KPMG PH Insights: EOPT Series Episode 1 (Overview of the EOPT Act)
Summary
TLDRIn the KPMG Insights EOP Series, Maria Carela and Leandro Ben M. Robiso discuss the Ease of Paying Taxes Act in the Philippines, signed into law by President Bongbong Marcos Jr. The Act simplifies tax filing and payment processes, introduces a classification system for taxpayers, and aims to modernize tax administration. It emphasizes the importance of stakeholder input in the creation of implementing rules and regulations, promoting a more inclusive and efficient tax system.
Takeaways
- 📜 The Ease of Paying Taxes Act (EOP), Republic Act No. 11976, was signed into law by President Bongbong Marcos Jr. on January 5, 2024, aiming to simplify and modernize tax administration in the Philippines.
- 📈 Taxpayers are reclassified into micro, small, medium, and large categories, with special provisions for micro and small taxpayers to ease their compliance burden.
- 🔍 The EOP Act introduces electronic and manual filing of tax returns and payments, allowing taxpayers to file with any Bureau of Internal Revenue (BIR) office or through authorized agents, eliminating the previous penalty for incorrect venue filing.
- 💼 The withholding tax requirement has been revised to be based on gross sales for both goods and services, instead of gross selling price for goods and gross receipts for services.
- 📄 The use of invoices has been standardized to substantiate both sales of goods and services, simplifying the documentation process for taxpayers.
- 🔄 The EOP Act has restructured the refund claim process into low, medium, and high risk categories and mandates the BIR to act on refund claims within 180 days of complete documentation submission.
- ⏳ An appeal to the Court of Tax Appeals must be made within 30 days from receiving the decision or from the expiration of the 180-day period for refund claims.
- 🏢 Registration with the Revenue District Office can now be done manually or electronically, and the annual registration fee of 500 pesos has been removed.
- 📊 The EOP Act emphasizes the need for the BIR to consider taxpayer size and ability to comply when determining procedures and documentary requirements, with a focus on prioritizing micro and small taxpayers.
- 📝 The implementing rules and regulations (IRR) for the EOP Act should provide clarity on electronic filing and payment processes, as well as the classification and concessions for different taxpayer categories.
- 🤝 The EOP Act encourages a partnership between the BIR and the private sector for effective consultations, promoting an inclusive approach to tax policy development.
Q & A
What is the purpose of the Ease of Paying Taxes Act (EOP Act)?
-The EOP Act aims to protect and safeguard taxpayer rights and welfare, modernize tax administration, encourage proper and easy compliance, update the taxation system, and adopt best practices.
Who is Maria Carela and what is her role in the EOP Series?
-Maria Carela is the Emperata Head of Tax of KPMG in the Philippines. She hosts the EOP Series, which provides insights on the EOP Act and its impact on taxpayers.
What significant changes does the EOP Act introduce to the National Internal Revenue Code?
-The EOP Act introduces significant amendments such as classifying taxpayers into micro, small, medium, and large categories, allowing electronic and manual filing of returns and payment of taxes, and updating the timing of withholding taxes.
What are the special concessions provided for micro and small taxpayers under the EOP Act?
-Micro and small taxpayers are given priority in terms of procedures and documentary requirements, with the EOP Act granting concessions such as a maximum of two schedules for income tax returns and reduced penalties during tax assessments.
How does the EOP Act address the issue of electronic filing and payment of taxes?
-The EOP Act allows taxpayers to electronically or manually file or pay taxes to any BIR office or through any authorized agent bank or authorized tax software provider, removing the 25% surcharge for filing in the wrong venue.
What is the role of the implementing rules and regulations (IRR) in the EOP Act?
-The IRR will provide clarity on the implementation of the EOP Act, including the electronic filing of returns and payment of taxes, and will consider inputs from the private sector for effective consultations.
What is the classification of taxpayers under the EOP Act based on?
-Taxpayers are classified under the EOP Act based on their gross sales, with categories for micro, small, medium, and large taxpayers, each having different thresholds for gross sales.
How does the EOP Act change the timing of withholding taxes?
-The EOP Act changes the timing of withholding taxes to when income payments become payable, basing it on gross sales for both sale of goods and services, instead of gross selling price for goods and gross receipts for services.
What is the impact of the EOP Act on VAT invoicing and registration?
-The EOP Act removes the requirement for a business style in VAT invoicing and registration, and the annual registration fee of 500 pesos is removed. It also simplifies the cancellation of BIR registration.
How does the EOP Act address the issue of refund claims?
-The EOP Act classifies refund claims into low, medium, and high risk, and mandates that refund claims of overpaid taxes should be acted upon by the BIR within 180 days from submission of complete documents by the taxpayer.
What is the significance of the EOP Act's provisions on the preservation of books?
