Monday, February 3, 2014

Clarification on alphalist submission

CONSIDERING taxpayers’ never-ending obligation to pay taxes, it behooves them to keep pace with the different regulations issued by the Office of the Commissioner of Internal Revenue, and more essentially, to properly understand and fully recognize the correct interpretation of these regulations.

Early this year, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. (RR) 1-2014 which requires the submission of the applicable alphabetical lists of employees and payees on income payments subject to creditable and final withholding taxes.

With the novel requirements introduced by RR 1-2014 that taxpayers must comply with, a number of issues surfaced. For that reason, the BIR recently issued Revenue Memorandum Circular No. (RMC) 5-2014 in order to clarify the compliance requirements ordered under RR 1-2014.

While RR 1-2014 specifically provided three modes for taxpayers to comply with the filing of the required alphabetical lists of employees and payees on income payments, RMC 5-2014 clarified that taxpayers mandated to use the electronic filing and payment system (eFPS) and the interactive forms system (IAF), including those who voluntarily enrolled therein, may comply with this mandatory filing only through eSubmission. However, RMC 5-2014 further provided that, once the attachment facility of the eFPS is already available, the foregoing eFPS users may submit the alphalists through either eSubmission, via the BIR Web site, or the eFPS attachment facility.

Taxpayers who are neither eFPS users nor IAF-enrolled may file the required alphalist through eSubmission. Nevertheless, the BIR has declared its preference for the eSubmission of alphalists rather than manual filing. RMC 5-2014 provides a step-by-step procedure that would be very helpful for taxpayers who opt to file their alphalists for the first time via eSubmmission.

The BIR further declared that the previously prescribed submission of hard copies, including the use of storage devices such as DVDs and USBs are no longer allowed.

The preference for the use of a data entry and validation module is also espoused by the BIR as the same may also be downloaded from the BIR website. However, taxpayers may still save the information in different file formats such as text file and/or excel formats before saving the file in the prescribed CSV data file format.

Taxpayers having branches that separately withhold and remit their withholding taxes are further required to prepare and file separate alphalists as distinct withholding agents. The head office shall use the head office code of 000 in its Tax Identification Number (TIN), while each of the branches shall use their respective branch office suffix codes (001, 002, etc.).

After the alphalists are appropriately filed and sent to the BIR, a pop-up message confirming the receipt by the BIR of the said alphalists shall appear on the screen. The taxpayer is advised to print the screen displaying such acknowledgement and attach this to the hard copy of the Annual Information Returns to be filed with the concerned Revenue District Office (RDO).

In cases where no message appears, taxpayers are advised to exercise due diligence and ensure that the alphalists have been actually and timely received by the appropriate (RDO). Taxpayers are obliged to coordinate with the RDO and ensure that they have actually received the alphalists filed through e-mail.

Taxpayers shall also receive an e-mail informing them of the successful upload of the submitted alphalists to the BIR data warehouse or of the failed validation process (the reasons for which shall be indicated in the message). The taxpayers concerned are given five days from receipt of the message to address the reasons for the failure of filed documents to be verified, and to resubmit the same through eSubmission or e-mail, as the case may be.

Taxpayers are likewise advised to regularly check their respective e-mails used in filing the alphalists since RMC 5-2014 specifically mandates that once the RDO proves that it has sent the appropriate message to the e-mail address of the taxpayer, the said message is deemed to have been actually received and read by the said taxpayer.

In cases where an alphalist is not successfully uploaded, the same shall be considered as a failure to make/submit/file any return or supply correct information thereby making the taxpayer criminally liable to the penalty of fine amounting to not less than P10,000 and imprisonment of not less than one year but not more than 10 years, or in lieu thereof, pay the corresponding compromise penalty equal to the taxpayer’s gross annual sales.

This compromise penalty may be considered as too excessive considering that it could paralyze or even kill the business of taxpayers especially since there are other documents that may serve as proof of the payment of the correct amount of withholding taxes.

Lastly, taxpayers are advised that the failure to file the alphalist, or in case the filed alphalist failed the validation process and the taxpayer concerned failed to address the issues and re-file the corrected alphalist, will bar them from claiming the corresponding amounts indicated in such alphalist as expenses for income tax purposes.

With the changing times, it is common that additional obligations are given to taxpayers. However, it is emphasized that the obligation of a taxpayer does not end with the actual payment or withholding of taxes. It is still essential for taxpayers to comply with all the reporting requirements of the BIR. On the other hand, the government should make it a point that taxpayers are also their partners in nation-building.

The author is a tax manager with the tax advisory and compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.


