Navigating the new tax landscape with the EOPT's IRR

By: Zyphyrkyhts Pelonio

AS the dust settles on the much-anticipated release of the implementing rules and regulations (IRR) of Republic Act 11976, also known as the Ease of Paying Taxes (EOPT) Act of 2024, businesses must now navigate the impact of the law, reassess their strategies and adapt to the evolving tax landscape.

To facilitate enforcement, the Bureau of Internal Revenue (BIR) issued six batches of revenue regulations (RR) that collectively took effect on April 27, 2024. Significant revisions pertaining to the value-added tax (VAT) and percentage tax were introduced in Revenue Regulations (RR) 3-2024 and 7-2024.

Standardized invoicing

One notable feature of the IRR is the streamlining of VAT invoicing by standardizing it across goods and services. This move not only diminishes ambiguity but also simplifies procedures for businesses, which will facilitate easier compliance with the new regulations.

There will be a shift from cash to accrual basis for purposes of VAT recognition under RR 3-2024. All references to "gross selling price," "gross value in money" and "gross receipts" will now be referred to as "gross sales" for both sale of goods or services. The term invoice will also now be used instead of "sales/commercial invoices" or "official receipts."

In this context, for VAT-registered taxpayers and persons required to register for VAT, input VAT claims will be evidenced by a VAT invoice for both sale of goods and services. This effectively removes the official receipt as a requirement for substantiating refund claims and input and output taxes, making the invoice the sole document required in declaring output taxes and claiming input taxes for both sale of goods and services.

For invoicing requirement purposes, information on "Business Style" has now been removed.

Output tax credit

Another notable amendment is the introduction of the output VAT credit on uncollected receivables. Sellers of goods or services may now deduct the output VAT pertaining to uncollected receivables from their output VAT in the subsequent quarter after the lapse of the agreed-upon period to pay.

To be eligible for the output VAT credit, however, certain conditions must be met: that the seller has fully paid the VAT on the transaction and the VAT pertaining to the uncollected receivables has not been claimed as allowable deduction for income tax purposes, specifically as bad debts.

To facilitate transition, it was provided that for collections on outstanding receivables related to sales of services prior to the effectivity of the RR, the VAT shall be declared upon collection. No output tax credit shall be allowed on uncollected receivables for sales of goods prior to the effectivity of the RR.

Unused official receipts

To address taxpayers' concerns on the unused official receipts (ORs), a transitory provision provides that all unused or unissued ORs may be used as supplementary document until fully consumed, provided that the phrase "THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX" is stamped on the face of the receipts.

For ease of doing business, taxpayers shall be allowed to strike the word "Official Receipt" on the face of manual/loose-leaf printed receipts and stamp it with terms "Invoice," "Cash Invoice," etc., to be issued as a primary invoice to buyers. For cash register machine and point of sale system users, reconfiguration is only a minor enhancement that does not necessitate reaccreditation of the system nor the issuance of a new permit to use. This conversion does not need approval from the BIR but requires submission of any unused OR inventory in duplicate original copies until May 27, 2024.

Conversely, for users of computerized accounting systems or computerized books of accounts, it is necessary to review the system to ensure compliance with the provisions of the law. As the adjustment will have a direct impact on the financial aspect, such a change is deemed a major enhancement, requiring taxpayers to revise their system registration.

It is clear from the foregoing discussion that it is crucial for taxpayers to maintain a meticulous approach to tracking their receivables, as outlined in the law's requirements. A primary focus lies in monitoring the claim for output VAT credit, ensuring accuracy and timeliness. This attention to detail is essential for complying with the law and maximizing the claim for output VAT credits. While automation can benefit businesses dealing with high accounts receivable volumes, aligning such automation with specific business needs remains a critical consideration.

The EOPT Act is a positive shift toward a more efficient and taxpayer-friendly tax environment. Businesses that embrace its provision and stay informed will be better positioned to thrive in the evolving tax landscape.

As published in The Manila Times on 13 May 2024. The author is a Senior at the Tax & Corporate Services practice of Deloitte Philippines.