-The EOP Act stipulates that books must be preserved for a period of 5 years, which is important for record-keeping and compliance purposes.
Outlines
📚 Introduction to the Ease of Paying Taxes Act
The video script introduces Maria Carela, the Emperata Head of Tax at KPMG in the Philippines, who welcomes viewers to the KPMG Insights EOP Series. The series aims to explore the Republic Act No. 11976, known as the Ease of Paying Taxes Act, which was signed into law on January 22, 2024. The Act introduces significant amendments to the National Internal Revenue Code, focusing on modernizing tax administration, safeguarding taxpayer rights, and encouraging compliance. Key features include the classification of taxpayers into micro, small, medium, and large categories, electronic filing and payment of taxes, and changes to VAT, input VAT credits, and refund processes. The series will also discuss the impact on individuals and the expected implementation of the law.
🔍 EOP Act's Impact on Tax Filing and Withholding
This paragraph delves into the changes brought by the EOP Act, emphasizing its goals of simplicity, efficiency, and clarity in tax processes. It mentions the president's veto of a provision that would have exempted micro taxpayers from withholding tax obligations. The discussion highlights the new flexibility in tax filing and payment, the removal of penalties for incorrect filing venues, and the need for clarity in electronic filing and payment processes. The paragraph also addresses the challenges of harmonizing different online payment methods and the potential need for funding and budget allocation for the implementation of these changes.
🏢 Classification of Taxpayers and Concessions under EOP Act
The script discusses the new classification system for taxpayers under the EOP Act, which is based on gross sales, distinguishing between micro, small, medium, and large taxpayers. It outlines the concessions provided to micro and small taxpayers, such as simplified income tax returns and reduced penalties during tax assessments. The conversation points out the need for the implementing rules and regulations (IRR) to clarify the classification process and ensure that taxpayers are correctly categorized to avail of the appropriate concessions. It also raises questions about the alignment of this classification with other existing laws and the potential for taxpayers to fall under different categories based on varying criteria.
🌟 Final Thoughts on the EOP Act and Encouragement for Taxpayers
In the concluding remarks, the speakers emphasize the EOP Act as a significant advancement towards a more efficient tax system in the Philippines. They encourage viewers and listeners to familiarize themselves with the new changes and to take advantage of the simplified tax processes. The speakers highlight that a simplified tax system benefits everyone and remind the audience to stay tuned for future episodes that will cover additional topics under the EOP Act.
Mindmap
Keywords
💡Republic Act Number 11976
💡Ease of Paying Taxes Act (EOP)
💡Taxpayers Classification
💡Electronic Filing
💡Implementing Rules and Regulations (IRR)
💡Micro Taxpayers
💡Global Compliance Management Services (GCMS)
💡Withholding Tax
💡Input VAT Credits
💡Tax Refunds
Highlights
Introduction of Republic Act No. 11976, the Ease of Paying Taxes Act, signed into law on January 22, 2024.
The Act aims to simplify tax administration, protect taxpayer rights, and encourage compliance.
Taxpayers are reclassified into micro, small, medium, and large categories with special provisions for micro and small taxpayers.
Electronic and manual filing of tax returns and payments are now allowed through authorized banks or tax software providers.
Withholding tax requirements have been revised to be based on gross sales for both goods and services.
Invoices can now be used to substantiate both sales of goods and services.
Refund claims are categorized into low, medium, and high risk, with a 180-day period for the BIR to act on complete refund claims.
Appeals to the Court of Tax Appeals must be made within 30 days of receiving the decision or the 180-day period's expiration.
Registration with the Revenue District Office can be done manually or electronically, and the annual registration fee of 500 pesos is removed.
The obligation to withhold taxes for micro taxpayers has been vetoed by the president.
The EOP Act emphasizes simplicity, efficiency, clarity, and taxpayer convenience.
The implementing rules and regulations (IRR) should consider inputs from the private sector for effective consultations.
Electronic filing of returns and payments can be done anywhere, eliminating the 25% surcharge for incorrect venue filing.
The BIR is expected to clarify how electronic filing and payment will be implemented under the EOP Act.
Taxpayers are classified based on gross sales, with different concessions for micro and small taxpayers.
The EOP Act provides a maximum of two schedules for income tax returns for micro and small taxpayers.
The IRR needs to address how to determine taxpayer classification and ensure proper availment of concessions.
Other laws may have different classifications based on assets, not gross sales, which could lead to discrepancies.
The EOP Act is a significant step towards a more efficient tax system in the Philippines.
