ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 47  May 2024 CPA Licensure Examination

TAX-2101S
TAXATION Prepared by K. MANUEL
A. TAMAYO  E. BUEN  E. GARCIA  G. CAIGA  C. LIM  K. MANUEL  J. TAGLE

SPECIAL HANDOUTS
EASE OF PAYING TAXES ACT
I. Basic Information
Title Ease of Paying Taxes Act Although the effectivity date is January 22, 2024, taxpayers are given
Republic Act No. 11976 six (6) months from the effectivity of the implementing revenue
Signed January 5, 2024 regulations to comply with the amendments to VAT and OPT.
Sec. 48, EOPTA
Effectivity date January 22, 2024

II. Declaration of Policy (Sec. 2, EOPTA)

(1) To provide a healthy environment for the tax paying public that protects and safeguards taxpayer rights and welfare, as well
as assures the fair treatment of all taxpayers;
(2) To modernize tax administration and improve its efficiency and effectiveness by providing mechanisms that encourage
proper and easy compliance at the least cost and resources possible;
(3) To update the taxation system, adopt best practices, and replace antiquated procedures; and
(4) To enact policies and procedures, which are appropriate to different types of taxpayers.

III. Filing of Returns and Payment of Taxes

Filing of return It refers to the act of accomplishing and submitting the prescribed tax return, electronically or
(Sec. 22(KK), NIRC) manually, to the Bureau of Internal Revenue (BIR), or through any authorized agent bank or
authorized tax software provider, as required under the NIRC or as prescribed under existing rules and
regulations.
Payment of tax or It refers to the act of delivering the amount of tax due or withheld, either electronically or manually,
remittance of tax to the BIR, or through any authorized agent bank or authorized tax software provider, as required under
(Sec. 22(LL), NIRC) the NIRC or as prescribed under existing rules and regulations.
Filing of ITR of An individual citizen of the Philippines who is working and deriving income solely from abroad as an
OCWs/OFWs 'Overseas Contract Worker' as provided under Section 23(C) of this Code, or 'Overseas Filipino Worker'
(Sec. 51(A)(2), NIRC) as defined under Section 3(G) of Republic Act No. 11641, otherwise known as 'Department of Migrant
Workers Act' shall not be required to file an income tax return.
Filing of ITRs, in Except in cases where the Commissioner otherwise permits, the return shall be filed with:
general 1. any authorized agent bank,
(Sec. 51(B), NIRC; Sec. 2. Revenue District Office through Revenue Collection Officer, or
77(A), NIRC)
3. authorized tax software provider.
Returns and Taxes deducted and withheld by withholding agents shall be covered by a return and paid to, either
Payment of Taxes electronically or manually, except in cases where the Commissioner otherwise permits,
Withheld at Source 1. any authorized agent bank,
(Sec. 58(A), NIRC) 2. Revenue District Office through Revenue Collection Officer, or
3. authorized tax software provider.
Filing of estate tax Except in cases where the Commissioner otherwise permits, the estate tax return shall be filed, either
return electronically or manually, with:
(Sec. 90(D), NIRC) 1. any authorized agent bank,
2. Revenue District Office through Revenue Collection Officer, or
3. authorized tax software provider.
Filing of donor’s The return of the donor shall be filed, either electronically or manually, within thirty (30) days after the
tax return date the gift is made, and the tax due thereon shall be paid, either electronically or manually, at the
(Sec. 103(B), NIRC) time of filing. Except in cases where the Commissioner otherwise permits, the return shall be filed and
the tax paid, either electronically or manually, to:
1. any authorized agent bank,
2. Revenue District Office through Revenue Collection Officer, or
3. authorized tax software provider.
Filing of VAT return Except as the Commissioner otherwise permits, the return shall be filed with and the tax paid, either
(Sec. 114(B), NIRC) electronically or manually, to:
1. any authorized agent bank,
2. Revenue District Office through Revenue Collection Officer, or
3. authorized tax software provider.
Filing of Every person subject to the percentage taxes shall file, either electronically or manually, a quarterly
percentage tax return of the amount of the person's gross sales, or earnings and pay, either electronically or manually,
return to:
(Sec. 128(A)(1), NIRC; 1. any authorized agent bank,
Sec. 128(B), NIRC)
2. Revenue District Office through Revenue Collection Officer, or
3. authorized tax software provider
the tax due thereon within twenty-five (25) days after the end of each taxable quarter.

