Tax breaks in these trying times

(First of two parts)

The government has announced several measures to contain the spread of COVID-19. President Rodrigo R. Duterte has placed Luzon under enhanced community quarantine and imposed stringent social distancing measures, with the entire country under a state of emergency.

With the goal of protecting the health and safety of all taxpayers from the further spread of COVID-19, the Bureau of Internal Revenue (BIR) issued specific guidelines/circulars to be observed during the quarantine period.

In Revenue Memorandum Circular (RMC) No. 25-2020 dated March 16, the BIR originally maintained its position that no extension of deadline shall be provided for the filing of 2019 annual income tax return (ITR) despite the quarantine being strictly implemented.

However, considering the limitations in preparing the annual ITR and possible errors in determining the income tax due, taxpayers can amend the annual ITR filed, provided the concerned taxable period has not yet been subject to an audit. The additional income tax liability resulting from any amendment is to be paid without penalties if paid on or before June 15.

The same circular also encouraged taxpayers, even those not required, to use the electronic filing facilities of the BIR (e.g., the electronic filing and payment system [eFPS] and eBIR Form Facility) to limit taxpayers’ movements and possible exposure to the virus.

However, various stakeholders and associations raised concerns that the measures being implemented by the national government will have a significant impact on meeting the existing tax, accounting and auditing requirements. There may be delays in auditing the balances of companies and businesses due to, among others, fieldwork or meetings suspended and the work from home scheme enforced.

ITR DEADLINE EXTENSION
Fortunately, the BIR issued RMC No. 28-2020 dated March 18, amending RMC No. 25-2020. This amendment extends the filing deadline of the 2019 annual ITR and payment of the tax originally due on April 15 to May 15, without the imposition of penalties.

Under this circular, taxpayers may file and pay the corresponding taxes due at any Authorized Agent Banks (AABs) nearest to the location of the taxpayer or to any Revenue Collection Officer (RCO) under the Revenue District Office (RDO). In other words, taxpayers may file and pay at their most convenient location.

According to the press release of the Department of Finance (DoF), these emergency measures are offered to provide relief to taxpayers who will not be able to prepare, let alone file, the necessary ITR documents on or before the original annual deadline of April 15 because of minimal-staffing arrangements and enhanced community quarantine rules.

In addition, the DoF estimated a shortfall in tax collections of around P145 billion, for which the national government may have to make up for with additional borrowing. Hence, the BIR urges taxpayers who are ready and able to file their ITRs to do so on or before the original deadline.

DEADLINE EXTENSION FOR TAX RETURNS AND ATTACHMENTS
The BIR likewise provided deadline extensions for other tax filings. On March 19, BIR Commissioner Caesar Dulay issued RMC No. 29-2020, amending RMC No. 26-2020 by extending the deadlines (by approximately one month) for the filing of various returns and payment of taxes due. Consequently, the BIR collection of taxes related to such tax filings may be delayed by approximately one month.

The provisions of RMC No. 28-2020 (extension of deadline for filing of annual ITR and payment of the related income tax due) and RMC No. 29-2020 (extension of deadlines for filing of various returns and payment of related taxes due thereon) were further amended and clarified by RMC No. 30-2020 dated March 23.

Under this circular, the required attachments for the filing of annual ITR are to be submitted on or before May 15. Moreover, deadlines were extended for other reportorial requirement submissions and one-time transaction (ONETT) payments. In general, a 30-day extension will be granted in case the deadline falls within the quarantine period.

RMC No. 30-2020 also provided clarity by addressing inadvertent errors on the due dates in the filing of certain tax returns and payment of the related tax due thereon under RMC No. 29-2020.

We should note that the BIR qualifies the application of the circular to Luzon, including the National Capital Region (NCR), which are under enhanced community quarantine and/or similar measures, and to other jurisdictions where Local Government Units have also adopted such measures.

VAT REFUND APPLICATION EXTENSION
Aside from the deadline extensions of these various tax returns and attachments, the BIR also extended the deadline for the filing of Value Added Tax (VAT) refund applications and the 90-day processing period through the issuance of RMC No. 27-2020 dated March 18.

This allows the filing of VAT refund applications covering the quarter ended March 31, 2018 to still be accepted until April 30, 2020. The original deadline was March 31, this year.

The 90-day processing period is also suspended for VAT refund claims that are currently being evaluated and those that may be received from March 16 to April 14. The counting of the number of processing days will resume after the enhanced community quarantine is lifted.

CONDUCTING FIELD OPERATIONS
Similarly affected is the conduct of audit/investigation/other field operations by revenue officials and employees. In relation to this, Deputy Commissioner (Operations Group) Arnel SD. Guballa, issued Operations Memorandum No. 20-2020 dated March 17.

Under this memorandum, Revenue Officers will continue to work on their assigned cases, whether prescribing or not, based on the documents previously submitted by the taxpayers to the BIR and other information available to the Bureau. Officers are encouraged to work from home but without sacrificing the security of the data and information being handled. Non-prescribing audit cases which are still lacking documentary evidence were given a 30-day extension for the submission of the report of investigation.

In addition, field audit/investigation, any form of business visitation or any field operations have been suspended. Likewise, personal service of electronic Letters of Authority (eLAs), Notice of Informal Conference, Discrepancy Notices or Missions Orders have been temporarily shut down during the quarantine period.

Should a taxpayer appear in the BIR office to submit documents, such documents are to be received without delay and without further verbal discussion with the taxpayer in order to limit contact and maintain social distancing.

In summary, the extended deadlines are as follows:

• ITR filing — May 15

• Tax returns & attachments — May 15

• Additional tax liabilities — 30-day extension

• VAT refund applications — April 30

• Non-prescribing audit cases lacking documentary evidence — 30-day extension

FACING THE CHALLENGES
While the government endeavors to address every Filipino’s need for basic services, health and safety, it is imperative that we as taxpayers likewise fulfill our duties and obligations as citizens. In our current situation, the maxim that taxes are the lifeblood of the country has never been more apt.

However, life — and taxes, as the main source of government resources — must go on. Without taxes, government agencies cannot continue to operate. Hence, the need to collect taxes must necessarily be balanced against other interests.

The deadlines and timelines mentioned in this article are pursuant to the author’s understanding of the administrative issuances of the BIR as of the date of writing. These may be subject to change in light of the recently passed RA No. 11469 or the “Bayanihan to Heal as One Act,” which authorizes the President to move statutory deadlines and timelines for the submission of documents and payment of taxes, fees, and other charges required by law, among others.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views reflected in this article are the views of the author and do not necessarily reflect the views of SGV, the global EY organization or its member firms. EYG no. 001498-20Gbl

Noel Andro D. Bico is a Senior Associate from the Global Compliance & Reporting Sub-Service Line of SGV & Co.