Transcripts
[Music]
hi I'm Maria carela emperata head of tax
of KPMG in the Philippines welcome to
KPMG insights EOP Series where we will
be delving into Republic act number
11976 or the ease of paying taxes Act a
landmark legislation signed into law by
the president and which has taken effect
on January 22
2024 this series aims to provide you a
glimpse of km's insights on the law how
we think it will affect tax payers and
what we hope will be addressed in the
implementing rules and regulations or
the
irr this will comprise a series of
episodes featuring our tax partners and
principals having conversation on the
following the general concepts of EOP
classification of tax payers electronic
filing of returns and payment of
taxes deductibility not withstanding the
failure to withhold one the obligation
to withhold arises VAT on sale of
services input vat credits on purchase
of services refunds and impact on
individuals in today's episode we'll
provide an over viiew of the EOP app and
focus our lens on the classification of
taxpayers and the electronic filing of
returns and payment of taxes joining me
today is Leandro Ben M robiso or La one
of our tax Partners who leads the global
compliance Management Services or gcms
and tax reimagine in the
Philippines hi La glad to have you here
glad be here Carmela is it really a good
time to be a tax practitioner and
equally a good time for our viewers and
listeners to hear insights from tax
practitioners on the EOP app I couldn't
agree more La so let's Jump Right In and
give our viewers and listeners a brief
overview of the EOP app so this brief
overview allow me to look into my notes
because this could be too technical for
me okay well as a backgrounder on
January 5 2024 president bongbong Marcos
Jr signed into law the much awaited
EOP the ACT introduces significant
amendments to the National Internal
Revenue code or the NRA or simply a tax
practitioners Bible which aims to
protect and Safeguard taxpayer rights
and Welfare modernized Tax
Administration provide mechanisms that
encourage proper and easy compliance
update the taxation system and adopt
best practices the selling features of
the eopt ACT are taxpayers are now
classified as micro small medium and
large with special concessions for micro
and small
taxpayers electronic and manual filing
of returns and payment of taxes to the
bir or through any authorized agent bank
or authorized tax software provider can
now be done the witholding tax
requirement on deductions has been remed
approved the timing of withholding of
taxes is only when income payments
become
payable that is now based on gross sales
for both sale of goods and services
before sale of goods was based on Gross
selling price while sale of services was
based on gross receipts that invoice is
now used to substantiate both sale of
goods and sale of services that refund
claims are now classified into low
medium and high risk the tax base of
percentage taxes is now gross sales or
amount build or gross sales or
earnings refund claims of rly paid taxes
should be acted upon by the BR within
180 days from submission of complete
documents by the
taxpayer appeal to the court of tax
appeal should be made within 30 days
from receiving of the decision or from
expiration of the 180-day period
application for registration with the
appropriate Revenue district office may
be made manually or
electronically business style is no
longer required in the vat invoicing and
registration annual registration fee of
500 pesos is now removed cancellation of
bi registration is upon mere manual or
electronic filing of an application for
the same lastly the preservation of
books is for a period of 5 years note
that the president has veto a provision
of the EOP act exempting microtax payers
from the obligation to withhold taxes
that's a lot of changes LA and it's
clear that the overall objective of the
EOP Act is Simplicity efficiency Clarity
and promotion of taxpayers convenience
now we look forward to the implementing
rules and
regulations now the declared policies of
the eopt ACT should guide the bi and the
doof in coming up with the irr also
inputs from the private sector should be
considered and in this regard what will
help address this need is the
partnership created by the commissioner
in August
2023 with multi sectoral private
organizations for Effective
consultations yeah I agree see MP um
because I see this as a trend no after
uh attending several Senate hearings on
proposed tax bills um they're now
including this Clause where there is
really a need to consider uh the voice
of stakeholders no so unlike before
where it's really just the BF and the
bir um who would have to come up with
implementing rules and regulations I
think this is a good step into making
our tax policy more inclusive in that
sense now let's shift our focus on
electronic filing of returns and payment
of taxes sure carella simplified filings
are now possible because the EOP act
allows taxpayers to file returns and pay
taxes anywhere well to be technically
correct about it taxpayers may
electronically or manually file or pay
to any BR office or through any
authorized agent back or authorized tax
software provider prior to the EOP act
filing should should be made with a
proper bir offices having jurisdiction
over the taxpayers or with the
authorized agent Banks within their
jurisdictions in fact a 25% SE charge is
imposed in case of filing a a return
with the wrong venue the EOP act has
eled this 25%
surcharge I view this as a progressive
change because I understand there are
some of us who may have the world as his
or her address but seriously speaking I
believe no penalty should be due because
there was no law to the government to
start with hence why impose a penalty
Carmela well it is easy to understand
that under the ACT venue has been made
but I think what needs Clarity what
needs to be provided in the irr is how
the birir will implement the electronic
filing of returns and payment of taxes
remember under the act the election to
do manual or
electronic is on the taxpayer right yes
now what exactly do we mean by
