ON VAT AND PERCENTAGE TAX PROVISIONS (RR No. 3-2024)
- The EOPT adopts the accrual basis of recognizing sales for both sales of goods and services, including transactions to government or any of its political subdivisions, instrumentalities or agencies, and government-owned or -controlled corporations (GOCCs).
- All references to “gross selling price”, “gross value in money”, and “gross receipts” shall now be referred to as “Gross Sales”, regardless of whether the sale is for goods under Sec. 106 or for services under Sec. 108 of the Tax Code (Sec. 2(A), RR No. 3-2024).
- The EOPT Act mandates a single document for sales of both goods and services.
- Sales/Commercial Invoices or Official Receipts shall now be referred to as “Invoice” (Sec. 2(B), RR No. 3-2024).
- All references to receipts or payments which was previously the basis for recognition of sales of service under Title IV [Value-Added Tax (“VAT”)] and Title V (Percentage Tax) of the Tax Code, shall now be referred to as “Billing” or “Billed”, whichever is applicable (Sec. 2(C), RR No. 3-2024).
- EOPT Act re-introduced the regular updating of the VAT-exempt threshold every three (3) years, all provisions mentioning the VAT-exempt threshold of Php 3,000,000.00 shall now read:
- “The amount of VAT threshold herein stated shall be adjusted to its present value every three (3) years using the Consumer Price Index (CPI), as published by the Philippine Statistics Authority (PSA).” (Sec. 2(D), RR No. 3-2024).
- Filing and Payment
- The filing of a tax return shall be done electronically in any of the available electronic platforms. In case of unavailability of electronic platforms, manual filing of tax returns shall be allowed.
- The payment of taxes with corresponding due dates shall be made electronically in any of the available electronic platforms or manually to any Authorized Agent Banks or Revenue Collection Officers (Sec. 2(E), RR No. 3-2024).
- For tax payment with corresponding due dates, the same shall be made:
- Electronically in any of the available electronic platforms; or
- Manually to any AABs and RCOs.
SPECIFIC AMENDMENTS ON RR NO. 16-2005
| SUBJECT | RR NO. 16-2005, as amended, prior to EOPT Act | RR NO. 3-2024 |
| Sale or Exchange of Service under Sec. 108 of the Tax Code (Sec. 3, RR No. 3-2024) | ||
| Sec. 4.108-1 – VAT on the sale of Services and Use or Lease of Properties | VAT is based on gross receipts (excluding VAT). | Sale or exchange or services, as well as the use or lease of properties, as defined in Sec. 108(A) of the Tax Code shall be subject to VAT, equivalent to 12% of the gross sales (excluding VAT). |
| Sec. 4.108-4 – Definition of Gross Sales | Definition of Gross Receipts | Gross Sales – total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services during the taxable period for the services performed for another person, which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter, or exchange of services that has already been rendered by the seller and the use or lease of properties that have already been supplied by the seller
excluding:
Provided, that for long-term contracts for a period of 1 year or more, the invoice shall be issued on the month in which the service, or use or lease of properties is rendered or supplied |
| Sec. 4.108-6 – Allowable Deductions from Gross Selling Price | In computing the taxable during the month or quarter, the following shall be allowed as deductions from gross selling prices:
Sales discount indicated in the invoice at the time of sale, the grant of which is not dependent upon the happening of a future event, may be excluded from the gross sales within the same month/quarter it was given.
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In computing the taxable base during the quarter¸ the following shall be allowed as deductions from gross sales:
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| VAT-Exempt Transactions (Sec. 4, RR No. 3-2024) | ||
| Sec. 4.109 (B) (cc) – Exempt Transactions | Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of Php 3,000,000.00.
Self-employed individuals and professionals availing of the 8% tax on gross sales and/or receipts and other non-operating income, under Section 24(A)(2)(b) and 24(A)(2)(c)(2)(a) of this Code shall also be exempt from the payment of twelve (12%) VAT.
