers
- Simplified Income Tax Return limited to two pages.
- Reduced penalties and fines on civil penalties, interest, and information return violations.
Data Privacy Compliance
- All data processing and handling to comply with the Data Privacy Act of 2012 and ensure transparency.
Implementing Rules, Transitory Provisions, and Effectivity
- Secretary of Finance to promulgate implementing regulations within 90 days.
- Six-month grace period for taxpayers to comply with amended VAT and percentage tax rules.
- Provisions severable if declared unconstitutional; conflicting laws repealed or modified.
- Act takes effect 15 days after publication in official media.
This Act comprehensively enhances tax administration, promotes digitalization, and provides concessions particularly benefiting micro and small taxpayers, while ensuring taxpayer rights and compliance are balanced with efficiency and technology adoption.