Tax Alert No. 1 [Ease of Paying Taxes Act (EOPT) signed into law]

An Act Introducing Administrative Tax Reforms

On 5 January 2024, the Ease of Paying Taxes (EOPT) Act was signed into law by President Ferdinand Marcos, Jr. The EOPT Act introduced significant amendments to the National Internal Revenue Code of 1997 (“Tax Code”) which are intended to protect and safeguard taxpayer rights and welfare, to modernize tax administration by providing mechanisms that encourage easy compliance at the least cost and resources, and to update the tax system and adopt best practices. It takes effect 15 days after its publication in the Official Gazette or in a newspaper of general circulation.

The amendments include the following, among others:

• File-and-pay anywhere mechanism. Taxes shall be paid EITHER electronically or manually at the time the return is filed.
• Classification of taxpayers into micro, small, medium and large taxpayers
• Withholding of tax on income payments only when payable
• Imposing value-added tax (VAT) on services based on gross sales, no longer on gross receipts
• VAT invoices are sufficient to substantiate input VAT arising from the purchase of both goods and services
• Removal of ‘business style’ as a VAT invoicing requirement
• Removal of withholding tax as a requirement for deductibility of income payments

The provision of the EOPT bill granting micro-enterprises exemption from the obligation to withhold taxes was vetoed by the President.

Please see attached for the details of the amendments on the National Internal Revenue Code of 1997 and their implications.