KPMG PH Insights: EOPT Series Episode 1 (Overview of the EOPT Act)

Summary

In 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

00:00

📚 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.

05:02

🔍 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.

10:04

🏢 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.

15:04

🌟 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.

Keywords

💡Republic Act Number 11976

Republic Act Number 11976, also known as the Ease of Paying Taxes Act, is the central legislation discussed in the video. It was signed into law by the president and aims to simplify and modernize the tax system in the Philippines. The Act introduces significant amendments to the National Internal Revenue Code, focusing on protecting taxpayer rights and encouraging compliance. The video discusses various features of this Act, such as the classification of taxpayers and the electronic filing of tax returns.

💡Ease of Paying Taxes Act (EOP)

The Ease of Paying Taxes Act (EOP) is a landmark legislation that has taken effect on January 22, 2024, as mentioned in the script. It is designed to make tax payment and compliance procedures more straightforward for taxpayers. The Act emphasizes the simplification of tax administration, the introduction of electronic filing and payment options, and the classification of taxpayers into micro, small, medium, and large categories, each with specific provisions and benefits.

💡Taxpayers Classification

Taxpayers Classification is a key concept in the EOP Act, which categorizes taxpayers into micro, small, medium, and large based on their gross sales. This classification is crucial as it determines the specific tax obligations and benefits that taxpayers are eligible for. For instance, micro and small taxpayers receive special concessions under the Act, such as reduced penalties and simplified tax return requirements.

💡Electronic Filing

Electronic Filing is a significant feature of the EOP Act that allows taxpayers to file their tax returns and make payments electronically. This method of filing aims to streamline the tax compliance process, making it more accessible and efficient. The video discusses the need for clarity in the implementation of electronic filing and how it will be managed by the Bureau of Internal Revenue (BIR).

💡Implementing Rules and Regulations (IRR)

The Implementing Rules and Regulations (IRR) are the specific guidelines that will be developed to enforce the provisions of the EOP Act. The video emphasizes the importance of these rules in clarifying the application of the Act, including the electronic filing process, the classification of taxpayers, and the concessions available to micro and small taxpayers.

💡Micro Taxpayers

Micro taxpayers are a category of taxpayers defined by the EOP Act as those with gross sales less than 3 million pesos. The Act provides special concessions to micro taxpayers, such as a maximum of two purchases in their income tax return and reduced penalties during tax assessments, to encourage compliance and simplify their tax obligations.

💡Global Compliance Management Services (GCMS)

Global Compliance Management Services (GCMS) is mentioned in the script as one of the areas led by the guest, Leandro Ben M. Robiso. Although not directly related to the EOP Act, GCMS is likely a service within KPMG that deals with compliance issues globally, which may include tax compliance and could be impacted by the changes brought about by the EOP Act.

💡Withholding Tax

Withholding Tax is a tax that is deducted at source by an employer or other payer and paid to the tax authority. The EOP Act has revised the rules regarding withholding tax, specifying that the obligation to withhold arises only when income payments become payable. This change is part of the Act's aim to simplify tax procedures and align them more closely with the realities of business transactions.

💡Input VAT Credits

Input VAT Credits refer to the tax credits that a business can claim for the value-added tax paid on goods and services used in the course of its business. The EOP Act impacts the way input VAT credits are handled, which is relevant to businesses of all sizes and an important aspect of the tax system that businesses need to understand.

💡Tax Refunds

Tax Refunds are mentioned in the context of the EOP Act, which classifies refund claims into low, medium, and high risk. The Act stipulates that refund claims of overpaid taxes should be acted upon by the BIR within 180 days from the submission of complete documents by the taxpayer. This provision is part of the effort to make the tax system more efficient and transparent.

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]

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