At Ease: RR 4-24 and its impact on individual taxpayers

In today’s dynamic business landscape, tax regulatory changes wield a significant influence on tax reporting practices. Indeed, Republic Act (RA) 11976, otherwise known as the Ease of Paying Taxes (EOPT) Act, has made far-reaching implications, even from an individual income tax aspect. Hence, it is incumbent that the intention and catalysts of this regulatory shift, coupled with its complexities and opportunities, be understood by individual taxpayers.

The EOPT Act was signed into law by President Marcos on January 5, 2024 and took effect on January 29, 2024 with the objective of modernizing the Philippine tax administration and strengthening taxpayer rights. Implementing rules and regulations (IRRs), specifically, Revenue Regulations (RR) 3, 4, 5, 6, 7 and 8-2024, were thereafter issued by the Bureau of Internal Revenue (BIR). Let us delve into RR 4-2024 and the key provisions thereof affecting individual taxpayers.

RR 4-2024 filing of tax returns, payment of taxes and other matters affecting the declaration of income

A. Manner of Filing and Payment of Taxes

Under this RR, the term “Payment of Tax or Remittance of Tax” is defined as the act of delivering the amount of tax due or withheld, either electronically or manually. Section 3 further elaborates that payments can be made either electronically through any of the available electronic platforms or manually to any Authorized Agent Banks (AABs) and Revenue Collection Officers (RCOs).

For those mandated to use the electronic Filing and Payment System (eFPS), manual filing and payment can be an option during an eFPS downtime, as clarified during the BIR’s EOPT public consultation in February 2024.

Likewise, married individuals can either electronically or manually file a joint return for the taxable year to declare the income of both spouses regardless of their tax residency. Where it is impracticable for the spouses to file one return, each spouse may file a separate return, but the returns so filed shall be consolidated and verified by the BIR. Joint tax filing for married individuals is required unless deemed impracticable, such as when the spouses are registered under different RDOs.

B. Removal of the 25 percent civil penalty for filing at the wrong venue

With “file and pay anywhere” rendered effective under EOPT, the 25 percent civil penalty for filing at the wrong venue is cancelled. Given this, are individual taxpayers still required to transfer or update their RDO registration when they change their place of residence, business operations, and/or employment? Will there be a clarificatory issuance that outlines scenarios whereby a transfer or an update of registration is required either manually or through Online Registration and Update System (ORUS)?

Technically speaking, a transfer should still be done since tax collection is not the only purpose of an RDO registration. The RDO having jurisdiction over the taxpayer should also provide other tax services.

Meanwhile, certain AABs require a bank bulletin to accept out-of-district tax returns, resulting in tax return filing delays or non-acceptance, as observed during the recent April 15 annual tax filing. Thus, the BIR must enforce upon its AABs the acceptance of such out-of-district tax returns to avoid the described scenarios.

Moreover, the BIR should clarify if RDOs can still manually stamp printed electronically filed Annual Income Tax Returns (AITRs) for requesting taxpayers who can provide a letter request as set forth in Revenue Memorandum Circular (RMC) 61-2023.

C. Exemption from filing an income tax return for an overseas contract worker (OCW) or overseas Filipino worker (OFW)

OCWs and OFWs, being deemed non-residents for Philippine tax purposes, enjoy a tax exemption on their overseas income. Accordingly, the EOPT Act added them to the list of individuals who are not required to file an income tax return.

An Overseas Employment Certificate (OEC), an employment contract with the overseas employer, and other equivalent documents can be used to support the tax filing exemption.

If there is a need for an OCW or an OFW to file an income tax return (for instance, for other income derived from Philippine sources), they may do so electronically for convenience.

As we, taxpayers, navigate through ongoing improvements in our tax rules and regulations, we recognize that these changes, albeit challenging at the beginning, foster positive effects for the taxpayers and the economy.

The recent tax filing season, case in point, is underscored by the widespread use of electronic platforms for tax filing and payment among taxpayers and tax practitioners. The prerogative to manually or electronically file, along with the flexibility of filing and paying anywhere, incentivized taxpayers to complete their tax requirements prior to the deadline.

Compliance with tax regulations will not only help reduce tax risks but also be conducive to ethical practices that can improve reputation and trustworthiness. We are still at the tip of the EOPT iceberg. As Eckhart Tolle said, “Being at ease with not knowing is crucial for answers to come to you,” proactively embracing EOPT and other tax regulatory changes will allow us taxpayers to take full leverage of new opportunities and contribute to a healthier tax compliance.

Vichellene Gandecila-Viernesto, Tax Director is from the Global Mobility Services Team under the Tax Group of KPMG in the Philippines (R.G. Manabat & Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Vichellene L. Gandecila-Viernesto through [email protected], social media or visit www.home.kpmg/ph.

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 in the Philippines.