Tax Alert No. 24 [Revenue Regulations (RR) No. 3-2024 dated 11 April 2024]

Implementing the VAT and Percentage Tax Amendments Introduced by the Ease of Paying Taxes Act

Please be informed that the Secretary of Finance has issued RR No. 3-2024, to implement the amendments on Title IV - VAT and Title IV - Percentage Tax of the NIRC 1997, as amended (Tax Code), as introduced in Republic Act No. 11976, otherwise known as the “Ease of Paying Taxes Act”.

Summary of the salient provisions of the issuance include the following:

1. Amendments on the following words, phrases, or actions used in Revenue Regulation No.16-2005 and its subsequent amendments:
   1. Gross Sales - 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 or services.
   2. Invoice - All references to Sales/Commercial Invoices or Official Receipts shall now be referred to as “Invoice”.
   3. Billings for sales of service on account - all references to receipts or payments which was previously the basis for the recognition of sales of services under VAT and Percentage Tax, shall now be referred to as “Billing” or “Billed”, whichever is applicable.
   4. VAT-exempt threshold -The VAT-exempt threshold of P3,000,000.00 shall be adjusted every three (3) years using the Consumer Price Index(CPI), as published by the Philippine Statistics Authority(PSA).
   5. Filing and payment - the filing shall be done electronically in any available electronic platforms, but manual filing shall be allowed in case of unavailability. Tax payments with corresponding due dates shall be made electronically in any available electronic platforms or manually to any authorized agent banks (“AABs”) or revenue collection officers (“RCOs”).
2. Other Specific Amendments on VAT Provisions:
   1. Output VAT Credit on Uncollected Receivable:
      • 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, (i) the seller has fully paid the VAT on the transaction (ii) the VAT component of the uncollected receivables has not been claimed as allowable deduction;
      • Uncollected receivables refer to sales of goods and/or services on account that occurred upon effectivity of these Regulations which remain uncollected by the buyer despite the lapse of the agreed period to pay;
      • The Regulation provided the requisites that must be present to be entitled to VAT credit;
      • In case of recovery of uncollected receivables, the output VAT shall be added to the taxpayer’s output VAT during the period of recovery;
      • These rules do not amend the conditions on the deductibility of bad debts expense in the income tax returns as provided in RR No. 25-02.
   2. Procedures for claiming a tax refund or Tax Credit Certificate of Input Tax.
      • VAT refund claims shall be classified into low, medium, and high risk based on the amount of VAT or other factors with medium and high risk claims to be subject to audit for the relevant year;
      • Taxpayers with canceled VAT registration due to cessation of business may apply for refund or Tax Credit Certificate for any unused input tax within two (2) years from date of cancellation provided that the date of cancellation being referred to is the date of the issuance of BIR Tax Clearance;
      • The 90 day period to process and decide the application for refund shall commence  from the date of submission of the invoices and other documents in support of the application filed provided that the Commissioner must state the legal and factual basis for denial;
      • In case of denial of the claim of refund, the taxpayer may appeal within 30 days from receipt of the denial or after the 90 days required to process the claim provided that failure on the part of the BIR official to act within the period shall be subject to administrative liability.
3. The Regulations shall apply to sale of services that transpired upon its effectivity. Hence, the output VAT for outstanding receivables on services prior to effectivity shall be declared once collected. 

The Regulations shall take effect fifteen (15) days following its publication in the Official Gazette or the BIR official website, whichever comes first. (i.e. 27 April 2024)

You may access the full version of this issuance through the BIR website.

For any inquiry or request for assistance, please feel free to contact anyone from our Tax Services group. You may also reach us through this link.