The Philippine Tax Whiz discusses the newly-issued regulation on the Ease of Paying Taxes Law
The EOPT law now recognizes sales using the accrual basis for both goods and services, including transactions with the government and its agencies. So, all mentions of terms like “gross selling price” or “gross receipts” are now called “GROSS SALES,” no matter if it is goods or services being sold.
Previously, there were distinctions between sales of goods and services, with separate documents like sales/commercial invoices and official receipts. However, with the shift to accrual basis for both goods and services, a single document is mandated for simplicity. This implies that all mentions of sales/commercial invoices or official receipts will now be consolidated and referred to simply as “INVOICE.”
Additionally, billings for sales of services on account, which were previously based on receipts or payments, will now be referred to as “BILLING” or “BILLED.” This change aims to streamline the invoicing process and ensure consistency in reporting under the new tax framework.
EOPT law has a feature of allowing taxpayers who have uncollected receivables to deduct the VAT from their next quarter’s VAT payment but only if they already paid the VAT on original sales and the VAT component on uncollected receivables has not been collected as allowable deduction. This is applicable for transactions transpired upon the effectivity of the regulation or April 27, 2024.
To qualify for VAT credit, the following requisites must be present:
In case of recovery of uncollected receivables, the output VAT pertaining thereto shall be added to the output VAT of taxpayer during the period of recovery.
For transactions prior to the effectivity, the output VAT component is to be declared upon collection of receivables and shall be supported by invoice.
The Risk-Based Classification of VAT Refund Claims is classified into low-, medium-, and high-risk claims. This only applies to tax credit/refund claims filed starting July 1, 2024 onwards. The risk levels and their corresponding verification processes for tax refund claims are as follows:
The level of risk is determined by:
The following claims shall be classified as high risk:
In essence, the new risk-based classification system under the EOPT law aims to enhance efficiency and transparency in VAT refund processing.
Under the EOPT law, official receipts are no longer valid for VAT purposes. However, if you still have unused ORs for your business, there are options available:
If you registered your business in 2023, you would initially be classified as a Micro Taxpayer under the EOPT law. This classification is based on your gross sales for the taxable year 2022. The table for initial classification of taxpayers based on the registered year is provided:
The initial classification will remain unless reclassified later if their sales reach a specific amount in accordance with the threshold values. The Bureau of Internal Revenue (BIR) will notify taxpayers of their classification or any changes to it according to procedures outlined in separate revenue issuances. The gross sales thresholds for different taxpayer classifications are as follows:
It is important to note that VAT-registered taxpayers are categorized as “Small” because they meet the P3-million threshold requirement. – Rappler.com
CONSULT ACG to understand and learn more about the impact of the newly enacted Ease of Paying Taxes (EOPT) Law to your businesses.