2016 ITR filing: Basic reminders

Have plans for the Holy Week? For individual and corporate taxpayers with an accounting year ending Dec. 31, plans for this upcoming Lenten season should include the preparation of the annual income tax filing. Why? Because this year’s due date falls on April 17^th (since April 15^th falls on Black Saturday which is a holiday). The timing can be a hassle considering that it is right after the holidays.

I have seen some infomercials and print ads reminding the general public to avoid the rush on April 17^th. The Bureau of Internal Revenue (BIR) is also asking Authorized Agent Banks (AAB) to accept returns and payments for internal revenue taxes starting April 1 and also April 8, both Saturdays.

Avoiding the rush will work to the taxpayers’ advantage in at least two ways. First, you will be worry-free during the long holiday, giving you more time to rest and reflect. Lent is a time for spiritual matters anyway. Second, preparing tax returns earlier gives us time to rectify incorrect or unsuccessfully filed returns within the deadline, thus avoiding penalties.

On March 30, the BIR issued the 2017 Annual Income Tax Return (ITR) Filing Guidelines [Revenue Memorandum Circular (RMC) No. 28-2017]. Among the basic reminders contained in the RMC are: 

1. Who are required to use the electronic filing and payment system (eFPS) and electronic BIR Forms (eBIRForms)?

Among those required to use eFPS are as follows:

a) Taxpayer Account Management Program (TAMP) taxpayers;

b) Those required to secure the BIR-Importer’s Clearance Certificate (ICC) and BIR Broker’s Clearance Certificate (BCC);

c) Licensed local contractors;

d) Enterprises enjoying fiscal incentives (PEZA, BoI, etc.);

e) Top 5,000 Individual Taxpayers;

f) Corporations with paid-up capital stock of P10 million and above;

g) Corporations with complete Computerized Accounting System;

h) Government Bidders;

i) Large taxpayers;

j) Top 20,000 private corporations; and

k) Insurance companies and stockbrokers.

On the other hand, those mandated to use eBIRForms include the following:

a. Accredited tax agents/practitioners and all its client-taxpayers;

b. Accredited printers of principal and supplementary receipts/invoices;

c. One-time transaction taxpayers who are classified as real estate dealers/developers; those who are considered habitually engaged in the sale of real property and regular taxpayers already covered by eBIRForms. Taxpayers who are filing BIR Form Nos. 1706, 1707, 1800, 1801 and 2000-OT (for BIR Form No. 1706 only) are excluded;

d. Those filing a “No Payment” return; and

e. Cooperatives registered with the National Electrification Administration and Local Water Utilities Administrations.

For the list of those mandated to use eFPS and eBIRForms, please see Annex A of RMC 28-2017. This is an important reminder, since taxpayers who must file their returns using eFPS or eBIRForms and who fail to do so, shall be penalized for 25% of the tax due to be paid and P1,000 per return. Further, non-compliant taxpayers will be included in the BIR’s priority audit program.

2. Where do you file and pay?

For eFPS filers, the filing and payment are done using the eFPS facilities. For eBIRForms filers with tax payment, the filing is done electronically through the eBIRForms Package, while the payment is made to an Authorized Agent Bank (AAB) located within the jurisdiction of the Revenue District Office (RDO) where the taxpayer is registered. On the other hand, for manual filers, the filing and payment are done to the AAB within the RDO where the taxpayer is registered. 

We should be cautious though of online traffic, to avoid what happened in the past when those who tried to file electronically on the last day, April 15, were not able to complete the process. Remember that to be a day late warrants a penalty of a 25% surcharge and if you are a corporation with a P100 million income tax due, a P25 million surcharge will be the penalty.

3. Are individual taxpayers required to fill out the Supplemental Information?

Supplemental Information pertains to Schedule 12 of BIR Form Nos. 1700 and 1701. This schedule contains disclosure of the individual taxpayer’s interest income, royalties, and dividends, among other forms of income subjected to the final withholding tax. For these disclosures, RMC 28-2017 provides that such are “optional” on the part of the individual taxpayers filing their ITR within the calendar year 2016.

4. Do I still need to attach a Board of Accountancy (BoA)-required compilation report?

Under RMC 28-2017, the list of required attachments to the 2016 ITR was enumerated. In the said enumeration, the BoA-required compilation report was not included in the list. 

In news reports, the BIR specifically dropped the submission of the said compilation report in line with the government’s aim to promote ease of doing business and streamlining bureaucratic requirements.

Nonetheless, I suggest that the taxpayers read the full text of the RMC 28-2017 to be guided on the filing of the 2016 ITR. We must also watch out for supplemental regulations, if any, to be issued by the BIR in the days to come. Remember that the proper and timely filing of tax returns is the key to sparing a taxpayer the penalties provided under the tax rules. 

For many, Lent is a time to reflect; we believe that such a time should not be dedicated to the preparations for the 2016 ITR filing.

Eliezer P. Ambatali is a senior 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.