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Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales do not exceed the amount of Php 3,000,000.00; provided that the amount herein stated shall be adjusted to its present values using the consumer price index (CPI), as published by the Philippine Statistics Authority (PSA) every three (3) years.
Self-employed individuals and professionals availing of the 8% tax on gross sales and other non-operating income, under Sec. 24(A)(2)(b) and Sec. 24(A)(2)(c)(2)(a) of the Tax Code shall also be exempt from the payment of 12% VAT. (Sec. 4) |
| Tax Credits | ||
| Sec. 4.110-9 – Output VAT Credit on Uncollected Receivables | No similar provision. | A seller of goods or services may deduct the output VAT pertaining to uncollected receivables from its output VAT on the next quarter, after the lapse of the agreed upon period to pay;
Provided that, the seller has fully paid the VAT on the transaction:
Provided further, that the VAT component of the uncollected receivables has not been claimed as allowable deduction under Sec. 34(E) of the Tax Code.
Uncollected Receivables – sales of goods and/or services on account that transpired upon the effectivity of these Regulations which remain uncollected by the buyer despite the lapse of the agreed period to pay.
Requisites on how to be entitled to VAT credit:
In case of recovery of uncollected receivables, the output VAT pertaining thereto shall be added to the output VAT of the taxpayer during the period of recovery.
These rules on VAT do not amend the conditions on the deductibility of bad debts expenses in the income tax returns as provided in RR No. 25-02. |
| Claims for Refund / Tax Credit Certificate of Input Tax | ||
| Sec. 4.112-1 – Claims for Refund/Tax Credit Certificate of Input Tax | ||
| (b) Cancellation of VAT registration | A VAT-registered person whose registration has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Sec. 106 (C) of the Tax Code may, within two (2) years from the date of cancellation, apply for the issuance of tax credit certificate for any unused input tax which he may use in payment of his other internal revenue taxes: Provided, however, that he shall be entitled to a refund if he has no internal revenue tax liabilities against which the tax credit certificate may be utilized: Provided, further, that the date of cancellation being referred hereto is the date of issuance of tax clearance by the BIR, after full settlement of all tax liabilities relative to cessation of business or change of status of the concerned taxpayer: Provided, finally, that the filing of the claim shall be made only after completion of the mandatory audit of all internal revenue tax liabilities covering the immediately preceding year and the short period return and the issuance of the applicable tax clearance/s by the appropriate BIR Office which has jurisdiction over the taxpayer. (RR No. 13-18) | A VAT-registered person whose registration has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Sec. 106 (C) of the Tax Code may, within two (2) years from the date of cancellation, apply for the issuance of tax credit certificate or cash refund for any unused input tax which he may use in payment of his other internal revenue taxes: Provided, however, that the taxpayer-claimant shall be entitled to a refund if he has no internal revenue tax liabilities against which the tax credit certificate may be utilized: Provided, further, for purposes of dissolution or cessation of business, the date of cancellation being referred hereto is the date of the issuance of the BIR Tax Clearance. |
| (c) Where to file the claim for refund/credit | Claims for refunds shall be filed with the appropriate Bureau of Internal Revenue (BIR) Office (Large Taxpayers Service (LTS), Revenue District Office (RDO) having jurisdiction over the principal place of business of the taxpayer. Claims for input tax refund of direct exporters shall be exclusively filed with the VAT Credit Audit Division (VCAD) (RR No. 13-18). | Claims for tax credits/refunds shall be filed with the appropriate BIR Office that will be designated by the Commissioner of Internal Revenue for this purpose. |
| (d) Period within which refund/credit of input taxes shall be made | In proper cases, the Commissioner of Internal Revenue shall grant refund for creditable input taxes within ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application filed in accordance with subsections (A) and (B) hereof: Provided, That, should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial.
