by Mary Rose P De Leon-Isleta
It is tax season again. With the annual deadline for filing income tax returns on April 15 fast approaching and amendments to the Tax Code taking effect, the changes in our tax landscape might seem like a complicated puzzle for taxpayers.
Along with the changes brought about by TRAIN are updated annual income tax returns. In implementing the changes to income taxation for individuals, the BIR introduced three (3) new tax forms. Individuals earning purely compensation income shall still file the BIR Form No. 1700 while self-employed individuals should file either the Annual Income Tax Return for Individuals Earning Purely from Business or Profession (BIR Form No. 1701A) or the Annual Income Tax Return for Individuals including Mixed Income Earner, Estates and Trusts (BIR Form No. 1701). Taxpayers should be guided accordingly on the applicable tax return they should file.
On 23 January 2019, the BIR issued Revenue Memorandum Circular No. 17-2019 which introduced a new tax form, the Annual Income Tax Return for Individuals Earning Purely from Business or Profession (BIR Form No. 1701A). This form is applicable if the taxpayer has opted to use the eight percent (8%) flat income tax rate or the graduated income tax rates with optional standard deduction as the mode of deduction provided further that the taxpayer is earning purely from business or practice of profession. Taxpayers filing this return are not required to attach financial statements. However, individual taxpayers who have already filed and paid the income tax due for 2018 using the old form (BIR Form No. 1701) are mandated to re-file using the new BIR Form No. 1701A through offline eBIRForms Package.
RMC No. 19-2019 issued by the BIR on 29 January 2019 released the new form to be used by individuals earning compensation income. The BIR Form No. 1700 is not yet available in the eBIRForms facility, hence, manual filers shall download and complete the pdf version of the form available in the BIR website and pay the corresponding taxes to the Authorized Agent Bank of the BIR (AAB) or to the respective Revenue District Office (RDO).
Moreover, on 18 March 2019, the BIR issued RMC No. 37-2019 which circularized the availability of the enhanced BIR Form No. 1701. This return shall be filed by taxpayer who avails the graduated income tax rates either by selection or failure to select or failure to qualify to be taxed at 8% income tax rate. The financial statements are required to be attached to the income tax return. Audited financial statements are required if the annual gross sales/receipts is more than Php 3,000,000.00.
The new returns for self-employed individuals are already available manually and in the offline eBIRForms package v7.4 but are not yet available in the electronic filing and payment system (EFPS). As a work-around procedure, EFPS filers are advised to use the new return in Offline eBIRForms package v7.4.
Along with the introduction of the new ITR forms, the BIR should provide guidance to avoid chaos and confusion this tax filing season. While compliance with tax filing and payment obligations in the Philippines sometimes get tedious and stressful, make tax day a breeze by understanding your tax filing requirements. Taxpayers may ask officers from the BIR or their tax practitioner friends to help them.
As a reminder to those who have not yet filed their 2018 tax returns, keep in mind that the last few weeks of tax season is very hectic, as such, our best advice is to file the tax returns as early as possible to comply with the tax filing deadlines.
Mary Rose P. De Leon-Isleta is an Assistant Manager from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.
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