A reprieve from tax filing during COVID-19

On 12 March, President Rodrigo R. Duterte placed Luzon under community quarantine between 15 March and 12 April to contain the spread of COVID-19. With the income tax filing deadline for the 2019 tax year less than a month away, concerns were raised by taxpayers on how to proceed with their tax obligations.

Despite the strict implementation of an enhanced community quarantine effective 17 March, the Bureau of Internal Revenue (BIR) maintained its initial position that the deadline will not be extended. Hence, in Revenue Memorandum Circular (RMC) No. 25-2020 issued on 17 March, the BIR initially reiterated that the filing of the annual income tax return (AITR) should be made on or before 15 April. However, considering the current public health emergency and limitations on the preparation of AITRs, the BIR recognizes that there may be inaccuracies in determining the correct amount of income taxes to be and paid. Hence, taxpayers may file an amended AITR, provided that the return is not yet subject to a tax audit.

As a general rule, returns filed beyond the deadline are subject to delinquent penalties, which include a 25% surcharge on the unpaid taxes, interest penalty at double the current legal rate per annum (i.e., 12% since the current legal interest rate is 6%), and applicable compromise penalty. Nonetheless, under the RMC, an amendment resulting in additional tax liability can be settled without corresponding penalties if paid no later than 15 June. This is a big help in terms of the taxpayer’s financial condition, especially during this time when business has slowed due to the quarantine.

The RMC did not mention a margin for error. Thus, there is some leeway for taxpayers who may file their AITRs on 15 April based on best estimates, then finalize once the complete information is gathered and file the amended AITRs by 15 June without paying penalties.

For individual taxpayers, another option that they may consider for cash flow purposes is paying their taxes in two equal installments. It is available when total tax due exceeds PHP2,000. The first payment must be made on or before 15 April, while the second and final payment due six months later, i.e., on or before 15 October.

Take for example an employee whose total tax due during the year is PHP300,000, with PHP250,000 withheld by the employer, as supported by his Certificate of Compensation Payment/ Tax Withheld (BIR Form 2316). Since 50% of the total tax due is fully covered by the taxes withheld by his employer, the remaining balance of PHP50,000 can be settled on or before 15 October. However, the AITR must still be filed on or before 15 April to signify the intention to settle the outstanding tax liability in installments.

Taxpayers who are not required to use the online filing facilities of the BIR-Electronic Filing and Payment System (eFPS) and eBIRForm platform are encouraged to use them. For eFPS filers, payment of taxes can be made through an authorized agent bank (AAB) of the BIR where the taxpayer is registered.

In keeping with the quarantine and stringent social distancing measures, the RMC also highlighted the use of online payment facilities for non-EFPS filers such as:

1. LandBank of the Philippines (LANDBANK) Link.Piz Portal (for taxpayers who have an ATM account with the bank and/or for holders of Bancnet ATM/Debit/Prepaid cards and taxpayers utilizing the PesoNet facility);
2. UnionBank Online Web and Mobile Payment Facility (for taxpayers who have an account with UnionBank of the Philippines);
3. Development Bank of the Philippines (DBP) Pay Tax Online (for holders of Visa or Mastercard credit cards and/or Bancnet ATM/Debit cards issued by any bank); and
4. Mobile payment via GCash or PayMaya.

Among the online payment facilities mentioned, only DBP accepts credit card payments. Meanwhile, GCash and PayMaya have respective transaction limits. GCash has a maximum limit of PHP100,000 per month and PHP40,000 per day both for incoming and outgoing transactions. PayMaya’s normal accounts can be loaded up to PHP50,000 per month while upgraded accounts can be loaded up to PHP100,000 per month. While these two facilities are convenient, they may only be able to cater to non-large taxpayers, considering the amount limitations.

Further questions that could arise are: “Can taxpayers file and pay their tax liabilities outside of their registered revenue district office (RDO)?” Will the bank accept payments from other RDOs not under its jurisdiction?.” Fortunately, these questions are addressed by RMC 28-2020 posted on the BIR’s website today (19 March) allowing taxpayers to file and pay taxes to any AAB nearest their location.

Taking into consideration the crisis and challenges faced by taxpayers, the Department of Finance and BIR finally granted the request of lawmakers and business groups for a 30-day extension of the filing deadline. RMC 28-2020 extends the 2019 tax filing deadline from 15 April to 15 May without penalty. Nevertheless, the BIR urges taxpayers who are ready and able to file their AITRs to do so on or before the original deadline to help the government raise sufficient funds to support health measures for COVID-19.