The 90-day period to process and decide, pending the establishment of the enhanced VAT Refund System shall only be up to the date of approval of the Recommendation Report on such application for VAT refund by the Commissioner or his duly authorized representative: Provided, That all claims for refund/tax credit certificate filed prior to January 1, 2018 will be governed by the one hundred twenty (120)-day processing period.
In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, that failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety (90)- day period shall be punishable under Section 269 of the Tax Code, as amended. (RR No. 13-18) |
In proper cases, the Commissioner of Internal Revenue shall grant refund for creditable input taxes within ninety (90) days from the date of submission of invoices and other documents in support of the application filed in accordance with subsections (A) and (B) hereof: Provided, That, should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial.
The 90-day period to process and decide shall start from the filing of the claim up to the release of the payment of the VAT refund: Provided that, the claim/application is considered to have been filed only upon submission of the invoices and other documents in support of the application as prescribed under pertinent revenue issuances.
In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals; or in case the VAT is not acted upon by the Commissioner within the period prescribed above, the taxpayer affected may:
Provided, that failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety (90)- day period shall be punishable under Section 269 (J) of the Tax Code.
Provided further that, in the event that the 90-day period has lapsed without having the refund released to the taxpayer-claimant, the VAT refund claim may still continue to be processed administratively.
However, the BIR official, agent or employee who has found have deliberately caused the delay in the processing of the VAT refund claim may be subjected to penalties imposed under said Section. |
| (e) Risk-based approach in the verification and processing of VAT refund claims | No similar provision. | VAT refund claims shall be classified into:
With the risk classification based on the amount of:
Provided, that medium-risk and high-risk claims shall be subject to audit or other verification processes in accordance with the BIR’s national audit program for the relevant year. |
| (f) Manner of giving refund | Refund shall be made upon warrants drawn by the Commissioner of Internal Revenue or by his duly authorized representative without the necessity of being countersigned by the Chairman, Commission on Audit (COA), the provision of the Revised Administrative Code to the contrary notwithstanding: Provided, That refunds under this paragraph shall be subject to post audit by the COA (RR No. 13-18). | Refund shall be made upon warrants drawn by the Commissioner of Internal Revenue or by his duly authorized representative without the necessity of being countersigned by the Chairman, Commission on Audit (COA), the provision of the Revised Administrative Code to the contrary notwithstanding:
Provided, That refunds under this paragraph shall be subject to post audit by the COA following the risk-based classification in RR No. 3-2024;
Provided, further, that in case of disallowance by the COA, only the taxpayer shall be liable for the disallowed amount without prejudice to any administrative liability on the part of any employee of the BIR who may be found to be grossly negligent in the grant of refund. |
Transitory Provisions
- Billed but uncollected sales of services
- These Regulations shall apply to sale of services that transpired upon its effectivity.
- For outstanding receivables on services on account that are rendered prior to the effectivity of RR 3-2024, the corresponding output VAT shall be declared once it has been collected.
- The sales and corresponding output VAT in case of collection shall be declared in the quarterly VAT return when the collection was made and shall be supported with an Invoice following the transitory provisions contained in the RR intended for invoicing requirements to implement the EOPT Act or the new BIR-approved set of Invoices, whichever is applicable (Sec. 7(a), RR No. 3-2024).Uncollected receivables from sale of goods as of the effectivity of RR No. 3-2024
- Claim of output tax credit on uncollected receivables shall only apply to transactions that transpired upon the effectivity of these Regulations.
- No output tax credit shall be allowed for outstanding receivables from sale of goods on account prior to the effectivity of these Regulations (Sec. 7(b), RR No. 3-2024).
ON THE FILING OF TAX RETURNS AND PAYMENT OF TAXES AND OTHER MATTERS AFFECTING THE DECLARATION OF TAXABLE INCOME (RR No. 4-2024)
Mode of Filing of Tax Returns and Payment of Internal Revenue Taxes (Sec. 3, RR No. 4-2024)
- Filing of Tax Returns shall be done electronically in any of the available electronic platforms.
