Ease of Paying Taxes Act

As announced by the BIR, the extension of mandatory e-invoicing to all major taxpayers in the Philippines is planned starting 2024. The BIR has issued a set of Revenue Regulations (RR) for the implementation of Republic Act No. 11976, also known as the Ease of Paying Taxes Act.

    

With the enactment of RR No. 7-2024, taxpayers, particularly service providers, will no longer be able to issue manual or loose official receipts to substantiate their service revenues. The issuance of official receipts for the sale of services will no longer be considered proof of the sale of services from April 27, 2024.

A penalty is envisaged for taxable persons who continue to issue them as the main documentary evidence. However, with reference to the transitional provision discussed later, unused official receipts can still be used for a longer period upon request and with the approval of the BIR. Thereafter, only BIR-approved sales/service invoices with an Authorization to Print (ATP) will be accepted for tax purposes.

As announced by the BIR on April 12, 2024, changes were implemented to the rules on Value Added Tax (VAT) and Percentage Taxes (PT) contained in RRs Nos. 3-2024 and 7-2024.

     

Changes have been made to the definition of tax terminology, including “gross turnover”, “invoice”, “invoices for the sale of services on account” and “VAT-exempt threshold”. Some of these terms have been further specified and/or redefined.

    

In addition, changes have been made to the recognition of VAT tax credits on uncollected receivables. The basis for calculating VAT on the sale of services and the use or rental of property is now gross turnover.

    

The EOPT introduces a new provision known as VAT credit for uncollected receivables. Under the new scheme, a seller of goods or services can deduct the output VAT due on uncollected receivables from his VAT in the next quarter after the expiry of the agreed payment period, provided that the seller has already paid the VAT on the turnover. 

     

In addition, the VAT portion of uncollected receivables should not be claimed as an allowable deduction for income tax purposes. Eight (8) requirements were established to be eligible for a VAT credit, such as selling on credit or on account, showing VAT separately on the invoice, not deducting VAT on uncollected receivables from gross income, etc.

     

Temporary provisions have also been made for invoiced but uncollected sales of services, uncollected receivables from the sale of goods, and for the issuance of VAT invoices.​

        

On June 13, 2024, the BIR promulgated Revenue Regulations (RR) No. 11-2024, which amends the transitional provisions of RR No. 7-2024 and extends the statutory deadlines for compliance with the new invoicing requirements under the Tax Payment Facilitation.

     

Guidelines for unused official receipts under RR No. 7-2024, affecting cash registers (CRM) and point-of-sales (POS) machines and e-receipting or electronic invoicing software, and finally, revised penalty provisions for the transitional provisions of RR No. 7-2024.

    

Among other things, taxpayers may use official receipts and statements/accounts/statements of charges converted into invoices not only until December 31, 2024 as before, but now until they are fully used up and comply with the newly required information under Section 6(B) of RR No. 7-2024, including the quantity, unit cost, and description or nature of the service. 

       

Converted invoices or invoice vouchers that meet these additional requirements are valid from April 27, 2024 until they are fully used up for claiming input VAT and proving sales and payments at the same time. Any manual or loose “Official Receipt” issued without a stamped “Invoice” shall be considered an additional document and cannot be used for input tax claims.

    

The BIR extended the deadline until the end of this year for taxpayers who are converting their Computerized Accounting System (CAS)/Computerized Books of Accounts (CBA) with Accounting Records (AR). It also allows the use of invoices with the wording “Official Receipt” from April 27, 2024 until the reconfiguration/system improvement is completed. Changing the wording from “Official Receipt” to “Invoice”, “Cash Invoice”, “Charge Invoice”, “Credit Invoice”, “Billing Invoice” is only a minor change for CRM/POS machines, e-receipting or electronic invoicing software without the need to inform the tax authorities.

     

These changes are a further step towards digitalization and simplification of tax payments.