Ease of Paying Taxes Act (Republic Act No. 11976) Signed into Law: Key Reforms and Implementation Timeline
On January 5, 2024, President Ferdinand "Bongbong" R. Marcos Jr. signed into law the Ease of Paying Taxes Act (EOPT Act or Republic Act No. 11976). The Act was published in the Official Gazette on January 7, 2024, and took effect on January 22, 2024, fifteen days after its publication.
The EOPT Act introduces significant amendments to the National Internal Revenue Code (NIRC) of 1997, aiming to protect taxpayer rights, modernize tax administration, simplify compliance, and update the taxation system with best practices. Key features of the Act include:
Taxpayer Classification and Concessions:
-Taxpayers are classified into micro, small, medium, and large categories.
-Special concessions for micro and small taxpayers, including a maximum of two pages for income tax returns and reduced penalties.
Filing and Payment Flexibility:
-Allows electronic or manual filing of returns and payment of taxes to the Bureau of Internal Revenue (BIR) or through any authorized agent bank or tax software provider.
Withholding Tax Reforms:
-Removal of the requirement that tax must be deducted/withheld from income payments and remitted to the BIR for the deductibility of income payments to apply.
-Withholding of taxes to apply when income payments become payable.
Value-Added Tax (VAT) Reforms:
-VAT on services to be based on gross sales.
-Requirement to issue a VAT invoice for every sale of goods and services.
-Use of a VAT invoice to substantiate input VAT claims from purchases.
-Classification of VAT refund claims into low, medium, and high-risk.
Percentage Tax Base Adjustment:
-Tax base of percentage taxes under Sections 116, 117, 118, 119, 120, and 128 of the NIRC is now based on gross sales or the amount billed, rather than gross receipts or the amount paid.
Refund Claims Processing:
-Refund claims of erroneously paid taxes must be acted upon by the BIR within 180 days from submission of complete documents.
-Appeals to the Court of Tax Appeals must be made within 30 days from receipt of the decision or from the expiration of the 180-day period.
Registration and Compliance Simplification:
-Application for registration with the appropriate Revenue District Office can be done manually or electronically.
-Business style is not required in VAT invoicing and registration requirements.
-Removal of the annual registration fee of Php500.00.
-BIR registration can be canceled through manual or electronic filing of an application.
-Preservation of books is required for five years.
Note that President Marcos Jr. vetoed a provision exempting micro taxpayers from the obligation to withhold taxes.
The implementing rules and regulations (IRR) of the EOPT Act are to be issued within 90 days from the Act's effectivity. Taxpayers have six months from the effectivity of the IRR to comply with the amendments on VAT and percentage taxes.
For further details, you can refer to the full text of RA No. 11976.