electronic under the EOP act well that
is a part of the EOP act that needs more
clarity taking into account the current
modes of filing EBR forms efps what
exactly is not yet considered electronic
filing with respect to electronic
payment so far under the be's governance
is the efps tax payments for EBR forms
are made manually with the authorized
agent Banks but there are online methods
for tax payments as already Allowed by
the
B okay but then it seems that the online
uh payment methods outside efbs no have
their own set of rules no um we have
Mobile payment channels like gcash and
those operated by DVP landm and Union
Bank these channels have their own set
of rules depending on the entity
operating them so what does the bir
intend to do does the bir intend to
harmonize the rules manage them um with
the same set of
rules but that will understandably take
time to develop for the bir it will also
require funding an allocation in the
National budget or from other sources
now of government
funds well then if that is the case if
that will take time
well let's just consider that the
taxpayer has somehow achieved certain
ease of paying taxes because venue has
been waved remember we we've seen it
we've seen this for how many years every
every April 15 bir will release an
advisory waving Vue okay and for large
tax payers yes for large taxpayers using
um efps every time efps mugs down we
will have to wait for a bir advisory
allowing large tax payers to use ebi
forms right yes yes you're right K now
on the next topic which is on the
classification of taxpayers under the
ACT taxpayers are classified depending
on their gross sales so we have Micro
taxpayers whose gross sales are less
than 3 million we have small taxpayers
whose gross sales are 3 million or and
up to less than 20 million now we have
medium taxpayers with grow sales of 20
million and up to less than 1 billion
pesos and finally the large taxpayers
would grow sales of 1 billion and
above now the ACT states that the B
should give priority
to micro and small taxpayers in terms of
procedures and documentary requirements
depending on factors such as um taxpayer
size and ability to
comply however if from notice the act
itself already grants concessions to
micro and small
taxpayers for example the income tax
return should have maximum of two
purches only a welcome development I
suppose for them okay and also penalties
to be imposed during um tax assessments
um these would be reduced no as stated
under the EOP act okay I think there is
no ambiguity with respect to the
concessions granted to micro and small
tax payers okay however what needs to be
addressed I think now by the IR is how
to ensure or how to determine if a
taxpayer really falls under this
classification yes I agree the act
itself provides for the Criterion but
the determining the determination of who
meets the Criterion is a different
matter uh will the BR look at prior your
sales alone and on that basis make the
classification no so who
knows I guess the question is who makes
the classification okay currently we
have the large tax fuse classification
and under current rules before the EOP
it is the B that will that will
determine if they are already large tax
payers and the B is supposed to give
them a notice stating that they are
already classified as large as large
taxpayers however in our case now under
the EOP act what will happen will there
be notice from the bir will there be um
some review by the bir or will there be
some kind of registration mandated no um
by the bir for you to be classified as
um as um micro or small medium or large
yeah most probably there will be a
reevaluation also of the existing pool
of large taxpayers before the E act the
criteria for large taxpayers were not
only based on gross sales tax payments
and other factors were considered but
what will likely be the the case under
the EOP act well that's interesting
because um I think the question also is
will there be the chance to be the
listed or will your classification be
changed depending on gross sales okay so
I think the IR should be clear
on the process for determining that the
taxpayer falls under a particular
classification and what will be the
substantiation required these things
should be cleared so that there will be
the proper availment of concessions you
do not want a taxpayer that is not
entitled to these concessions to be
granted or to be enjoying these
concessions at any rate we have to
realize also that um this is very
important because other laws provide for
the same classification of tax payers
okay um we have the Magna Carta for
small medium and large um taxpayers we
also have the what we call the bangai um
bangai um micro bangai micro businesses
Act of 2002 these laws have something on
classifications something that the
taxpayers as classified can Avail of and
these are not really um aligned with
what you have under the eopf for one
thing under these laws the
classification is based on assets on
assets not on B Sales so will it be
possible for a taxpayer to be considered
medium under the EOP act but large under
these laws could be right so maybe
registration of taxpayers to enjoy the
the concessions should be required to
implement the op act yes I agree with
you la there should be some kind of
registration or other very released
notice so the taxpayer is aware of what
classification he is falling
under now La we are coming to the end of
our episode any final thoughts messages
to our viewers or listeners well
absolutely the EOP act represents a
significant step towards a more
efficient tax system in the Philippines
I encourage everyone to familiarize
themselves with this change changes and
take advantage of the simplified
processes and remember a simplified tax
system benefits everyone well said La
unfortunately that's all the time we
have thank you for sharing your time
thank you for sharing your knowledge
bless thank you for tuning in to playm
jph insights EOP series stay tuned for
other episodes on the other topics under
the EOP app Remember to subscribe to
[Music]
stay
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