- In case of unavailability of the electronic platforms, manual filing of tax returns may be allowed.
- Payment of Internal Revenue Taxes shall be made either:
- Electronically in any of the available electronic platforms; or
- Manually to any Authorized Agent Banks (AABs) or Revenue Collection Officers (RCOs).
- Filing of Income Tax Return (ITR) by married individuals (the husband and wife, whether citizens, resident or nonresident aliens, who are both self-employed, either engaged in business or practice of profession) – file their ITR for the taxable year jointly
- If impracticable such as where the businesses of the spouses are registered under two different Revenue District Officers (RDOs), each spouse shall file separately their respective ITRs.
- AABs and RCOs shall only accept tax payments manually after the taxpayers have already electronically filed their tax returns, unless an advisory is issued allowing manual filing (Sec. 3, RR No. 4-2024).
- Because Sec. 248(A)(2) of the Tax Code has been repealed, the civil penalty of 25% of the amount due in case of filing a return with an internal revenue officer other than those with whom the return is required to be filed shall not be imposed. (Sec. 4, RR No. 4-2024).
- Sec. 9 of RR No. 8-2018 with regard to “Individuals Not Required to File ITR” has been amended with the following changes:
- The Certified List of Employees Qualified for Substituted Filing of ITR, reflecting the amount of income payment, the tax due and tax withheld, if any, filed by the respective employers, duly stamped “Received” by the Bureau shall be tantamount to the substituted filing of ITR by said employees.
- An individual citizen of the Philippines who is working and deriving income solely from abroad as an Overseas Contract Worker (OCW) or Overseas Filipino Worker (OFW) as defined under Section 3(G) of Republic Act No. 11641 (otherwise known as the “Department of Migrant Workers Act”) is not required to file ITR (Sec. 5, RR No. 4-2024).
- The EOPT repealed in its entirety Sec. 34(K) of the Tax Code. Hence, upon effectivity of the EOPT, Sec. 2.58.5 of RR No. 2-98, as amended, is likewise repealed.
- However, please note that the obligation to withhold tax on certain income payments and remit the same remains (Sec. 6, RR No. 4-2024).
- Sec. 2.57.4 of RR No. 2-98 as regards “Time of Withholding” has been amended to read as follows:
- “Sec. 2.57.4. Time of Withholding. The obligation of the payor to deduct and withhold the tax under Sec. 2.57 of these Regulations arises at the time an income has become payable. The term “payable” refers to the date the obligation becomes due, demandable or legally enforceable. The obligation of the payor to deduct and withhold the tax arises at the time an income payment is accrued or recorded as an expense or asset, whichever is applicable, in the payor’s books, or at the issuance by the seller of the sales invoice or other adequate document to support such payable, whichever comes first” (Sec. 7, RR No. 4-2024).
- Income upon which any creditable tax is required to be withheld at source under Sec. 57 of the Tax Code, as amended, shall be included in the return of its recipient, but the excess of the amount of tax so withheld over the tax due on his return shall be refunded subject to the provision of Sec. 204 of the same Code (Sec. 8, RR No. 4-2024).
ON TAX REFUNDS (RR No. 5-2024)
- The Regulations shall cover tax credit/refund claims that are filed starting July 1, 2024, onwards and implements the following:
- (A) Section 112(C) of the Tax Code that introduced the risk-based approach to verification of VAT refund claims;
- (B) Section 112(D) of the Tax Code which clarified the liability of the taxpayer-claimant and the BIR in case of disallowance by the Commission of Audit (COA);
- (C) Section 76(C) of the Tax Code allowing the application for refund of unutilized excess income tax credit in case of dissolution of cessation of business. For purposes of the Regulations, the entire provision of 76(C) of the Tax Code shall be covered to include policies for the processing of income tax credit/refund of taxpayers who have chosen the option to apply for tax credit or refund the excess income tax in their Annual Income Tax Returns (AITR);
- (D) Section 240(C) of the Tax Code that introduced the one hundred eighty (180)-day processing of claims for tax refund except for VAT Refunds under Section 112 of the Tax Code; and
- (E) Section 229 of the Tax Code outlined the policies for judicial claims and repealed the supervening clause provision thereof.
