Tax Filing Reminders - · PDF fileBIR Form No. 1702-MX Version June 2013 (Annual Income Tax...

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ATTY. LUIS JOSE P. FERRER, CPA

Partner, Business Tax Services

PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

sponsored by

Committee on Legislation and Taxation

SEMINAR on“Tax Updates and Court Decisions”

Holiday Inn & Suites Makati

March 4, 2016

Tax Filing Reminders

Year-end Tips and RemindersPage 2

OUTLINE

I. Time, Place and Manner of Filing of

Annual ITR and Audited FS

II. Payment of Income Tax

III. Attachments to Annual ITR

IV. Financial Statements

V. Computation of Income Tax

VI. Others


I. Time, Place and Manner of Filing of

Annual ITR and Audited FS


Time Of Filing

The Annual Income Tax Return (“ITR”) shall be filed on

or before April 15, or on or before the 15th day of

the 4th month following the close of the fiscal year,

as the case may be.

No extension on ITR filing is allowed.

Late filing of ITR will be subject to a 25% surcharge,

20% interest per annum and compromise penalty.

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Signatory of the ITR

For Individuals:

The taxpayer himself

For Corporations:

President

Vice-President or

Other principal officer The ITR shall be sworn by such officer and by the

treasurer or assistant treasurer

[Section 52(A), Tax Code].

Accredited tax agent


GENERAL RULES:

No Payment:

File the ITR with the Revenue District Office (RDO) / BIR

office where registered as taxpayer.

With Payment:

File the ITR with the BIR authorized agent bank (“AAB”)

having jurisdiction over the location of the principal office of

the corporation.

If there are no AABs, file the ITR with the Collection Agent

or duly authorized Treasurer of the city or municipality

having jurisdiction over the principal office of the

Corporation.

Where to File the ITR and Pay the Tax


Electronic Filing and Payment System (eFPS)

eFPS is a system which allows taxpayers to directly

encode, submit their tax returns and pay their taxes due

online over the internet through the BIR website.


Taxpayers required to file ITR and pay the tax through eFPS:

• Large taxpayers

• All government bidders

• Corporations with paid-up capital stock of P10 million

• Corporations with complete computerized system

• Top 20,000 private corporations

• Top 5,000 individual taxpayers

• Enterprises enjoying fiscal incentives granted by government

agencies under special laws (RA 7916, EO 226, RA 9400

other zone authorities)

Electronic Filing & Payment System (eFPS)

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Electronic Filing and Payment System (eFPS)

eFPS is also mandatory for taxpayers included in the

Taxpayer Account Management Program, including

prospective importers required to secure the Importer

Clearance Certificates and Customs Broker

Clearance Certificates (Revenue Regulations No. 10-

2014 dated December 10, 2014).


Time of Payment in case of eFPS Filing

E-payments shall be made within the day the return

is electronically filed following the “pay-as-you-file”

principle. [RR No. 09-02]

The filing of the return ahead of the payment of the tax

due is in accordance with the “pay-as-you-file”

principle as long as the payment of the tax is made

on or before the due date of the applicable tax.

[RR No. 09-02]


Electronic BIR Forms for Non-Large Taxpayers

Revenue Memorandum Circular No. 61-2012 dated

October 12, 2012

► Authorize the use of Electronic Bureau of Internal Revenue Forms

(eBIR Forms) Packages on a pilot basis in Metro Manila starting

October 16, 2012.