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January 20, 2014

New year, new regulation

AS WE usher in the New Year, some of us have set our new year’s resolutions or certain personal rules that we aim to follow throughout the year. Apparently, the Bureau of Internal Revenue (BIR) had a similar idea when it issued a new regulation to be followed by the taxpayers.

On Jan. 10, the Commissioner of Internal Revenue (CIR) issued Revenue Regulations No. (RR) 1-2014, which amend RR 2-98 and RR 10-2008 regarding the submission of an alphabetical list of employees and/or list of payees of income payments.

Under the new regulation, taxpayers required to withhold are required to submit an alphabetical list of employees and list of payees of income payments subject to creditable and final withholding tax. The list is to be attached as an integral part of the Annual Information Returns (BIR Forms 1604CF/ 1604E) and Monthly Remittance Returns (BIR Form 1601 C, etc.).

Under existing rules, manual submission of the alphabetical list of employees and list of payees of income payments subject to withholding tax is allowed by the BIR. However, under RR 1-2014, manual submission is no longer allowed. The only acceptable modes of submission of the alphabetical list are:

1. as an attachment in the electronic filing and payment system (EFPS; efps.bir.gov.ph),

2. electronic submission via the BIR’s Web site, and

3. e-mail to the dedicated BIR address (esubmission@bir.gov.ph) using CSV file format.

In addition to the foregoing, RR 1-2014 requires all income payments to be specifically enumerated, i.e. each payee must be specifically listed in the alphalist.

This means that income payments and taxes withheld which are lumped into a single amount and listed as a group -- such as various payees, various employees, PCD nominees, and the like -- are no longer allowed.

In short, under the new regulations, withholding agents must strictly comply with the technical (format) and substantial (details) requirements set forth therein; otherwise, the income payments subject of the “incorrect” or “non-compliant” submission of the alphabetical list of employees or income payees shall not be allowed as deductible expense.

A reading of the regulations shows that there are two main requirements that a withholding agent must comply with so that the income payments will be allowed as a deductible expense.

First, the list of employees or income payees must enumerate each recipient of the income payments, and there must be no grouping of payees into one category. Second, the alphabetical list submitted to the BIR must be in the format required, which is CSV file format for e-mail submission.

Failure to comply with any of the two requirements will result in non-deductibility of the income payments and will be considered as failure to file the required alphabetical list. Hence, the non-deductibility of income payment and failure to file will be applied in both instances:

1. the list is substantially compliant (i.e. it has specifically enumerated each income payee), but is not in the format required, or

2. the file format is correct but the list contains income payments that were lumped together.

However, please note that the regulation also mentions the issuance of another regulation in so far as CSV format filing is concerned. Although Revenue Memorandum Circular No. (RMC) 5-2009 circularizes the file format to be used in the submission of alphalist in electronic form, its applicability pending the issuance of the new regulation is not clearly provided under RR 1-2014. One may wonder, why should a taxpayer be penalized for non-compliance if there are still regulations that are yet to be issued, detailing the compliance required in RR 1-2014?

Moreover, an issue arises on whether the submission of monthly alphalist on BIR form 1601-C is now applicable. Currently, alphalist is not required to be submitted with BIR 1601-C, and the current EFPS format does not allow for attachments.

While the submission of the list of employees and income payments has already been implemented long ago, and taxpayers have already been complying with this, the penalty imposed for non-compliance on the proper format required seems too high a price for the taxpayers. Take note that failure to file an information return under Section 250 of the National Internal Revenue Code (NIRC) is subject to payment of a fine of P1,000 for every return that was not filed. It appears that failure to file the information return under Section 250 of the NIRC imposes a lower penalty than that provided under the RR 1-2014 for failing to comply with the technical and/or substantial requirements for filing the alphabetical list. Hence, given the foregoing, the taxpayer is put to a quandary -- to comply or not to comply.

Finally, the regulation was published in the newspaper on Jan. 13 and is thus effective by Jan. 28. Accordingly, compliance must be made for filing of BIR Form 1604CF and 1604E immediately, as the regulation is already effective on the deadline for the filing of the same, i.e. Jan. 31.

The author is a tax associate with the tax advisory and compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.


source: Businessworld

2 comments:

  1. di na kami nagiging productive dahil ang dami pinapagawa ni Kim.lahat ng oras napunta dito sa pag aaral kung ano pa ang idadagdag nya bukod sa mga annual, monthly, quarterly etc etc.

    ReplyDelete
  2. how much is the penalty if late submission of alphalist but on time naman yong return namin

    ReplyDelete