Today, we shall discuss on income tax in Philippines and income tax return in Philippines. As report of World Bank Philippines rank is 115th among 190 nations of the world in the Paying Taxes index. While corporate tax rate is 30% applicable to both foreign and local companies the filling processes of Income Tax Return ITR are not reasonably tax payers friendly. The tax rates have not been changes that much over the years. Tax Rates have been prevailed in Philippines from 1997 until 2016 was 31.95 percent on average. The rate was all time high of 35 percent in 1997 and the lowest being the 30 percent prevailing at the moment.
The country wise comparison of corporate taxation as per Doing Business 2017 of world bank is as follows;
|Points of comparison||Philippines||East Asia & Pacific||USA||Germany|
|Number of Payments of Taxes per Year||28.0||22.9||10.6||9.0|
|Hours taken for administrative formalities||185.6||198.0||175.0||218.0|
|Share of Taxes [% of profit]||42.9||33.9||44.0||48.9|
The calendar year is the fiscal year in Philippines. The tax payers are required to file ITR on or before the15th day of 4th month i.e. April.
E-filing named Electronic Filing and payment System eFPS was launched in Philippines in 2015 by the Bureau of Internal revenue BIR and has made it mandatory for the following establishments as part of filing process of income tax in Philippines;
- 1. TAMP [Taxpayer Account Management Program ] Taxpayers (RR 10-2014);
- 2. Accredited Importer and Prospective Importer
- National Government Agencies
- 4. All licensed local contractors
- 5. Enterprise enjoying fiscal incentives
- 6. Top 5,000 Individual Taxpayers
- 7. Corporations with paid-up capital stock of P10 Million and above
- 8. Corporations with complete Computerized Accounting System CAS
- 9. Procuring Government Agencies with respect to withholding of VAT and Percentage Taxes
- 10. Government bidders [RR 3-2005]
- 11. Insurance companies and Stock brokers RMC 71-2004]
- 12. Large taxpayers [RR 2-2002, as amended] and
- 13. Top 20,000 Private Corporations [RR2-98, as amended]
In the beginning there are confusions about understanding e-filing system and the requirements of supporting documents in between tax payer’s consultants and the BIR personnel generating influx of complaints and disorders. Addressing these the Bureau of Internal Revenue issued Revenue Memorandum Circular RMC # 28-2017 providing the tax payers in general with the guidelines in filing, receiving and processing of ITR along with the requirements of documents upon submission of returns.
The eFPS or Electronic Filing and Payment System, essentially a paperless tax filing and payment system developed by the Bureau of Internal Revenue BIR, requiring Enrolling for eFPS and is free of charge.
Income Tax Return in Philippines
Income tax return (ITR) using Electronic Filing and Payment System eFPS
Following are the steps in enrolling first ;
– Using internet browser log on to BIR website
– In the pop-up page Click on eFPS icon to go the eFPS home page.
– Click on ‘Enroll to eFPS’ link while in the eFPS home page.
– The eFPS enrollment form will appear. Complete the required fields on the Enrollment Form — Click on the “Submit” button.
– The system would generate a pop-up message confirming of enrollment
The BIR would send an email to the tax payer intimating whether the enrollment is approved or not. Once your enrollment is approved an account will be activated and lets the tax payer able to do all the functions like e-filing and e-paying of ITRs and taxes within the scope of eFPS. The tax payer is advised to remember the username, passwords and the answers to the questions generated by system for future references.
Once enrollment with both eFPS and online banking with any of the Authorized Agent Banks [AABs] is done, the taxpayer would simply fill out the tax returns form with the required details, then validate and submit the same after logging on to the BIR’s webpage.
A system generated Filing Reference Number FRN in a page will thus be displayed once the filing and submission of ITR is successfully done. There is a Proceed to Payment button in the FRN page. In case the taxpayer intended to pay the tax then click this button. System will generate an eFPS payment form showing Mode of payments options by default. Tax payer would require choosing mode of payments and AAB the authorized Agent bank.
Then by clicking submit button the instruction to payment will be submitted to the bank by re-directing the intimation to the URL of the concerned bank. Once payment is successful, a confirmation screen stating that the BIR eFPS has received the payment transaction will appear, as proof of successful tax payment.
If any documents required supporting the ITR, then the same to be submitted along with the printed form of income tax return in Philippines to the Revenue District Office RDO depending on the location of business within 15 days of e-Filing. Following are the general requirements of documents:
- The Certificate of Income Payments, if applicable [ not Subjected to Withholding Tax, BIR Form 2304
- The Certificate of Creditable Tax, if applicable [Withheld at Source, BIR Form 2307
- The approved Tax Debit Memo, if applicable
- The Certificate evidencing of Foreign Tax Credits, if applicable
- The signed AIF [Account Information Form] AIF and/or Audited Financial Statements certified by an independent CPA in case of gross quarterly exceed PHP 150,000.00
The Bureau of Internal Revenue BIR, in pursuant to the RR 5-2015 has provision for penalties for failing to file ITR under electronic systems of the BIR by those tax payers mandated to compulsory e-filing as law of income tax in Philippines.
- A penalty of P1,000 per return pursuant to Sec. 250 of the NIRC, as amended
- A penalty equaling to the 25 percent of the payable tax required to be paid for filing an ITR not in accordance with the provisions and regulations prescribed in 248 A of the NIRC
- The non-compliant tax payers will be included in the Priority Audit Program PAP of respective RDOs [Revenue District Office]
The system of filling of ITR and the provisions for documentary submissions seem complex and time consuming, things become easier and smooth once accustomed to bureaucracy here is more or less favorable.