The recent surge in the number of COVID-19 cases in Metro Manila and surrounding areas adds to everyone’s anxieties during this challenging time. Perhaps, for a change of pace, some more positive developments can lighten the mood, particularly for taxpayers who have a lot on their plate.
Here are some of the more beneficial recent tax issuances that taxpayers may welcome:
LOWER CORPORATE INCOME TAX RATES
One of the main objectives of Republic Act (RA) No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act is to provide support to businesses in their recovery from unforeseen events, such as the pandemic, and to strengthen the country’s ability to address similar developments in the future.
Under the CREATE Act, domestic corporations now enjoy a lower corporate income tax rate of 25%. Domestic corporations with net taxable income not exceeding P5 million AND total assets not exceeding P100 million, excluding the land on which the entity’s office, plant, and equipment are situated, currently enjoy a lower corporate income tax rate of 20%.
On the other hand, nonprofit hospitals are subject to a tax rate of 10%, though in the period between July 1, 2020, and June 30, 2023 they pay 1%, as per the CREATE Act. These tax rates apply also to proprietary educational institutions as per the recently signed RA No. 11635.
VAT EXEMPTION ON SELECTED COVID-19 ITEMS
The CREATE Act also grants VAT exemptions for the following COVID-19 related items for transactions beginning Jan. 1, 2021, and Dec. 31, 2023:
1. Capital equipment, spare parts, and raw materials necessary for the production of personal protective equipment (PPE) components such as coveralls, gowns, surgical gloves, dedicated shoes, and shoe covers, for COVID-19 purposes;
2. All drugs, vaccines, and medical devices specifically prescribed and directly used for the treatment of COVID-19; and
3. Drugs for the treatment of COVID-19 approved by the Food and Drug Administration (FDA) for use in clinical trials, including raw materials directly necessary for the production of such drugs.
Note further that the exemption is exclusive. Hence, only the medicines and medical devices for COVID-19 with the corresponding dosage strength, form, and route of administration included in the list submitted by the FDA to the Bureau of Internal Revenue (BIR) will enjoy the exemption. The updated list can be accessed as attached to Revenue Memorandum Circular (RMC) No. 123-2021, and for the related implementation, taxpayers may refer to RMC 99-2021. The RMC also provides for the treatment of certain unutilized VAT that could be carried over to the succeeding taxable quarter/s or be charged as part of cost.
The above is beneficial in reducing the cost of purchasing COVID-19 vaccines, as many corporations are also expediting the implementation of their vaccination programs for their personnel.
USE OF ELECTRONIC SIGNATURES
As the country digitizes, the BIR has provided alternatives to aid taxpayers in better complying with regulations. Under RMC No. 29-2021, the use of e-signatures is allowed on certain BIR Forms/certificates:
• BIR Form No. 2304 — Certificate of Income Payment not Subject to Withholding Tax (Excluding Compensation Income);
• BIR Form No. 2306 — Certificate of Final Tax Withheld at Source;
• BIR Form No. 2307 — Certificate of Creditable Tax Withheld at Source; and
• BIR Form No. 2316 — Certificate of Compensation Payment/Tax Withheld.
Allowing the use of e-signatures on the above forms reduces the instances requiring physical contact with employees and suppliers, which is of great help during these times.
I hope the BIR releases issuances that will further expand the coverage of the use of e-signatures.
ON TAX FILING AND PAYMENT
While some corporations currently employ work-from-home arrangements, there are still instances where physical filing of tax returns/forms is required. This is a challenge, particularly for personnel who will be traveling to and from their homes, offices, and the filing/payment venues.
Fortunately, to help ease this burden, the BIR issued Bank Bulletin No. 2022-02 on Jan. 10, a directive for Authorized Agent Banks to accept all tax payments from taxpayers registered under the Revenue District Offices (RDOs) in areas placed under General Community Quarantine Alert Level 3 and higher levels, including out-of-district returns.
With this resolution, taxpayers may now proceed with the payment of their taxes at the nearest AAB notwithstanding the RDO jurisdiction. No penalty shall be imposed based on wrong venue filing and payment of taxes. Alternatively, taxpayers may also resort to Mobile Payment platforms such as GCash/PayMaya or Taxpayer Software Provider (TSP) MyEG.ph.
While acknowledging our resilience, we, as taxpayers, will need all the good things that we can get to overcome our anxieties during the pandemic. Lessons from the past, together with the beneficial tax issuances released by the government, will certainly help ease the burden during these times. Despite uncertainty, taxpayers need to adapt and push through. After all, nothing in this world is certain, except death and taxes.
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.
John Alexis S. B. Sumulong is a senior in charge from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.
