Ease of Paying Taxes

Signed on January 05, 2024 as RA 11976, the Ease of Paying Taxes Act adopts a modern taxation system that simplifies the payment process of taxes. Among the salient provisions of the new law include: the classification of taxpayers into “micro,” “small”, “medium,” and “large” based on gross sales; permitting filings of returns and payment of taxes through electronic or manual means; harmonizing the rules regarding the value-added tax (VAT) treatment of sales of goods and services; among others.

The full copy of the law can be found here.

On April 11, the Bureau of Internal Revenue released the implementing rules and regulations (IRR) of the Ease of Paying Taxes Act, also known as RA 11976, in six separate revenue regulations. Each revenue regulation covers a specific provision of the law and outlines the implementing policies for those provisions.

The summary of each revenue regulation is outlined below:  

Revenue Regulations No. 3-2024 

• The regulation provides standardizations of the use of the following terminologies:  
  • Gross Sales: The terms “gross selling price”, “gross value in money”, and “gross receipts” are unified under the term “GROSS SALES” for both goods (Section 106) and services (Section 108). 
  • Invoice Usage: The term “Invoice” now replaces “Sales/Commercial Invoices” and “Official Receipts.” 
  • Billing Recognition: All references to “receipts or payments” for the recognition of sales of service are now referred to as “BILLING” or “BILLED”, depending on the context. 
• The VAT-exempt threshold, previously set at three million pesos, will now be adjusted every three years to reflect the present value using the Consumer Price Index (CPI) as published by the Philippine Statistics Authority (PSA). 

Revenue Regulations No. 4-2024 

• Tax returns should primarily be filed electronically using available platforms. Manual filing is allowed if electronic platforms are unavailable. 
• The 25 percent penalty for filing at the wrong office is removed. 

Revenue Regulations No. 5-2024 

• Staring July 1, 2024, the following policies for tax credit/refund claims will be implemented:  
  • Introduction of a risk-based approach for VAT refund verifications. 
  • Clarification on liabilities during tax refund disallowance. 
  • Inclusion of policies for claiming refunds in cases of business cessation. 
  • Standardizing a 180-day period for processing refund claims, except VAT. 
  • Judicial claims processes have been streamlined, removing previous limitations. 

Revenue Regulations No. 6-2024 

• Below are the penalties on the following violations cited in the Ease of Payment of Taxes Act:  
  • Failure to File Any Return and Pay the Tax Due:10 percent of the amount due for failing to file any return and pay the tax due on the prescribed date. 
  • Deficiency Tax Assessment Following a Tax Audit: 10 percent of the deficiency tax is imposed if the particular tax return being audited was found to have been filed beyond the prescribed period or due date. 
  • Failure to Pay the Deficiency Tax Within the Prescribed Time: 10 percent of the deficiency tax for failing to pay within the time prescribed in the notice of assessment. 
  • Failure to Pay the Full or Part of the Amount of Tax Shown on Any Return Required: 10 percent of the tax amount for failing to pay the full or part of the amount of tax shown on any return, or the full amount of tax due for which no return is required, on or before the prescribed date. 
  • Willful Neglect or Fraudulent Filing: A penalty of 50 percent of the tax or deficiency tax is imposed for either willful neglect to file a return within the prescribed period, or for the filing of a false or fraudulent return. 
  • Failure to Comply with Informational Requirements: PHP 500 for each failure to file an information return, statement, or keep records, etc., on the prescribed date. The aggregate amount for all such failures during a calendar year shall not exceed PHP 12,500. 
  • Compromise Agreement in Lieu of Criminal Prosecution: For covered taxpayers who violate certain tax laws not involving fraud, the option of entering into a compromise agreement with the Commissioner of Internal Revenue is available. 

Revenue Regulation No. 7-2024: 

• The regulation lists down the registration procedures and invoicing requirements for various sections of the Tax Code such as:  
  • Invoicing and Accounting Requirements for VAT Registered Persons (Section 113) 
  • Preservation of Books of Accounts and Other Accounting Records (Section 235) 
  • Registration Requirements (Section 236) 
  • Issuance of Invoices (Section 237) 
  • Printing of Invoices (Section 238) 
  • Transitory Provisions 

Revenue Regulations No. 8-2024 

• The regulations defines the categories that were mentioned in the law: Micro, Small, Medium, and Large taxpayers based on annual gross sales. 
• The regulation enumerates procedures for initial classification and reclassification based on sales thresholds. 
• The regulation also lists down special rules for newly registered businesses and those without complete sales data.