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Busy season during a pandemic 2: The sequel

TOP OF MIND - Angelique G. Blando (The Philippine Star) - April 20, 2021 - 12:00am

It’s just been a few days after April 15, which is generally the deadline in the filing Annual Income Tax Returns (AITR) with the Bureau of Internal Revenue (BIR). Prior to this date, most tax practitioners are jokingly known to enter into a hermit-like state and spend hours and hours of quality time with their calculators. But immediately after filing, they are welcomed back into the real world with a joyful glee for successfully hurdling another busy season amidst a pandemic, a feat worthy of a celebration.

As a tax professional working for an auditing firm, I cannot help but reminisce how we used to celebrate before our present situation – with the abundance of good food (e.g., lunch buffets, having merienda, or dining out) while letting new hires share their experiences of their first busy season; with the team members physically together and just enjoying their time after working long hours. I know everyone misses this, too, but while the modified enhanced community quarantine (MECQ) has been reimposed, we will have to make do with virtual celebrations with the same level of camaraderie and kinship. After all, the health and safety of everyone should always come first.

The last pandemic recorded by the Centers for Disease Control and Prevention (CDC) was the 2009 H1N1, which lasted from April 2009 until April 2010. From the said period, CDC estimated that there were 60.8 million cases in United States alone and over 151,000 people died worldwide during the first year the virus circulated. Despite the end of the virus, H1N1 remains to circulate as a seasonal flu and cause illness, hospitalization, and death worldwide.

After 11 years from the last pandemic, COVID-19 broke out. Due to the dramatic increase in cases internationally and domestically, the Philippines was initially placed under an enhanced community quarantine (ECQ) from March 12 until April 14, 2020. This prompted most of us to adopt a work-from-home arrangement, wherein correspondences would mostly be done digitally/electronically. But despite the pandemic, the BIR initially issued Revenue Memorandum Circular (RMC) 25-2020 informing the public that the deadline for AITR filing was not extended, hence it remained to be on or before April 15, 2020. The imposition of the lockdown made it difficult for taxpayers to prepare and file their AITRs. Fortunately, responding to the appeal of the general public, the deadline was extended until May 15, 2020, as provided in RMC 28-2020.

However, the same appeal was not heard a year after when the BIR issued RMC 46-2021 on April 6. Through this RMC, the BIR announced that there would be no extension for the deadline of filing the AITR. Nonetheless, the filed return may be amended on or before May 15, 2021.

Further difficulty and confusion arose in preparing AITRs as the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) was signed into law by the President on March 26 and took effect on April 11 – just a few days before the AITR filing deadline. The CREATE, among others, effectively reduced the income tax rate applicable to most corporate taxpayers (from 30 percent to 25 percent or 20 percent, depending on the taxpayer’s net taxable income and total assets) beginning July 1, 2020. True enough, taxpayers and tax practitioners were scrambling because of this.

Thankfully, the BIR had the initiative to host a public consultation and immediately issue the following rules and regulations even before the effectivity of the CREATE:

Revenue Regulations (RR) 2-2021 on withholding taxes – “Amends certain provisions of RR 2-98, as amended, to implement the amendments introduced by RA 11534 (Corporate Recovery and Tax Incentives for Enterprises Act or CREATE Act) to the NIRC of 1997, as amended, relative to the final tax on certain passive income.”

RR 3-2021 on Tax Incentives – “Prescribes the rules and regulations to implement Section 3 of RA 11534 (CREATE Act), amending Section 20 of the NIRC of 1997, as amended.”

RR 4-2021 on value-added tax – “Implements the provisions on value-added tax (VAT) and percentage tax under RA 11534 (CREATE Act), which further amended the NIRC of 1997, as amended, as implemented by RR 16-2005, as amended.”

RR 5-2021 on income tax – “Implements the new income tax rates on the regular income of corporations, on certain passive incomes, including additional allowable deductions from gross income of persons engaged in business or practice of profession pursuant to RA 11534 (CREATE Act), which further amended the NIRC of 1997.”

There was also uncertainty on the proper tax returns to be used. With the changes brought about by the CREATE, the BIR had to update the tax returns available in the Electronic Bureau of Internal Revenue Forms (eBIRForms) and Electronic Filing and Payment System (eFPS). For this purpose, the BIR issued RMC 50-2021, which prescribes the guidelines in the filing and payment of AITR by non-individual taxpayers for the taxable years ending July 31, 2020 to June 30, 2021. The tax returns in eBIRForms and eFPS have already been updated to incorporate the changes from the CREATE.

Undoubtedly, it is burdensome to go through technical and procedural changes in the midst of a global health crisis. Nonetheless, with proper guidance from the government, I can confidently say that we can hurdle each busy season – with or without a pandemic! Kudos to the BIR and every Filipino taxpayer and tax practitioner for contributing to the successful filing this year!

 

 

Angelique G. Blando is an associate 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.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-inquiry@kpmg.com or rgmanabat@kpmg.com.

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