Revenue Memorandum Order No. 24-2013 dated

September 11, 2013

►Prescribing the Guidelines, Policies, and Procedures on

the Use of eBIRForms in Relation to RMC No. 61-2012


Mandatory Use of Electronic BIR Forms (eBIRForms)

Revenue Regulations (RR) No. 6-2014 (September 5, 2014),

as amended by RR No. 5-2015 (March 17, 2015)

Mandatory Coverage:Non-eFPS filers enumerated below are required to use eBIRForms on

all 36 enumerated returns (including the ITR) to be filed on September

1, 2014 or after:• Accredited tax agents/practitioners and all its client-taxpayers

• Accredited printers of principal and supplementary receipts/invoices

• One-Time Transaction taxpayers

• Those who shall file a “No-Payment” return

• Government-owned or controlled corporations

• Local government units (LGUs), except barangays

• Cooperative registered with National Electrification Administration and Local

Water Utilities Administration

Electronic BIR Forms

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RR No. 6-2014, as amended by RR No. 5-2015

► Two (2) types of electronic services (e-Services) provided by the

Bureau relative to the preparation, generation, and submission of tax

returns:

a. Offline eBIRForms Package: software that allows the taxpayer and

Accredited Tax Agent (ATA) to accomplish or fill up tax forms offline;

and

a. Online eBIRForms System: is a filing infrastructure that accepts tax

returns submitted online and automatically computes penalties for

tax returns submitted beyond due date.




► The eBIRForms are available to all filers with or without Internet

access. Taxpayers with Internet can download the eBIRForms

Package from the BIR website, while taxpayers without internet can

download the eBIRForms Package from the BIR e-lounges.

► Those covered by these regulations are required to electronically

submit and file their tax returns.

► Upon successful validation of the accomplished tax return, taxpayer

shall receive a system-generated notification email

acknowledging successful filing of the return. Taxpayer should

print the Filing Reference (FRN) page and submit this to AABs for

the payment of the tax.




► Penalties for failure to comply with the regulations:

►Penalty of P1,000 per return pursuant to Section 250 of the Tax

Code

►Civil penalty of 25% of the tax due, for filing a return in a manner

not in compliance with existing regulations, thus, tantamount to

wrong venue filing; and

► Inclusion in priority audit program of Revenue District Offices



RMC No. 58-2015: Availability of Electronic eBIRForms

Package Version 5.1

► The eBIRForms Package Version 5.1 is now available and

downloadable from any of the following sites:

1. www.knowyourtaxes.ph;

2. www.dof.gov.ph;

3. Dropbox link: http://goo.gl/UCr8XS;

4. Direct link: http://ftp.pregi.net/bir/ebirforms_package_v5.1.zip;

5. www.bir.gov.ph

http://www.bir.gov.ph/

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RMC No. 58-2015: Availability of Electronic eBIRForms

Package Version 5.1

► The new eBIRForms package has the following modifications:

A. BIR Form No. 1707-A (Annual Capital Gains Tax Return for Onerous

Transfer of Shares of Stock Not Traded Through the Local Stock

Exchange) is included in the package and thirty seven (37) returns are

now available in eBIRForms;

B. BIR Form Nos. 1601E, 1702-MX and 2000 were enhanced; and

C. Annual Income Tax Returns (BIR Form Nos. 1700, 1701, 1702-EX,

1702-MX & 1702-RT) can now be submitted online thru the eBIR Forms

System.

► All the thirty seven (37) tax returns can be filed by clicking the “SUBMIT” or

“FINAL COPY” button and the taxpayer will receive the corresponding

confirmation thru email notification.


eFPS Filing

General Rule:

Taxpayers who shall avail of eFPS shall submit their Audited

FS, Certificates of Withholding Tax (CWT) (in DVD-R), Tax

Debit Memo (TDM) utilized in the payment of taxes, if any, to

the RDO or LTS (LTAD) or LTDO where they are

registered within 15 days from date of filing of the ITR (RMO No. 05-02; RR No. 02-2015).


eFPS Filing

RR No. 02-2015 dated December 17, 2014: In lieu of the

submission of hard copies of Certificate of Creditable tax

Withheld at Source (BIR Form No. 2307) as attachment to the

Summary Alphalist of Withholding Agents of Income

Payments Subjected to Creditable Withholding Taxes (SAWT)

(which is an ITR attachment), the taxpayer shall submit:

scanned copies of the certificates, stored using “PDF” file format

in a Digital Versatile Disk-Recordable (DVD-R),

DVD-R is labeled properly

DVD-R is submitted to the BIR office where the taxpayer is

registered, and

taxpayer submits a notarized Certification of a duly authorized

representative certifying that the soft copies of the BIR form

contained in the DVD-R are complete and exact copies of the

originals.


