A look back on changes to the Phl individual tax landscape

Part Two

Year 2021 (The resurgence)

Unlike the previous year, there was no extension for tax filing for 2020. The government needed funds to sustain its programs and there may have been a conclusion that people have adjusted to the situation. RMC 46-2021, however, provided an allowance for filed returns to be amended on or before May 15, 2021 without imposition of penalties. Taxpayers whose amended returns will result in overpayment of taxes can opt to file for a refund or carry over the overpaid tax as credit against the tax due for the same tax type in the succeeding period.

As no further guidelines were provided in relation to cross-border individuals, questions on the tax impact of work from home and work from anywhere continue to grow. The BIR issued Revenue Memorandum Order (RMO) 14-2021 to streamline the procedures and documents for the availment of treaty benefits. Lesser administrative requirements would have been welcomed as a relief. Moreover, clarification on how the rules apply to foreign nationals who have no constituted Philippine withholding agents would have been helpful.

More recently, the BIR issued RR 20-2021 providing guidelines on the taxation of foreign employees of Philippine Offshore Gaming Operations (POGO). The regulations require them to secure a Tax Identification Number (TIN) and pay 25 percent final withholding tax on gross income subject to certain provisions.

To digitize taxpayer services, the BIR also released the Mobile TIN Verifier App. The app is a service channel for taxpayers to send online TIN validation and inquiry, and receive real-time response from BIR offices. However, limitations on the extent of support provided and insufficient live agents make the use of the app less effective.

Year-end payroll activities are the final challenge to tackle. Changes to the year-end payroll reporting requirements include RMC 111-2021 that provides for the latest offline electronic Bureau of Internal Revenue forms (eBIRForms) Package Version 7.9.2, and RMC 117-2021, which clarifies the manner of submission of BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) and 2316 (Certificate of Compensation Payment/Tax Withheld for Compensation Payment With or Without Tax Withheld) under RR 16-2021. A tax advisory was issued as well to inform taxpayers that the BIR shall accept submission of the BIR Form 2316 without the employee’s signature, provided that the same is signed by the authorized representative of the employer. Given the spike in Omicron cases, the BIR has directed its offices and agent banks to accept out of district submissions in areas under Alert Level 3.

Taxpayers are filled with questions for the future – will the BIR allow the continued use of electronic signatures? Will there be more digital payment facilities available? Will there be improvements to increase the reliability of the current tax filing system? In your experience, how many of these questions and scenarios match yours from a payroll and tax perspective?

We can expect the BIR to stick with the tax filing and payment deadlines as movement restrictions continue to ease up. The BIR does try to make it easier for taxpayers to file their income tax returns as it results in more collection. It is also active in attempting to address gray areas through consultations with the private and public sectors, and issuance of RMCs. However, we find that at times, the circulars themselves cause further confusion, requiring taxpayers to come up with their own interpretations.

Companies nowadays are undergoing a lot of transformations – reviewing compensation benefits and policies, addressing the workforce needs and considering remote or hybrid work arrangements. Other factors such as environment, social and governance (ESG) issues, health and safety, are also emerging as agents of change. The policies and programs, therefore, need to be agile with the eccentricities of these factors, particularly in the changes in the income tax rules.

Theodore Roosevelt once said, “The more you know about the past, the better prepared you are for the future.” 2022 is here and it would do us good to prepare based on the facts of what has already transpired the past couple of years. We can’t ignore the massive changes in the income tax rules, and they are becoming certainly more complex. It is important for us to look back and understand where we succeeded or went wrong in terms of compliance and of course, how to resolve these problems in the future. There are still a lot of things the BIR should look at to adapt fully to the new reality of income tax reporting, domestic and international tax regulations, and technological advancements, gradually but hopefully, soon, these can be implemented.

Karen Jane S. Vergara-Manese is a partner, the Global Mobility Services Country Leader and Immigration Practice head while Vichellene L. Gandecila-Viernesto is a director from the tax group of KPMG R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.

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 KPMG International or KPMG RGM&Co.

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