- The Regulations do not cover processing of tax refund/credit claims pursuant to the final and executory judgement by the courts.
- VAT refund claims filed pursuant to Section 112(A) of the Tax Code shall be classified into low, medium, and high-risk claims. Provided that, medium- and high-risk claims shall be subject to audit or other verification processes in accordance with the BIR’s national audit program for the relevant year or with the current policies and procedures applicable to the year of the application of VAT Refund (Section 3(A) RR No. 5-2024).
- The scope of verification in accordance with the identified risks as follows:
| Risk Level | Submission of Complete Documentary Requirements Prescribed by the BIR* | Scope of Verification of Sales | Scope of Verification of Purchases |
| Low | Yes | No verification | No verification |
| Medium | Yes | At least 50% of the amount of sales and 50% of the total invoices/receipts issued including inward remittance and proof of VAT zero-rating | At least 50% of the total amount of purchases with input tax claimed and 50% of suppliers with priority on ‘Big Ticket” Purchases. |
| High | Yes | 100% | 100% |
- Note: Based on initial checking of the documents submitted during check-listing procedures only. This does not include thorough verification of the supporting documents for sales and purchases.
- The following are the limitations to the above matrix:
- Claims filed by 1st time claimants shall be automatically considered as high-risk and shall remain as such for the succeeding three (3) VAT Refund claims.
- In case of full denial of a claim, the succeeding claimed filed shall be classified as high-risk.
- For medium-risk claims, verification shall be adjusted to 100% if the assigned Revenue Officer found at least 30% disallowance of the amount of VAT Refund claim.
- Claims classified as low-risk for the three (3) consecutive filing of VAT refund claims shall be subject to mandatory full verification on the fourth (4th) refund claim regardless of the risk classification.
- VAT credit/refund claim for any unused input tax pursuant to Section 112(B) of the Tax Code field by a VAT-registered person whose registration has been cancelled due to retirement from business or due to changes in or cessation of status under Section 106(C) of the Tax Code shall be classified as high-risk and will require full verification thereof.
- For taxpayer-claimants filing on a quarterly basis, the risk classification shall be made for every filing.
- Other limitations that may be identified by the Commissioner of Internal Revenue through revenue issuances (Section 3(B), RR No. 5-2024).
- The verification and processing of VAT refund claims shall be separate from the regular audit, if any, of internal revenue taxes particularly VAT conducted by the appropriate BIR office that has jurisdiction over the taxpayer-claimant. Any findings during the verification of VAT refund claim that has no effect to the amount to be refund shall be: (1) Endorsed for further verification and/or consolidation with the existing audit if the processing is conducted by an Office other than the BIR office that has jurisdiction over the claimant; or (2) Incorporate to the existing audit for the taxable year covered by the claim if processed within the same BIR office that has jurisdiction over the claimant (Section 3(D), RR No. 5-2024).
ON IMPOSITION OF REDUCED INTEREST AND PENALTY RATES FOR MICRO AND SMALL TAXPAYERS (RR No. 6-2024)
| Taxpayer | Gross Sales |
| Micro | Less than Php 3,000,000.00 |
| Small | Php 3,000,000.00 to less than Php 20,000,000.00 |
- In addition to the tax required to be paid, a penalty equivalent to 10% of the amount due in the following cases:
- Failure to file any return and pay the tax due thereon as required under the provisions of the Tax Code or rules and regulations on the date prescribed;
- No penalty shall be imposed to an amendment of a tax return if the covered taxpayer filed the initial tax return and paid the tax due thereon on or before the prescribed date for its filing.
