Simplified or obscured: The new annual income tax return for juridical entities

(Conclusion)

In brief, the following are the salient changes in the new BIR form No. 1702 (cont’d):

4. Supplemental form for taxpayer activity profile and tax relief availment

Perhaps, the most remarkable feature of the new BIR form No. 1702 is the addition of the portion for tax relief under special law/international treaty. For juridical taxpayers with multiple activities per regime, they shall be required to fill out schedule 4 (supplemental form). Information that cannot be accommodated in relevant fields of Parts I (background information) and II (computation of tax) of the ITR shall be disclosed therein, e.g. investment promotion agency, tax incentive, etc. 

The guidelines on the use of the new BIR form No. 1702 states that in case the columns provided for the taxpayer’s activity profile in section 1, schedule 4 of the new form are not adequate to cover all the registered activities, additional sheets of said section must be accomplished, clearly indicating therein the number of sheets used in the said schedules, and the same must be filed together with the tax form proper. According to the BIR, the supplemental forms are expandable. It is available in excel format so that taxpayers can insert more columns and/or rows in the spreadsheets to accommodate the relevant information. 

Apparently, the purpose of the foregoing additional disclosures is to enable the BIR to have a better idea as to how much taxes the government has foregone by granting tax incentives and exemptions to taxpayers.

5. Additional attachments

In addition to the attachments required under the old BIR form No.1702, the following documents must also support the new BIR form No.1702:

a. Supplemental form (schedule 4) for taxpayers with multiple activities per tax regime;

b. Account Information form (AIF) and/or financial statements (FS), including the following schedules prescribed under existing revenue issuances which must form part of the notes to the audited FS (AFS):

i. Sales/receipts/fees

ii. Cost of sales/services

iii. Non-operating and taxable other income

iv. Itemized deductions (if taxpayer did not avail of the OSD)

v. Taxes and licenses

vi. Other information required to be disclosed in the notes to FS

Previously, the above-mentioned items do not form part of the notes to the AFS, as the old form provided separate schedules for these items in the ITR.

c. Statement of management’s responsibility (SMR) for annual ITR; and

d. Certificate of Tax Treaty Relief/Entitlement issued by the concerned investment promotion agency.

With respect to the required CPA certificate, the new BIR form No.1702 expressly states that the independent CPA must be duly accredited by the BIR.

6. Deleted information and schedules

On the other hand, the following information and schedules are deleted under the new BIR form No.1702:

a. The date of incorporation/creation/date of registration;

b. Field on number of sheets;

c. Schedule of sales/revenues/receipts/fees;

d. Schedule of cost of sales/services;

e. Schedule of non-operating and taxable other income;

f. Computation of current year MCIT;

g. Computation of optional standard deduction; and

h. Schedule of itemized deductions.

To the BIR, the above modifications are preliminary simplification measures that will enable it to realize its priorities of exceeding revenue targets, improving taxpayer satisfaction and compliance, and improving its core processes. To the corporate taxpayers, the above modifications may initially present difficulties in the preparation of the annual ITR and its supporting documents, which may eventually affect the timely filing of the ITR. It may also be that what is supposed to be simplified for the BIR may become a source of obscurity in the future when it begins synthesizing the additional disclosures obtained in the return. Or what may seem obscure to the taxpayers at the onset will later on simplify compliance with the filing of the annual ITR. At this point, the practical value and effectiveness of the new form to both the BIR and the taxpayers is yet another question. Anyhow, since the deadline for the filing of the annual ITR is barely months away, juridical taxpayers are advised to be mindful of the changes so that they may properly prepare and timely file their annual ITR. 

Dyann O. Castillo is a supervisor of tax of Manabat Sanagustin & Co., CPAs, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity.The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG in the Philippines. For comments or inquiries, please email [email protected]or [email protected]