Large Taxpayer/ eFPS Taxpayer The Annual ITR shall be e-filed and the tax e-paid using the

eFPS facilities thru www.bir.gov.ph.

Non-Large Taxpayer/ eBIRForms taxpayer The Annual ITR shall be filed with the authorized agent

bank (“AAB”) having jurisdiction over the location of the

principal office of the corporation.

If there are no AABs, the Annual ITR shall be filed with the

Revenue Collection Officer of the city or municipality

having jurisdiction over the principal office of the

Corporation.

The eBIR Forms taxpayer may also file the ITR

electronically using the eBIR Forms system.

Where to File the ITR and Pay the Tax

http://www.bir.gov.ph/

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Revised Forms

Revenue Regulation No. 02-14 issued January 24, 2014

► Superseding Revenue Regulation (RR) No. 19-2011 and prescribes the new

BIR Forms to be used for Income Tax filing covering and starting the taxable

year ended December 31, 2013:

1. BIR Form No. 1700 Version June 2013 (Annual Income Tax Return for

Individuals Earning Purely Compensation Income)

2. BIR Form No. 1701 Version June 2013 (Annual Income Tax Return for Self-

Employed Individuals, Estate and Trusts)

3. BIR Form No. 1702-RT Version June 2013 (Annual Income Tax Return for

Corporation, Partnership and Other Non-individual Taxpayers subject only to

the Regular Income Tax Rate)

4. BIR Form No. 1702-EX Version June 2013 (Annual Income Tax Return for

Corporation, Partnership and Other Non-individual Taxpayers exempt under

the Tax Code)

5. BIR Form No. 1702-MX Version June 2013 (Annual Income Tax Return for

Corporation, Partnership and Other Non-individual Taxpayers subject to

Multiple Income Tax Rate or Special/ Preferential Rate)


Revised Forms

Revenue Memorandum Circular (RMC) No. 13-2015

dated March 31, 2015

► Amends BIR Forms No. 1700, 1701 and 1702

► Amendment consists mainly in making the disclosure of Supplemental

Information under BIR Forms No. 1700 and 1701 optional on the part

of the taxpayer on the part for income tax filing covering and starting

with calendar year 2014, due for filing on or before April 15, 2015

► Individual income tax filers using BIR Forms No. 1700 and 1701 are

advised that for the income tax filing covering and starting with

calendar year 2015, the disclosures required under Supplemental

Information portion of the said forms will be mandatory


Manner of Filing

Number of Copies

Taxpayer shall only accomplish and file three (3) copies of tax

returns with the AAB and/or the BIR.

Any excess shall not be received by the AAB and/or the BIR.

Stamping of the Official receiving Seal

All concerned Offices, including AABs, shall receive the ITRs by

stamping the official receiving seal or stamp of receipt of an

internal revenue office where the said returns are filed on the

space provided for in the three (3) copies of the returns.

Revenue Memorandum Order (RMO) No. 06-10, as amended by RMO Nos. 13-10 and 13-11

- not applicable to eFPS taxpayers


Manner of Filing

The attachments to the ITRs shall also be received in the same

manner as above, but the attached FS shall be stamped

received only on the page of the Audit Certificate, the

BALANCE SHEET and the INCOME STATEMENT.

The other pages of the FS and its attachments need not be

stamped received.

In the case of corporations and other juridical persons, there

should be a stamp "RECEIVED" in at least two (2) extra copies

of the AFS for filing with the SEC.

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Revenue Memorandum Circular No. 33-2010

RMO No. 6-2010, as amended by RMO Mo. 13-2010, prescribes

the policies and guidelines in the

1. stamping of ITRs and the accompanying AFS, and

2. limiting the number of copies of ITRs and AFS to be

received by AABs and the BIR to three.