- In case of a deficiency tax assessment as a result of a tax audit, a penalty shall be imposed on the tax deficiency if the particular tax return being audited was found to have been filed beyond the prescribed period or due date
- Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or
- Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of the Tax Code or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment (Sec. 3, RR No. 6-2024).
- Failure to file any return and pay the tax due thereon as required under the provisions of the Tax Code or rules and regulations on the date prescribed;
- A penalty at the rate of 50% of the tax or of deficiency tax in case of payment made before the discovery of the falsity or fraud in the following cases:
- Willful neglect to file a return within the period prescribed by the Tax Code or by rules and regulations
- False or fraudulent filing of return (Sec. 3, RR No. 6-2024)
- A substantial under-declaration of taxable sales or income, or a substantial overstatement of deductions shall constitute prima facie evidence of a false or fraudulent return.
- Substantial under-declaration of taxable sales or income – failure to report sales or income in an amount exceeding 30% of the declared per return
- Substantial overstatement of deductions – a claim of deductions in an amount exceeding 30% of actual deductions
- A substantial under-declaration of taxable sales or income, or a substantial overstatement of deductions shall constitute prima facie evidence of a false or fraudulent return.
| Interest Rate | |
| 50% of the interest rate mandated in Section 249 of the Tax Code. | Any unpaid amount of tax by the covered taxpayers |
| 6% | Legal interest imposable on covered taxpayers |
- A penalty of Php 500.00 shall be paid for each failure by the covered taxpayer in the following cases:
- Failure to file an information return, statement or list;
- Failure to keep any record; and
- Failure to supply any information,
- as may be required on the date prescribed.
- The aggregate amount to be imposed for all such failures during a calendar year shall not exceed Php 12,500.00 (Sec. 5, RR No. 6-2024).
- A compromise penalty of 50% of the applicable rate or amount of compromise under Annex “A” of Revenue Memorandum Order No. 7-2015 and its subsequent amendments, if any, shall be applied in case of criminal violation by covered taxpayers of Sec. 113, 237, and 238 of the Tax Code, not involving fraud (Sec. 6, RR No. 6-2024).
- Compromise penalty shall be collected in lieu of criminal prosecution for violation committed where payment is based on a compromise agreement validly entered into between the covered taxpayer and the Commissioner of Internal Revenue (CIR).
- The compromise penalty shall in no case differ in amount from those specified in these Regulations, except when duly approved by the CIR or his duly authorized representatives.
- The compromise penalty shall not prevent the CIR or his duly authorized representatives from accepting a compromise amount higher than what is provided hereof.
- A compromise offer lower than the prescribed amount may be accepted after approval by the CIR or his duly authorized representatives.
- These Regulations shall apply prospectively in accordance with Sec. 51 of RA No. 11976 (Sec. 7, RR No. 6-2024).
ON REGISTRATION PROCEDURES AND INVOICING REQUIREMENTS (RR No. 7-2024)
- A VAT-registered person shall issue a duly registered VAT Invoice, for every sale, barter, exchange or lease of goods or properties, and for every sale, barter, or exchange of services regardless of the amount of transaction (Section 3(A)(1), RR No. 7-2024).
- A VAT Invoice shall be issued as evidence of sale of goods and/or properties and sale of services and/or leasing of properties issued to customers in the ordinary course of trade or business, whether cash sales or on account (credit), which shall be the basis of the output tax liability and the input tax claim of the buyer (Section 3(A)(1), RR No. 7-2024).