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EASE OF PAYING TAXES ACT TAX-2101S
Filing of DST return Except as the Commissioner otherwise permits, the return shall be filed with and the tax paid, either
(Sec. 200, NIRC) electronically or manually, to:
1. any authorized agent bank,
2. Revenue District Office through Revenue Collection Officer, or
3. authorized tax software provider.
Instances of 25% Filing a return with an internal revenue officer other than those with whom the return is required to be
surcharge filed is removed as an instance where 25% surcharge may be imposed.
(Sec. 248, NIRC)

IV. Classification of Taxpayers

Classification Taxpayers shall be classified as follows:
(Sec. 21(b), NIRC)
GROUP GROSS SALES
Micro Less than ₱3,000,000
Small ₱3,000,000 to less than ₱20,000,000
Medium ₱20,000,000 to less than ₱1,000,000,000
Large ₱1,000,000,000 and above
Withholding Micro taxpayers shall not be required to withhold taxes under Section 57(B), NIRC
Requirement [Section 57(B) pertains to creditable withholding taxes.]
[Note: This provision is vetoed by the President and is therefore not effective.]
Concessions The following concessions shall be made available to micro and small taxpayers:
(Sec. 45, EOPTA) (a) The Income Tax Return (ITR) required under Section 51 of the NIRC shall consist of a maximum of
two (2) pages in paper form or electronic form;
(b) A reduced rate of 10% for civil penalties as provided under Section 248 of the NIRC, as amended;
(c) A 50% reduction on the interest rate imposed under Section 249 of the NIRC, as amended;
(d) A reduced fine of ₱500 as penalty for failure to file certain information returns as provided under
Section 250 of the NIRC, as amended; and
(e) A reduced compromise penalty rate of at least 50% for violations of Sections 113, 237, and 238 of
the NIRC, as amended.

V. VAT Provisions
VAT Base on Sale There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a
of Goods VAT equivalent to 12% of the gross sales of the goods or properties sold, bartered or exchanged, such
(Sec. 106(A), NIRC) tax to be paid by the seller or transferor.
Gross Sales, It means the total amount of money or its equivalent value in money which the purchaser pays or is
defined obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties,
(Sec. 106(A), NIRC) excluding the VAT. The excise tax, if any, on such goods or properties shall form part of the gross sales.
VAT Base on Sale There shall be levied, assessed and collected, a VAT equivalent to 12% of the gross sales derived from
of Services the sale or exchange of services, including the use or lease of properties.
(Sec. 108(A), NIRC)
Gross Sales, It is the total amount of money or its equivalent representing the contract price, compensation, service
defined fee, rental or royalty, including the amount charged for materials supplied with the services during the
(Sec. 108(A), NIRC) taxable quarter for the services performed for another person, which the purchaser pays or is obligated
to pay to the seller in consideration of the sale, barter, or exchange of services that has already been
rendered by the seller and the use or lease of properties that have already been supplied by the seller

Exclusions:
1. value-added tax and
2. those amounts earmarked for payment to third (3rd) party or
3. received as reimbursement for payment on behalf of another which do not redound to the benefit
of the seller as provided under relevant laws, rules or regulations

[The following inclusion is removed by EOPTA: “deposits and advanced payments actually or
constructively received.”]
Rule on long-term For long-term contracts for a period of one (1) year or more, the invoice shall be issued on the month in
contracts which the service, or use or lease of properties is rendered or supplied.
Sales allowances The value of services rendered for which allowances were granted by a VAT-registered person may be
and discounts on deducted from the gross sales for the quarter in which a refund is made or a credit memorandum or
sale of services refund is issued.
(Sec. 108(C), NIRC) Sales discount granted and indicated in the invoice at the time of sale and the grant of which does not
depend upon the happening of a future event may be excluded from the gross sales within the same
quarter it was given.
Adjustment of The amount of ₱3,000,000 provided in Section 109(CC) shall be adjusted to its present values using the
VAT-Exempt consumer price index, as published by the Philippine Statistics Authority (PSA) every three (3) years.
Threshold
Input VAT on Any input tax duly evidenced by a VAT invoice on purchase of services on which a VAT has accrued
purchase of shall be creditable against the output tax.
services
(Sec. 110(A)(1), NIRC)

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EASE OF PAYING TAXES ACT TAX-2101S
Output VAT Credit A seller of goods or services may deduct the output VAT pertaining to uncollected receivables from its
on Uncollected output VAT on the next quarter, after the lapse of the agreed upon period to pay:
Receivables • Provided, That the seller has fully paid the VAT on the transaction:
(Sec. 110(D), NIRC) • Provided, further, That the VAT component of the uncollected receivables has not been claimed as
allowable deduction against gross income as bad debts.

In case of recovery of uncollected receivables, the output VAT pertaining thereto shall be added to the
output VAT of the taxpayer during the period of recovery.
Invoicing A VAT-registered person shall issue a VAT invoice for every sale, barter, exchange, or lease of goods or
Requirement properties, and for every sale, barter or exchange of services.
(Sec. 113(A), NIRC)
[The requirement to issue an Official Receipt has been removed.]
Sale of at least In the case of sales in the amount of ₱1,000 or more where the sale or transfer is made to a VAT-
₱1,000 registered person, the name, address and Taxpayer Identification Number of the purchaser, customer or
(Sec. 113(B)(4), NIRC) client.

