Tax Articles

Revisiting the Ease of Paying Taxes Act (EOPT)

By: Atty. Mabel L. Buted

Mabel L. Buted Partner   +632 8403-2001 loc.160 This email address is being protected from spambots. You need JavaScript enabled to view it. View Profile

Almost two years have passed since the EOPT Act became effective in January 2024. The primary objective of the law is to simplify the compliance of taxpayers in filing and paying their taxes and in fulfilling their other tax obligations. To this end, the law presented some reforms and new taxpayer classifications. Let us revisit the changes introduced by EOPT.

One of the significant changes relates to the timing of reporting and remittance of output taxes. Under the law, all taxpayers, whether engaged in the sale of goods or services or both, are mandated to adopt the accrual method of reporting and subjecting their revenues to VAT. Regardless of collection, all sales are now subject to VAT. This rule requires all taxpayers to issue invoices on their sale or transfer of goods and services. Taxpayers can recover the output taxes paid on uncollected receivables on sales by deducting the VAT previously paid from the output tax in the next quarter after the lapse of the payment period.

Under the EOPT Act, taxpayers are entitled to file and pay their taxes anywhere, through any BIR office, authorized agent banks (AABs) or authorized tax software provider, regardless of the place of the taxpayer’s registration. Under the revenue regulations, filing must be done electronically (eFPS/eBIRForms) and payment may be manual or online. The BIR had released bank bulletins directing all AABs to accept tax payments, notwithstanding the RDO’s jurisdiction over the banks. This file-and-pay anywhere rule does not, however, relieve taxpayers mandated to enroll in the eFPS platform to register and comply.

There were also reforms instituted in the processing of tax refunds. The EOPT introduced the risk-based approach in verifying VAT refund claims. The extent of the BIR’s tax audit will depend on the taxpayer’s risk classification (low, medium or high). Invoicing requirements were made simpler, as the taxpayer’s business style is not required anymore to be indicated in the invoices to substantiate purchases and input taxes.

The law had also finally provided a definite period within which the BIR would act on claims for refunds of excess and unutilized creditable withholding taxes (CWTs). The claim must be decided by the BIR within 180 days from the date of submission of complete documents in support of the application filed. It is only after the expiration of this period can the taxpayer appeal to the CTA. The taxpayer can appeal either the BIR’s decision rendered within the 180-day period or the BIR’s inaction within the same period. The BIR had also prescribed the mandatory requirements in CWT refund claims.

The law expressly included the rule on the timing of withholding of taxes on income payments. The obligation to deduct and withhold the tax arises at the time the income has become payable. The implementing rules provides that an income becomes payable when the obligation becomes due, demandable or legally enforceable, requiring the payor to withhold “at the time an income payment is accrued or recorded as an expense or asset, whichever is applicable, in the payor’s books, or upon the issuance by the seller of the sales invoice or other adequate document to support such payable, whichever comes first.”

Prior withholding of taxes on expenses is no longer a condition in the deductibility of the expense.

Payment of the annual registration fee of P500.00 for every head office or branch was discontinued. Cancellation and transfer of registration may now be effected by mere filing of an application for registration information update.

The law further classified taxpayers into micro, small, medium and large taxpayers, depending upon their gross sales for the taxable year, and granted special considerations to micro and small taxpayers such as reduced rates of compromise and civil penalties (6% interest and 10% surcharge). Micro and small taxpayers now also have simpler, only two-page, Annual Income Tax Return (BIR Form No. 1701-MS).

These are the changes under the EOPT Act. Are all these changes being implemented in actual practice or not? Did these also make tax compliance easier or simpler? Are there changes that still need further clarifications? It is important to ask these questions, verify the changes that are being put into practice and evaluate those that practically worked in terms of meeting the objectives of the law. By doing so, we can initiate further discussions, provide additional clarifications, and present further reforms.