Taxwise Or Otherwise
By Donabel M. Villegas
On Feb. 25, businesses, schools and government offices will be closed in celebration of one of the most significant events in Philippine history — the People Power Revolution. It commemorates the day when Filipinos gathered along EDSA, a major public road and a historical stage for those who rallied to restore democracy in the Philippines and end decades of dictatorship. For millions of Filipinos, the protest in EDSA was a reclamation of liberty long denied.
A similar feeling of independence may have been felt by some taxpayers when the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 10-2020 on Feb. 6. This circular suspends the issuance of the Permit to Use (PTU) for Computerized Accounting Systems (CAS), Computerized Books of Account, and its components. The PTU is required before a taxpayer can use computerized accounts in its business operations. Unauthorized use would be subject to penalties.
In prior years, Revenue District Offices (RDOs) could process and issue PTUs. However, due to concerns with the approval process at the RDO level, the BIR decided to centralize the evaluation of PTU applications at the National Office in 2015. Subsequently, PTU applications at the BIR National Office started to pile up.
CAS applications start with the submission of complete documentary requirements. The application will then be assigned to a Technical Working Group (TWG) for a system demonstration that involves a walk through of the CAS. The BIR representatives will test-check if the CAS is compliant with the BIR rules (e.g., invoicing requirements and mandatory fields in the books of account). If any issues are noted, the BIR proposes adjustments to the system, and the applicant-taxpayer is given time to make the necessary rectifications. The BIR may also request for another walk through, if necessary. It is only upon satisfaction of these requirements and procedures that a PTU can be issued. Considering the lengthy procedures and the voluminous number of applications handled at the BIR National Office, the evaluation and release of a PTU could take more than a year.
Finally, in late 2018, the BIR allowed the advance issuance of a PTU number to taxpayers who have substantially complied with the application requirements and can justify the immediate need for deployment of the CAS. Notably, however, this procedure was not covered by a formal BIR circular or memorandum. However, there were taxpayers who successfully secured advance PTU numbers and deployed their systems.
Now, with RMC 10-2020, the pending applications (including those which have undergone system demonstration) for PTU will be handed over to the RDO where the taxpayer is registered. In lieu of a PTU number, taxpayers will receive an Acknowledgement Certificate with Control Number within three days from the submission of documentary requirements. The documents mainly consist of sample print copy of system-generated books of account and principal/supplementary receipts or invoices and a sworn statement with attached summary of system description, commercial invoices/receipts/ document description, forms/records and reports specification executed and signed by the taxpayer or company’s authorized representative/s.
The above requirements are not new to the applicant-taxpayers because most of them should have been included in the original application submitted to the BIR National Office. At most, the applicant-taxpayer may only need to adjust the format to comply with the prescribed sworn statement. Notably, however, the sworn statement under RMC 10-2020 is almost similar to the sworn statement required by the BIR when it allowed the issuance of advance PTUs in 2018.
Unlike before, where the release of the PTU number technically marks the end of the application, the applicant-taxpayer would now be subject to post-evaluation checking, which may be done simultaneously with a regular tax audit under a Letter of Authority.
The BIR is set to issue separate guidance implementing the circular, which would include detailed procedures for the post evaluation checking. Hence, we may expect more detailed guidance, especially since there are items needing clarifications. For instance, the BIR needs to clarify the specific coverage of RMC 10-2020. This is important because new applicants are confused whether they should follow the new documentary requirements and procedures for securing an Acknowledgement Certificate with Control Number given that the RMC suspended the issuance of PTUs. In addition, taxpayers with approved CAS applications but where the PTU is just pending release, are now concerned whether they will be classified as “pending applications” whose docket would be transmitted to the RDOs where they are registered.
On another note, the BIR National Office also needs time to transmit all pending applications to the respective RDOs. It must therefore also be clarified whether RDOs will start accepting and processing the documentary requirements under the RMC even if they haven’t yet received the relevant docket from the National Office.
Many taxpayers have waited a long time to finally get permission to use their CAS, with a few delaying their business plans until approval from the BIR is received. Ease of doing business was promised back in 2018 when Republic Act No. 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, was enacted. If ease of doing business is indeed the main driver for the issuance of RMC 10-2020, it is reasonable to expect that the BIR will provide positive responses to address the afore-mentioned matters as no taxpayer would want to wait another year or two to deploy their system.
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.
Donabel M. Villegas is a tax manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.
+63 (2) 8845-2728