[The requirement to indicate the business style of the purchaser has been removed.]
Consequence of If a VAT-registered person issues a VAT-invoice to another VAT-registered person with lacking
Invoice Lacking information required under Section 113(B), the issuer shall be liable for noncompliance with the
Information invoicing requirement, however, the VAT shall still be allowed to be used as input tax credit on the part
(Sec. 113(D)(3), NIRC) of the purchaser pursuant to Section 110 of this Code if the lacking information do not pertain to:
1. the amount of sales,
2. amount of VAT,
3. name and Taxpayer Identification Number of both the purchaser and issuer/seller,
4. description of goods or nature of services, and
5. the date of the transaction.
Issuance of Sales All persons subject to an internal revenue tax shall, at the point of each sale and transfer of
Invoice merchandise or for services rendered valued at ₱500 or more, issue duly registered sale or commercial
(Sec. 237(A), NIRC) invoices, showing the name, TIN, date of transaction, quantity, unit cost and description of merchandise
or nature of service. [Note: This was increased from ₱100]
• The amount herein stated shall be adjusted to its present values every three (3) years using the
consumer price index, as published by the PSA.
• The seller shall issue sale or commercial invoices when the buyer so requires regardless of the
amount of transaction.
• If the sales amount per transaction is below the threshold, the seller will issue one (1) invoice for
the aggregate sales amount for such sales at the end of the day provided that the aggregate sales
amount at the end of the day is at least ₱500.
• VAT-registered persons shall issue duly registered sale or commercial invoices regardless of the
amount of the sale and transfer of merchandise or for services rendered.
• [The requirement to issue an OR was removed.]

Exercises:
1. A VAT-registered contractor has the following selected VAT exclusive data for the month of July 2024:
Collections made on July 2024 from contracts completed in June 2024, contracts billed on June 2024 ₱ 500,000
Advances from contracts to be completed in August 2024 300,000
Contracts billed on July 2024, services already rendered, not yet paid by client 400,000
Collections from contracts completed in July 2024, net of 10% retention on billings transferred by the
payor to the account of the contractor, entire amount billed on July 2024 198,000
Materials charged with the services rendered, July 2024 100,000
Payments for services rendered by a subcontractor, July 2024 200,000

Applying the Ease of Paying Taxes Act, how much is the:

a) gross sales for the month of July 2024?
b) output tax for the month of July 2024?

Answer
Contracts billed in July 2024, services already rendered, not yet paid by client ₱ 400,000
Collections from contracts completed in July 2024, net of 10% retention on billings transferred by the
payor to the account of the contractor, entire amount billed in July 2024 (198,000/90%) 220,000
Materials charged with the services rendered, July 2024 100,000
Gross sales ₱ 720,000
Tax rate 12%
Output tax ₱ 86,400

Explanations:
• Collections made on July 2024 from contracts completed in June 2024, contracts billed on June 2024 will be subject to output
VAT when billed, i.e., on June 2024.
• Advances from contracts to be completed in August 2024 will be subject to output VAT when the service has been rendered,
i.e., on August 2024.

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EASE OF PAYING TAXES ACT TAX-2101S
2. A VAT-registered taxpayer has the following VAT-exclusive data for the month of January 2024:
Accounts receivable, January 1, 2024 ₱ 500,000
Sales on account, January 2024 1,000,000
Cash sales, January 2024 300,000
Accounts receivable, January 31, 2024 700,000
Cash purchases, January 2024 400,000

Applying the Ease of Paying Taxes Act, how much is the output tax for the month of January 2024 using 12% rate
assuming the taxpayer is a:
a) trader?
b) service provider?
Answer
Sales on account ₱ 1,000,000
Cash sales 300,000
Gross sales ₱ 1,300,000
Tax rate 12%
Output tax ₱ 156,000

Explanation: Both trader and service provider will be subject to an output VAT of ₱156,000. Both seller of goods and services
are subject to VAT based on gross sales.

