Let’s Talk Tax
By Glenda Jay Gee T. Calagui
Establishments have been looking forward to the lifting of the enhanced community quarantine (ECQ), especially as most economic activity ground to a halt after March 16. For more than six weeks, the COVID-19 pandemic and the resulting ECQ have crippled some businesses and the economy. The most vulnerable have been reduced to relying on emergency relief goods after being denied the opportunity to work. The government’s revenue-collecting agencies have missed their targets for the first quarter of this year, mainly due to the lockdown, which runs until May 15.
In addition, taxpayers were prevented by the lockdown from filing their returns and paying taxes while they were juggling with the unexpected challenges. The government has taken notice and extended tax deadlines and waived penalties for taxpayers unable to file because of the quarantine.
EXTENSION OF TAX DEADLINES
Bureau of Internal Revenue (BIR) Revenue Regulations (RR) No. 11-2020 issued on April 30 further extends the statutory deadlines for filing tax returns, paying related tax dues, and submitting documents. RR No. 11-2020 amends RR No. 10-2020 in consideration of the extension of the quarantine.
For the filing of annual income tax returns for the calendar year ended Dec. 31, 2019, the deadline is now June 14, 2020. For tax assessments, the filing of position papers, protest letters, transmittal letters, appeals, and correspondence is due 30 days from the lifting of the quarantine.
The deadline for availing of tax amnesty on delinquencies is now June 22.
For the other types of tax returns and other filings, a table in RR No. 11-2020 indicates the new deadlines for the guidance of the taxpayers which apply nationwide. RR No. 11-2020 also clarified that the term “quarantine” means any announcement by the national government resulting in limited operations and mobility including, but not limited to, community quarantine, ECQ, modified community quarantine, and general community quarantine.
Additionally, the Department of Finance (DoF) issued on April 23 Department Circular (DC) No. 002-2020, which extends the deadlines for paying taxes, fees, and charges to local government units (LGUs) pursuant to Republic Act (RA) No. 11469, otherwise known as the Bayanihan to Heal as One Act.
EXEMPTION FROM DOCUMENTARY STAMP TAX
The Implementing Rules and Regulations (IRR) of Section 4(aa) of RA No. 11469 is a relief to borrowers who were given a 30-day grace period for all loans and/or interest falling within the ECQ period.
The BIR, in its RR No. 8-2020 and Revenue Memorandum Circular Nos. 35-2020 and 36-2020, also provided an exemption from documentary stamp tax (DST) on certain debt instruments resulting from credit extensions, microlending, including those obtained from pawnshops, and extensions thereof during the ECQ.
In effect, these instruments with extended maturity periods due to the grace periods, whether the maturity periods originally fall due within the ECQ and from resulting credit restructuring, exempts taxpayers from paying DST. This relief, however, is not stretched to apply to those availing of a new loan or top-up to existing loans and new loan drawdowns during the ECQ period and the collateral documentation, which remains subject to DST.
WAGE SUBSIDY FOR SMALL BUSINESSES
The DoF has a relief program for qualified small businesses, known as the Small Business Wage Subsidy (SBWS). Under the SBWS program, the national government provides a wage subsidy for up to two months to affected employees of small businesses to help mitigate the impact of the ECQ. “Small businesses” refer to corporations, partnerships, or sole proprietorships that are not overseen by the BIR’s Large Taxpayers Service.
The program, through the Social Security System (SSS), provides a wage subsidy of between P5,000 to P8,000 per month to eligible employees of qualified small businesses. Employers may verify on the BIR website whether their small business is eligible. If qualified, the employers can apply through the SSS website between April 16 and May 8.
‘POSSIBLE’ EXTENSION OF NET OPERATING LOSS CARRYOVER
Another possible form of relief is a “proposal” by the DoF to extend the deductibility period for the net operating loss carryover (NOLCO) for small businesses up to five years. Under the present tax laws, net operating losses can be carried over as a deduction from gross income over the next three taxable years immediately following the year the loss was recorded.
If the DoF’s proposal is approved, the government will absorb the foregone tax payments, giving small businesses two more years to recover their losses resulting from the economic fallout triggered by the pandemic.
The change proposed by the DoF would require an amendment to tax laws, which will require an act of Congress.
As the country gradually moves towards an economic reopening after the COVID-19 crisis, the relief provided represent the government’s efforts to aid taxpayers through these turbulent times. Let us hope that this crisis ends soonest, as the resilience of businesses is being heavily tested.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Glenda Jay Gee T. Calagui is a tax associate of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.