Legal basis and covered tax framework
- These regulations are issued pursuant to Sections 245 and 67 of the National Internal Revenue Code (NIRC) under Section 1.
- Section 1 ties the regulatory procedure to the quarterly filing and payment obligations for individuals receiving self-employment income.
- Section 2 states that individuals covered by these regulations are taxable under Section 21(f) of the NIRC.
- Section 3 expressly explains that quarterly filing and payment operate in lieu of the estimated income tax procedure under Section 67(a) and (b) of the NIRC, because estimating may not approximate the correct tax.
Policy purpose for quarterly filing
- These regulations require quarterly filing and payment instead of estimated tax because the income tax to be paid may not be reasonably approximated by the estimated-income procedure under Section 67.
- The regulations treat “estimated tax” for an individual as the amount declared as income tax in the individual’s final income tax return for the preceding taxable year under Section 67(c) of the NIRC, and explain why that basis may disadvantage taxpayers when current income trends lower.
Who must file and when returns apply
- Section 2 requires a return for each of the first three quarters and a final/adjustment return for individuals receiving self-employment income.
- Section 2 requires the quarterly and final/adjustment returns for all individuals, including estates and trusts.
- Section 2 provides that covered individuals generally include those who declare income from the practice of a profession or conduct of trade or business as a sole proprietor or through a general partnership of which the individual is a member.
- Section 2 makes the general coverage subject to Section 21(f) of the NIRC.
- Section 2 provides that nonresident Filipino citizens, with respect to income from without the Philippines, and nonresident aliens not engaged in trade or business in the Philippines are not required to render the declaration.
Required forms for quarterly and final returns
- Section 2 requires filing a summary declaration of gross income and deductions using BIR Form No. 1701Q for each of the first three quarters.
- Section 2 requires a final or adjustment return using BIR Form No. 1701.
Filing deadlines and payment timing
- Section 3 requires quarterly returns to be filed on or before the indicated dates:
- First quarterly return: May 15 of the current year
- Second quarterly return: August 15 of the current year
- Third quarterly return: November 15 of the current year
- Final return: April 15 of the following year
- Section 3 requires that the income tax computed be paid at the same time the return is filed.
- Section 3 requires payment based on declarations of actual income and deductions for the particular quarter.
Place of filing and payment
- Section 4 requires returns to be filed with, and income tax to be paid at, an accredited bank in the city or municipality where the principal place of business is located.
- Section 4 provides an alternative where no accredited banks exist: returns must be filed and tax must be paid with the collection officer or authorized Municipal Treasurer.
How quarterly taxable income and tax are computed
- Section 5 requires gross income and deductions to be computed on a cumulative basis to determine quarterly taxable income for the returns.
- Section 5 limits reportable gross income to those subject to tax under Section 21(f) of the NIRC.
- Section 5 requires that gross income for the quarterly returns does not include income taxable under Section 21(a) to (e) of the NIRC (e.g., compensation income and passive income).
- Section 5 limits deductions for the first three quarters by excluding personal and additional exemptions; Section 5 provides that exemptions can be claimed as deduction only in the last quarter.
- Section 5 requires computing the income tax due for each quarter in accordance with Section 21(f) of the NIRC, based on cumulative taxable income for the quarter and preceding quarters.
- Section 5 requires quarterly tax payment as the balance of income tax after deducting:
- total quarterly income taxes previously paid, and
- any taxes withheld under the Expanded Withholding Tax System from items of gross income reported for the period.
- Section 5 addresses excess payments/taxes withheld measured against income tax in the final return by giving the taxpayer an option:
- Option (1): issuance of a tax refund or tax credit certificate, or
- Option (2): application as a credit against quarterly income tax liabilities for the taxable quarters of the immediately succeeding year.
- Section 5 requires that the second credit option is available to individuals who do not want to wait for the processing of any tax refund.
- Section 5 provides that if the credit applied to the succeeding year is not completely utilized during that year, the remaining amount must be claimed for refund or credit pursuant to Section 204 of the NIRC.
Non-compliance and penalties
- Section 6 imposes penalties under Sections 248 and/or 249 of the NIRC where any of these occur:
- failure to file the quarterly tax return;
- filing after the prescribed due date;
- nonpayment on or before the prescribed payment date of the amount shown as tax on the return or any part of that amount; or
- underpayment of the quarterly tax.
Implementation effect
- Section 7 makes the regulations effective immediately upon adoption on January 04, 1993 (adopted 4 Jan. 1993).