VI. Percentage Tax Provisions

Minimum Gross The provision regarding minimum quarterly gross receipts of domestic carriers and keepers of garages
Receipts was removed.
(Sec. 117, NIRC)
Tax Base Changed The tax base on the following percentage taxes were changed to gross sales:
to Gross Sales 1. Tax on Persons Exempt from Value-Added Tax (VAT) (Sec. 116)
2. Percentage Tax on Domestic Carriers and Keepers of Garages (Sec. 117)
3. Percentage Tax on International Carriers (Sec. 118)
4. Tax on Franchises (Sec. 119)
5. Tax on Overseas Dispatch, Message or Conversation Originating from the Philippines (Sec. 120)
[phraseology changed from “amount paid” to “amount billed”]

VII. Claims for Refund of Taxes

A. Refund of Excess Income Tax
Inclusion in Gross Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income
Income a payments shall be given due course only when it is shown that the income payment has been
Prerequisite for declared as part of the gross income and the fact of withholding is established.
Filing Claim for Claims for tax credit of any creditable income tax deducted and withheld in a previous period can still be
Refund creditable in the subsequent calendar or fiscal year
(Sec. 58(e), NIRC) Provided, the same had been declared in the tax return where the corresponding income is reported.
Refund of Excess In case the taxpayer cannot carry over the excess income tax credit due to dissolution or cessation of
Income Tax on business, the taxpayer shall file an application for refund of any unutilized excess income tax credit, and
Dissolution the BIR shall decide on the application and refund the excess taxes within two (2) years from the date
(Sec. 76, NIRC) of the dissolution or cessation of business.
B. Input VAT Refunds
Classification of The VAT refund claims shall be classified into low-, medium-, and high-risk claims, with the risk
Input VAT Refunds classification based on amount of VAT refund claim, tax compliance history, frequency of filing VAT
(Sec. 112(C), NIRC) refund claims, among others. Medium- and high-risk claims shall be subject to audit or other verification
processes in accordance with the BIR’s national audit program for the relevant year.
Inaction on Input In case of full or partial denial of the claim for tax refund, or the failure on the part of the Commissioner
VAT Refund Claims to act on the application within the period prescribed above, the taxpayer affected may, within 30 days
(Sec. 112(C), NIRC) from the receipt of the decision denying the claim or after the expiration of the 90-day period, appeal
the decision with the Court of Tax Appeals.
C. Refund of Erroneously or Illegally Paid Taxes
Period for the BIR The Commissioner shall process and decide the refund under this provision within 180 days from date of
to Decide on submission of complete documents in support of the application filed.
Refund Claims • Should the Commissioner deny, in full or in part, the claim for refund, the Commissioner shall state
(Sec. 204, NIRC) the legal and/or factual basis for the denial
• Failure on the part of any official, agent, or employee of the Bureau of Internal Revenue to process
and decide on the application within the 180-day period shall be punishable under Section 269.
Filing of Refund No suit or proceeding for the recovery of any national internal revenue tax hereafter alleged to have
Claims before the been erroneously or illegally assessed or collected shall be filed unless there is a full or partial denial of
CTA the claim for refund or credit by the Commissioner or there is a failure on the part of the Commissioner
(Sec. 229, NIRC) to act on the claim within the 180-day period under Section 204.

In case of full or partial denial of the claim for tax refund, or the failure on the part of the Commissioner
to act on the application within the period prescribed above, the taxpayer affected may, within 30 days
from the receipt of the decision denying the claim or after the expiration of the 180-day period, appeal
the decision with the Court of Tax Appeals.
[The two-year period within which to file a claim for refund with the CTA has been removed.]
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EASE OF PAYING TAXES ACT TAX-2101S
VIII. Other Provisions
Timing of The obligation to deduct and withhold the tax arises at the time the has become payable.
Withholding
(Sec. 58(C), NIRC)
Preservation of All the books of accounts, including the subsidiary books and other accounting records of corporations,
Books of Accounts partnerships, or persons, shall be preserved by them for a period of five (5) years reckoned from the
and Other day following the deadline in filing a return, or if filed after the deadline, from the date of the filing of
Accounting the return, for the taxable year when the last entry was made in the books of accounts.
Records
(Sec. 235, NIRC)
Mode of Every person subject to any internal revenue tax shall register once, either electronically or
Registration manually, with the appropriate Revenue District Office
(Sec. 236, NIRC)
Annual The requirement to pay the annual registration fee of ₱500 has been removed.
Registration Fee
Transfer of In case a registered person decides to transfer the place of business or head office or branches, it shall
Registration be the person's duty to update the registration status by merely filing, either electronically or
(Sec. 236(C), NIRC) manually, an application for registration information update in the form prescribed therefor.
• If the transferring registered person is subject of an audit investigation, the Revenue District Office
which initiated the audit investigation shall continue the same.
Cancellation of The registration of any person shall be cancelled upon mere filing, either electronically or manually,
Registration with the Revenue District Office where he is registered, an application for registration information
(Sec. 236(E), NIRC) update in a form prescribed therefor.
• However, this shall not preclude the CIR or his authorized representative from conducting an audit
in order to determine any tax liability
Securing an ATP All persons who are engaged in business shall secure free of charge from the BIR an authority to print
(Sec. 238, NIRC) sales or commercial invoices before a printer can print the same.

END

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