Requirements for deductibility of certain expenses

In general, all expenses are deductible unless stated by law or regulations that are nondeductible or it requires certain requirements for deductibility of such expenses.

Requirements for deductibility of certain expenses is an intriguing tax issue based on Revenue Regulations (RR) No. 6-2018 that was issued by the bureau in the previous months. These regulations revokes RR No. 12-2013 Thereby Reinstating the Provisions of Section 2.58.5 of RR No. 14-2002, as Amended by RR No. 17-2003 of the Requirements for Deductiblity of Certain Expenses to read as follows:

"Sec. 2.58.5. Requirements for Deductiblity. - Any income payment which is otherwise deductible under the Code shall be allowed as a deduction from the payor's gross income only if it is shown that the income tax required to be withheld has been paid to the Bureau in accordance with Secs. 57 and 58 of the Code.

A deduction will also be allowed in the following cases where no withholding of tax was made:

(A) The payee reported the income and pays the tax due thereon and the withholding agent pays the tax including the interest incident to the failure to withhold the tax. and surcharges, if applicable, at the time of the audit/investigation or reinvestigation/reconsideration.

(B) The recipient/payee failed to report the income on the due date thereof. but the withholding agent/taxpayer pays the tax. including the interest incident to the failure to withhold the tax and surcharges" if applicable at the time of audit/investigation or reinvestigation/reconsideration.

(C ) The withholding agent erroneously underwithheld the tax but pays the difference between the correct amount and the amount of tax withheld including the interest. incident to such error. and surcharges, if applicable, at the time of the audit investigation or reinvestigation/reconsideration.

Items of deduction representing return of capital such as those pertaining to purchases of raw materials forming part of finished product or purchases of goods for resale. shall be allowed as deductions upon withholding agent's payment of the basic withholding tax and penalties incident to non-withholding or underwithholding.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%206-2018.pdf of the full text of RR No. 6-2018.

The Importance on the Use of Non-Thermal Paper for All Cash Register Machines (CRMs) / Point of Sales (POS) Machines and Other lnvoice / Receipt Generating Machine / Software

Why all business establishments and others need to know the importance on the Use of Non-Thermal Paper for All Cash Register Machines (CRMs) / Point of Sales (POS) Machines and Other lnvoice / Receipt Generating Machine / Software?

Recently, the bureau has issued Revenue Regulations (RR) No. 16-2018 amending RR No. 10-2015 as amended by RR Nos. 12-2015, 14-2015 and 6-2016. In Section 2 of these Regulations stated the AMENDMENTS of Sections 2, 3, 4, 5 and 6 of RR 10-2015 to read as follows:

All taxpayers using CRM/POS machines or other invoice/receipt generating machine/software shall have the option to use the type of paper depending on their business requirements, subject to the retention and preservation of accounting records for a period within which the Commissioner is authorized to make an assessment and collection of taxes, as prescribed in Section 203 and 222 of the 1997 National Internal Revenue code, as amended. 

All tape receipts issued and the data printed on the tape receipts shall show the information required under Section 5 of RR l-0-201-5, as amended, namely: 

1. Taxpayer's (TP) Registered Name; 

2. TP's BLrsiness Name/style, if any;

3. A statement that the taxpayer is VAT or NON VAT registered followed by the Taxpayers Identification Number (TIN) and 4-digit branch code. Example: VAT Registered TIN 123-456-789-0000; 

4. Machine Identification Number (MIN); 

5. Serial number of the CRM/PoS machine; 

6. Detailed business address where such Official Receipts (ORs) / Sales Invoices (SIs) / Commercial Invoices (CIs) shall be used/located; 

7. Date of transaction; 

8. Serial Number of the OR/SI/CI printed prominently; 

9. A space provided for the Name, Address and TIN of the buyer; 

10. Description of the items/goods or nature of service; 

11. Quantity; 

12. Unit cost 

13. Total cost; 

14. VAT amount (if transaction is subject to 12%V AT); 

15. If the VAT taxpayer is engaged in mixed transactions, the amounts involved shall be broken down to: VATable sales, VAT Amount, Zero Rated Sales, and VAT Exempt Sales; 

16. For Non-VAT ORs/Sls and Cls (VAT or NON-VAT) such as delivery receipts, order slips, purchase orders, provisional receipts, acknowledgment receipts, collection receipts, credit/debit memo, job orders and other similar documents that form part of the accounting records of the taxpayer and/or issued to the customers, in addition to the above-enumerated applicable information, the phrase "THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX" in bold letters, shall be conspicuously printed at the bottom of the NON VAT ORs/SIs/CIs; 

17. Taxpayers whose transactions are not subject to VAT or Percentage Tax shall issue NON-VAT principal receipts/invoices indicating prominently at the face of such receipts/invoices the word'EXEMPT'; 

18, If the taxpayer is subject to percentage tax under Title V of the 1997 NIRC, as amended, but also sells goods/services under Section 109 (A) to (W), excluding (E) of the same Code, as amended by Republic Act (RA) No. 10378, the non-VAT principal receipts/invoices shall indicate the breakdown of Sales Subject to Percentage Tax (SSPT) and Exempt Sales; 

19. The following shall be printed at the bottom portion of the OR/SI/CI: 

* Name, address and TIN of the accredited supplier of CRM/POS/Other similar machines/software; 

* Accreditation number and the date of accreditation (date issued "mm/dd/yyyy" and valid until "mm/dd/yyyy") of the accredited supplier; 

* BIR Final Permit To Use (PTU) Number; 

* The phrase "THIS INVOICE/RECEIPT SHALL BE VALID FOR FIVE (5) YEARS FROM THE DATE OF THE PERMIT TO USE." 

