Taxwise Or Otherwise
By Milette Zapanta
In times of crisis, even clichés find renewed meaning. We all know that taxes are the lifeblood of the government. However, against the COVID-19 pandemic that has claimed thousands of lives worldwide, the maxim makes much more sense both literally and figuratively. Billions in public funds have been used to keep lives afloat, defray expenditures for medical supplies and equipment, and subsidize social amelioration projects for affected households, but much more is needed.
The impact of the impeded flow of taxes cannot be denied. Without the usual tax collections in April, the government quickly tapped emergency reserves, eyeing loans from foreign banks, and even considered selling government assets to pay for these loans and fund social welfare programs. With the extension of the quarantine until April 30, the Department of Finance (DoF) is facing further delay in the collection of taxes worth P145 billion, crucial for the country’s much-needed social protection and emergency health measures.
EXTENSION OF TAX DEADLINES
Even prior to the enactment of Republic Act No. 11469, otherwise known as the Bayanihan to Heal As One Act, on March 24, the Bureau of Internal Revenue (BIR) extended the filing and reportorial deadlines falling within the quarantine period. The various extensions covered not only tax return filings but also those related to value added tax refund claims, Certificate of Residence for Tax Treaty Relief (CORTT) Form filings, tax amnesty applications, and protests to tax assessments. All these extensions were consolidated in Revenue Regulations No. 7-2020 which formally implements the filing extensions granted under the Bayanihan Act.
With the extension of the quarantine, the BIR issued Revenue Memorandum Circular (RMC) No. 39-2020 on April 7, further extending the deadlines of some returns and reportorial requirements under RR No. 7-2020 for another 15 calendar days. Moreover, the BIR issued RR No. 10-2020 just recently to update all the extended deadlines and to include additional deadlines falling within the extended quarantine period until April 30.
PENALTY-FREE FILINGS AND AMENDMENTS
While the quarantine has made it necessary for the government to grant tax filing extensions, the BIR and the DoF have appealed to the public for early filing and payment of taxes and to take advantage of the online filing system and payment platforms.
Under the law, late payment of tax is subject to 12% interest, a 25% surcharge, and the applicable compromise penalty. The same penalties apply in case of an amended return with additional tax due but only if it is filed beyond the prescribed due date under existing regulations. The 25% surcharge alone accounts for a quarter of the basic tax due. Thus, while there may be taxpayers who prefer to submit their returns early, the risk of incurring these penalties may have held them back in case they have potential adjustments when finalizing their financial reports.
To address these concerns, the BIR issued RMC No. 37-2020 on April 6 to confirm that taxpayers can file their returns within the original deadline or before the extended deadline, and file an amended return at any time on or before the extended deadline, without interest, surcharge, and penalty. While these are automatically computed under the electronic filing and payment system (eFPS), the BIR has nevertheless previously issued a tax advisory to ignore and pay only the basic tax due.
Conversely, if the amended return results in overpayment of taxes in the original filing, the taxpayer can choose to use the overpaid tax as a credit in the succeeding periods for the same tax return or file a claim for refund, as applicable.
This goes hand in hand with other measures the BIR has implemented to make tax filing easier even for those who intend or are compelled to pay manually. In Bank Bulletin No. 2020-03, the BIR reiterated the responsibilities of the Authorized Agent Banks (AABs) to accept payments for Annual Income Tax Returns for 2019 and other tax returns falling due within the quarantine period. The AABs are directed to be flexible in handling the tax payments citing the suitability of accepting a combination of cash and check payments, and out-of-district returns without the imposition of any penalties.
CLARIFICATION ON MODE OF FILING FOR CERTAIN CORPORATE TAX RETURNS
As a reminder, RMC No. 37-2020 stated that the January 2018 enhanced version of the BIR Form No. 1701 or the Annual Income Tax Return for individuals (including mixed-income earner), estates, and trusts is not yet available on the eFPS. As such, eFPS filers shall use the offline eBIR Forms Package Version 7.6 that was recently circulated through RMC No. 16-2020. However, the BIR did not mention the other enhanced annual corporate income tax returns that are also not yet available on the eFPS — BIR
Form No. 1702-RT (for corporations subject to regular tax), BIR Form No. 1702-MX (for corporations with income subject to multiple tax rates or special/preferential tax rates) and BIR Form No. 1702-EX (for corporations exempt from income tax).
During the tax filing season last year, since the enhanced version of the corporate tax returns were not yet available on eFPS, the BIR issued RMC No. 46-2019 to direct taxpayers to still file through eFPS using the old forms. It seems that the same procedure will have to be followed for this tax filing season. Nevertheless, it would perhaps be helpful if the BIR can also issue similar guidelines to confirm the mode of filing for this year.
HEALING AS ONE
People have been clamoring for the government to do what is necessary to address the pandemic. This includes enabling our health workers to hold the front lines, and sustaining the lives of people who cannot earn a living while under quarantine. All this entails funding. Now more than ever, both taxpayers and the BIR need to work hand-in-hand to keep the country buoyant.
It is good that the BIR has been on its toes in an effort to ensure that its pronouncements are clear, comprehensive, and released in a timely manner to reach as many taxpayers as possible. Likewise, with the extension of the deadlines and waiving of penalties, it may also be an opportune time to reflect on our sovereign responsibility and the significance of our collective capacity as taxpayers to file and pay taxes early, if possible. In the Filipino spirit of bayanihan, let us do our part in lifting our country back towards recovery.
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only and should not be used as a substitute for specific advice.
Milette Zapanta is a senior associate with the Tax Services Group of Isla Lipana & Co., the Philippine member firm of the PwC network.
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