Substance over new BIR Form

It’s been more than a year since the effectivity of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, but the effects of its implementation are far from over. Just this year, the Bureau of Internal Revenue (BIR) released the following BIR Forms, labeled as January 2018 versions:

All the revised forms include barcodes and a reference to the Data Privacy Act of 2012. On top of that, some new information is required in the revised forms and Alphalists released since July. These data are a gold mine for the BIR, and can be used to assess and monitor a taxpayer’s compliance, among others. The salient modifications to the forms issued during the second half of this year are detailed below.

BIR Form 1604-E and related alphalists

Under Part I of BIR Form 1604-E, a taxpayer needs to disclose whether it is a top withholding agent (TWA) in the “Background Information.” The BIR has released two lists of TWA, the first in October 2018 and the other in March 2019. The list is expected to be updated no later than 15 June and 15 December every year per Revenue Memorandum Order (RMO) No. 26-18, and considering the issuance of Revenue Regulation (RR) No. 7-2019, which took effect on 29 June, defining TWAs as taxpayers whose gross sales, gross purchases, or claimed itemized deductions amounted to PHP12m and more during the preceding taxable year. To avoid incurring penalties, taxpayers should check the list of TWAs to ensure compliance with the withholding and reporting obligations.

For the “Summary of Remittances” under Part II, Schedule 1, taxpayers are only required to report their total quarterly remittances per BIR Form 1601-EQ, and not the monthly payments filed using BIR Form 0619-E.

However, for the related Alphalist under Part III, Schedule 3, the nature of income payments subject to expanded withholding tax has been removed.

BIR Form 1604-C, BIR Form 1604-F, and related alphalists

From the consolidated BIR Form 1604-CF, we now have two separate forms: the Annual Information Return for Compensation (BIR Form 1604-C) and for Final Withholding Taxes (BIR Form 1604-F).

Similarly, taxpayers are required to disclose in the “Background Information” of both forms whether or not they are a TWA. Further, in BIR Form 1604-F, a taxpayer also needs to specify if it is availing of tax relief under a special law or international tax treaty. When claiming tax treaty benefits for dividend, interest, and royalty income paid to non-resident income earners, consider the requirements of Revenue Memorandum Order (RMO) No. 8-2017.

Likewise, taxpayers are only required to report in the “Summary of Remittances” under Part II of BIR Form 1604-F their total quarterly remittances per BIR Forms 1601-FQ and 1602Q, and not the monthly payments filed using BIR Form 0619-F. However, in BIR Form 1604-F, there is no specific column for Drawee Bank/ Bank Code/ Agency. Nonetheless, it would be prudent for taxpayers to include these data under the column TRA/eROR/eAR Number.

For the BIR Form 1604-F Alphalist, taxpayers are required to include the nature of the fringe benefit in Part III, Schedule 5. Moreover, Part III, Schedule 6, the “Alphalist for Other Payees Whose Income Payments are Exempt from Withholding Tax but Subject to Income Tax” is an added requirement.

As for BIR Form 1604-C Alphalists, the previous five schedules were reduced to two: “Alphalist of Employees” (Schedule 1) and “Alphalist of Minimum Wage Earners” (Schedule 2). Employers are now required to report in the new Alphalists the nationality of their foreign employees, employment status (whether Regular, Casual, Contractual/Project-Based, Seasonal, Probationary or Apprentices/Learners), period of employment with the present and previous employers, Tax Identification Number (TIN) of the former employer for newly-hired employees, and reason of separation for all terminated employees.

Notably, the BIR removed the requirement to reflect the TIN of the employees in the new format. Further, salaries of employees amounting to PHP250,000 & below should now be reported under Non-taxable/Exempt Compensation, which is mirrored in the revised BIR Form 2316. Considering that the revised BIR Form 1601-C is not yet available in the Electronic Filing and Payment System (eFPS), taxpayers may have not yet reflected as exempt compensation those falling under the PHP250,000 and below basic salary. If such is the case, the total compensation in the monthly BIR Form 1601-C may not match with the Alphalist entries following the revised format. To reconcile the discrepancies, amendments or adjustments in the e-filed tax returns must be made in the remaining months until December 31.

BIR Form 2316

Following the TRAIN amendments, the exemption status and details of qualified dependents under “Employee Information” (Part I) are now removed in the revised BIR Form 2316. Further, under the Conforme section, a valid ID is now an option in place of declaring the Community Tax Certificate information.

Any delay would not only cause inconvenience and confusion to the taxpayers but also hinder their smooth transition to the new reporting requirements. With optimism, let us all hope that these BIR Forms will be available on both platforms before the year ends. Fingers crossed.