20. For taxpayers transacting with a Senior Citizen (SC) and/or Person/s With Disability (PWD) pursuant to RA 9994 (Expanded Senior citizens Act of 2010) and RA 10754 [(An Act Expanding the Benefits and Privileges of Persons With Disability (PWD)], respectively, a space for the following shall also be required: 

* Senior Citizen/PwD TIN; 

* OSCA lD No./PWD ID No.

* Senior Citizen / PWD discount (show detailed breakdown of the 20% discount and/or 12%VAT exemption, whichever is applicable; and 

* Signature of the SC/PWD. 

However, for taxpayers whose transactions ore not covered by RA 9994 / 70754, the above information may not be indicated, Moreover, the buyer/customer who maybe needing proof of such payment to be able to claim for expense (for income tax purposes) or input tax (for VAT purposes), may return the issued tape receipt to the seller and request for issuance of a manual invoice or receipt. Whenever so requested by the buyer/ customer, the seller shall issue the manual receipt/invoice, whichever is applicable, to replace the previously issued tape receipt. 

Sales generated from CRM / POS machines where tape receipts issued were replaced by manual invoice / receipt shall be deducted from the sales to be reported in the eSALES system of the BIR. This deduction shall be reflected as an adjustment in the CRM Sales Book/Back end report. 

The returned tape receipt shall be attached to the duplicate copy of the manually issued invoice / receipt and shall be the basis in adjusting the sales. However, the sales that were replaced with manual invoice / receipt shall still be included but separately indicated in the Summary List of Sales (SLS) required to be submitted by VAT registered taxpayers.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2016-2018.pdf of the full text of RR No. 16-2018.

Submission of the Quarterly Alphabetical List of Payees (QAP) that shall accompany the Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) [BIR Form No. 1601-EQ] and Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ)

Are you aware of the Submission of the Quarterly Alphabetical List of Payees (QAP) that shall accompany the Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) [BIR Form No. 1601-EQ] and Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ)?

In Section 2.58 of Section 5 of Revenue Regulations (RR) No. 11-2018 describes the Returns and Payments of Taxes Withheld. Besides, it also identifies the Manner, Venue and Time of Filing of Withholding Tax Returns and Payment of Taxes Withheld at Source to read as follows:

Taxpayers mandated to electronically file and pay shall use the BIR’s electronic system, while those not mandated has the option to either use the said electronic system, or file with the Authorized Agent Banks (AABs) under the jurisdiction of the Revenue District Office where they are registered. Withholding agents located at municipalities where there is no AAB, the returns shall be filed with the Revenue Collection Officer assigned in the said municipality. The filing of the withholding tax returns (BIR Form No. 1601EQ for creditable withholding tax and Form Nos. 1602 for final tax on interest on bank deposits, 1603 for final tax withheld on fringe benefits, and 1601FQ for all other final withholding taxes) and payment of the taxes withheld at source shall be made not later than the last day of the month following the close of the quarter during which the withholding was made. 

For this purpose, the quarter shall follow the calendar quarter, e.g., for taxes withheld during the quarter ending March 31, the same shall be remitted by the withholding agent on or before April 30. The return filed shall be accompanied by the Quarterly Alphabetical List of Payees (QAP), reflecting the name of income payees, Taxpayer Identification Number (TIN), the amount of income paid segregated per month with total for the quarter (all income payments prescribed as subject to withholding tax under these regulations, whether actually subjected to withholding tax or not subjected due to exemption), and the total amount of taxes withheld, if any.

The bureau recently issued a Tax Advisory with regards to the submission of Quarterly Alphabetical List of Payees (QAP) to read as follows:

In line with the submission of the Quarterly Alphabetical List of Pavees (QAP) that shall accompany the Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) BIR Form No. 1601-EQ] and Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ), please be informed that the Alphalist Data Entry and Validation module Version 6.0 is now available for use. This can be downloaded from the Bureau's website at www.bir.gov.ph as follows: 

1. Click on the "Downloadables" button at the lower left side of the web page; 

2. Scroll down to search the the section showing the "Alphalist Data Entry and Validation Module Version 6.0 (new)"; and 

3. Follow the instructions stated on the said section to install the module. The QAP shall be submitted either through the eSubrnission facility (esubmission@bir.gov.ph) of the Bureau or through the dedicated email account of the Revenue District Officer having jurisdiction over the withholding agent's registered address. This is required to be submitted on or before the last day of the month following the close of the quarter as an "attachment" to the quarterly withholding tax returns prescribed under Revenue Regulations No. 1 1-201 B, as amended.

Please refer the full text of the regulations and tax advisory as follows: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202018/RR%20No.%2011-2018/RR%20No.%2011-2018.pdf and https://www.bir.gov.ph/images/bir_files/internal_communications_1/Advisory/Advisory-Alphalist%20data%20entry.pdf