- Consequences of issuing erroneous VAT Invoice (Section 3(D), RR No. 7-2024).
| Specific Act | Consequence |
| A non-VAT registered person issuing a VAT invoice. | In addition to other percentage taxes, he/she shall be liable to:
(1) VAT under Section 106 or 108 of the Tax Code, without benefit of any input tax credit, and (2) a 50% surcharge under Section 248(B) of the Tax Code. |
| A VAT-registered person issuing a VAT Invoice for a VAT-Exempt transaction but fails to display the term VAT-Exempt Sale, or clearly provide a breakdown thereof on the invoice. | Liable for VAT under Section 106 or 108 as if Section 109 of the Tax Code did not apply. |
| Lack of information required under Section 3(B) RR 7-2024 | The seller shall be liable for non-compliance with the invoicing requirements. However, the VAT amount shall still be allowed as an input tax credit under Section 110 of the Tax Code, on the part of the purchaser or buyer, except if the lacking information pertains to any of the following:
a. Amount of sales; b. VAT amount; c. Registered name and TIN as shown in the BIR Certificate of Registration of both purchaser or buyer and issuer or seller; d. Description of goods or nature of services; and e. Date of transaction.
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- All Books of Accounts, including the subsidiary books and other accounting records of corporations, partnerships, or persons, shall be preserved by the taxpayer for a period of five(5) years reckoned from the day following the deadline in filing a return, or if filed after the deadline, from the date of the filing of the return, for the taxable year when the last entry was made in the Books of Accounts (Section 4(A)(1), RR No. 7-2024).
- Notwithstanding the foregoing, if the taxpayer has any pending protest or claim for tax credit/refund of taxes, and the books and records concerned are material to the case, the taxpayer is required to preserve the Books of Accounts and other accounting records until the case is finally resolved in support of their defenses and aid, even beyond the prescribed 5-year retention period (Section 4(A)(4), RR No. 7-2024).
- The Books of Accounts shall be subject to examination and inspection by internal revenue officers; Provided, that for income tax purposes, such examination and inspection shall be made only once in a taxable year, except for the following cases:
- Fraud, irregularity or mistake, as determined by the Commissioner;
- The taxpayer requests reinvestigation;
- Verification of compliance with withholding tax laws and regulations;
- Verification of capital gains tax liabilities; and
- In the exercise of the Commissioner’s power under Section 5(B) of the Tax Code, to obtain information from other persons, another or separate examination and inspection may be made (Section 6(a), RR No. 7-2024).
ON CLASSIFICATION OF TAXPAYERS (RR No. 8-2024)
| TAXPAYER GROUP | GROSS SALES |
| Micro | less than Php 3,000,000.00 |
| Small | Php 3,000,000.00 to less than Php 20,000,000.00 |
| Medium | Php 20,000,000.00 to less than Php 1,000,000,000.00 |
| Large | Php 1,000,000,000.00 and above |
(Sec. 2, RR No. 8-2024)
- Gross Sales – total sales revenue, net of VAT, if applicable, during the taxable year, without any other deductions
- Cover business income, excluding compensation income earned under employer-employee relationship, passive income under Sec. 24, 25, 27, and 28, and income excluded under Sec. 32(B), all of the Tax Code
- Business Income – income from the conduct of trade or business or the exercise of a profession
- The taxpayers who will register to engage in business or practice of profession upon effectivity of these Regulations shall initially be classified based on its declaration in the Registration Forms starting from the year they registered¸ and shall remain as such unless reclassified (Sec. 3, RR No. 8-2024).
- Taxpayers shall be classified based on the threshold values stated under Sec. 2 of these Regulations.
- Taxpayers shall be duly notified by the BIR of their classification or reclassification, as may be applicable, in a manner of procedure to be prescribed in a revenue issuance to be issued separately (Sec. 4, RR No. 8-2024).
- Taxpayers registered in 2022 and prior years shall be classified on the basis of their gross sales for taxable year 2022.
- For: (a) Taxpayers registered in 2022 and in prior years who did not submit information on their gross sales for taxable year 2022 and (b) taxpayers registered in 2023 or 2024 (before the effectivity of these Regulations) – are classified as MICRO except VAT-registered taxpayers who shall be classified as SMALL (Sec. 5, RR No. 8-2024)
