Staying compliant with tax regulations is crucial for businesses in the Philippines. The Bureau of Internal Revenue (BIR) regularly updates its policies, and one of the latest significant changes is encapsulated in Revenue Regulations (RR) 3-2024, which focuses on Value-Added Tax (VAT) and Percentage Tax. In this blog post, we’ll delve into the key aspects of RR 3-2024, how it affects businesses, and what steps you should take to ensure compliance.
For a comprehensive guide to understanding taxes in the Philippines, you can visit this detailed resource.
Overview of RR 3-2024 – Ease of Paying Taxes Act (EOPT)
With regard to the Ease of Paying Taxes Act (EOPT), pursuant to the Revenue Regulation (RR) No. 3-2024 issued last April 11, 2024, EOPT adopts the accrual basis of recognizing sales for both goods and services. This regulation aims to enhance tax administration and compliance, providing clearer guidelines for taxpayers. Let’s break down the primary components of these regulations:
Key Changes for Sales Transactions
- Output VAT and Percentage Tax on Sales:
- These taxes must be remitted in the applicable filing period based on the invoice date, irrespective of whether the sales have been collected.
- Allowable Deductions from Gross Sales:
- Refunds or Credit Memorandums of refund.
- Sales discounts indicated in the invoice at the time of sale.
- Output VAT on Uncollected Receivables (VAT Credit):
- Deductible from the Output VAT of the succeeding quarter if the following conditions are met:
- Sale occurs after the regulation’s effective date.
- Sale is on credit or on account.
- There is a written agreement on the credit term.
- VAT is separately shown on the invoice.
- Sales are reported in the Summary List of Sales for the relevant period.
- Seller declared the corresponding output VAT within the prescribed period.
- The agreed payment period has elapsed.
- The VAT component of the uncollected receivable was not claimed as a bad debt deduction from gross income.
- If uncollected receivables are recovered, the output VAT pertaining thereto must be added to the output VAT during the recovery period.
- Deductible from the Output VAT of the succeeding quarter if the following conditions are met:
- Terminology Changes:
- “Gross selling price,” “gross value in money,” and “gross receipts” will now be referred to as “GROSS SALES,” regardless of whether the sale is of goods or services, and must be supported by an “INVOICE”.
- Long-Term Contracts:
- Invoices for long-term contracts (one year or more) must be issued in the month when the service or use/lease of properties is rendered.
- EOPT Regulations and Prior Services:
- Output VAT from uncollected receivables on services rendered before the regulation’s effectiveness will be declared in the quarterly VAT return upon collection and supported by an invoice.
Transition Guidelines for Sale of Services
BILLED | COLLECTED | REMIT OUTPUT VAT OR PERCENTAGE TAX within the quarter | PRINCIPAL DOCUMENT |
On or before April 26, 2024 | On or before April 26, 2024 | When the collection is received | Official Receipt |
On or before April 26, 2024 | April 27, 2024 onwards | When the collection is received | Invoice (issued upon collection) |
April 27, 2024 onwards | April 27, 2024 onwards | When the revenue is recognized (accrual basis) | Invoice |
Key Changes for Purchases
Substantiation Documents:
A BIR-Registered Invoice is now required for claiming input tax for both goods and services purchases.
POS and CRM Receipts:
Input VAT on purchases using BIR-Registered tape and electronic receipts showing “Official Receipt” can be claimed until June 30, 2024, as per RR 7-2024.
After June 30, 2024, using “Official Receipts” from POS and CRM for goods and services will be non-compliant, and input VAT on these documents cannot be claimed.
INCURRED | PAID | CLAIM INPUT VAT within the quarter | PRINCIPAL DOCUMENT |
On or before April 26, 2024 | On or before April 26, 2024 | When the payment is made | Official Receipt |
On or before April 26, 2024 | April 27, 2024 onwards | When the payment is made | Invoice (received upon payment) |
April 27, 2024 onwards | April 27, 2024 onwards | When the expense is incurred (accrual basis) | Invoice |
Other Notable Changes
- VAT-Exempt Threshold:
- Updated regularly, adjusted every three years using the Consumer Price Index (CPI) as published by the Philippine Statistics Authority (PSA).
- Filing and Payment:
- Electronic filing and payment are required where applicable, with manual options available through any Authorized Agent Banks (AABs) and Revenue Collection Officers (RCOs).
- Conversion of Official Receipts:
- Official Receipts converted to invoices by marking them as such are valid only until December 31, 2024. New invoices with an Authority to Print (ATP) must be obtained before fully using converted Official Receipts or by the end of 2024, whichever comes first.
These changes aim to streamline tax processes and ensure compliance with updated regulations. Businesses must adapt their accounting systems and procedures accordingly to stay compliant and take full advantage of the new rules.
Ensure Tax compliance and make informed business decisions with FilePino’s assistance. Our expert accounting services can provide guidance with government regulations and compliance services. Set up a consultation with our team today!
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