The three copies of the ITRs shall be distributed as follows:

► Two (2) copies to the BIR (and attached to the ITRs)

► One (1) copy to the taxpayer

Certified True Copies of ITR and Audited

Financial Statement (“AFS”)

Note: The stamping of only three (3) copies of the ITR shall also be applied to

all other tax returns and payment forms, unless a lesser number of copies is

prescribed, pursuant to RMO No. 54-2010.


The taxpayer has the option of filing with the SEC either :

a. one (1) original copy of the complete AFS with External

Auditor’s Certification, Balance Sheet and Income Statement duly

stamped by the BIR or AABs and two (2) sets of photocopies of

said documents; or,

b. one (1) certified true copy of the complete AFS, with the

BIR certification appearing on each and every page of the AFS

and two (2) sets of photocopies of said documents.

Certified True Copies of ITR and AFS

Note: The underlined text is amended by RMC No. 36-2010, stating that the AFS shall be duly stamped by the BIR or AABS ONLY on the first page.


► If the second option is selected, the taxpayer shall request for a

certified true copy of the AFS from the BIR office where the taxpayer is

registered. A certification fee of One Hundred Pesos (PhP100.00) per

set of AFS and DST of Fifteen Pesos (PhP15.00) shall be paid for

each set of AFS certified as true copy by the BIR.

► In case that the taxpayer shall desire to request for a certified true copy

of the ITR, the certification fee of One Hundred Pesos (PhP100.00)

and DST of Fifteen Pesos (PhP15.00) shall be paid for each ITR

certified as true copy by the BIR.

► It is NOT MANDATORY that certified true copies of the ITR and AFS

be secured. It is the option of the taxpayer to secure these or not.

Certified True Copies of ITR and AFS


2016 Schedule of Filing of AFS with SEC

SEC Memorandum Circular No. 1 dated January 11, 2016

Audited FS of companies whose fiscal year ends on December 31,

2015 shall be filed depending on the last numerical digit of their

SEC registration or license number in accordance with the

schedule provided by the Circular.

Date of FilingLast numerical digit of SEC registration

April 18, 19, 20, 21, 22 1 and 2

April 25, 26, 27, 28, 29 3 and 4

May 2, 3, 4, 5, 6 5 and 6

May 10, 11, 12, 13 7 and 8

May 16, 17, 18, 19, 20 9 and 0

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2016 Schedule of Filing of AFS with SEC

SEC Memorandum Circular No. 1 dated January 11, 2016

However, all corporations may file their AFS regardless of the last numerical digit of their registration or license number on or before the first day stated in the abovementioned schedule.

Late filings of filing after respective due dates shall be accepted starting May 23, 2016 and shall be subject to the prescribed penalties which shall be computed from the date of the last day of filing schedule mentioned.


Establishment of eLounge Facilities in Revenue

District Offices or RDOs (RMO 18-2012)

1. The eLounge facility in the RDO shall be created to provide taxpayers with free electronic or online medium to access the BIR's web services.

2. The eLounge facility shall be established in the following Bureau Offices:• The Tax Information and Education Division (TIED), at the National Office;• The Metro Manila RDOs; and• Selected RDOs outside Metro Manila, in accordance with a set of basic criteria

regarding the number of taxpayers mandated to perform on-line transactions with the BIR, taking into consideration the ICT readiness/availability of the locality of the Bureau office where an eLounge facility will be established.


Establishment of eLounge Facilities in Revenue

District Offices or RDOs (RMO 18-2012)

3. Mandatory requirements for the creation of an eLounge facility:• The eLounge shall be set up at or near the Taxpayer Service Area at the Taxpayer

Service Section (TSS).4. The eLounge shall be manned by personnel under TSS. 5. A queuing system shall be installed in the eLounge, to support the mandate of the RDO to

provide fast and accurate frontline service to BIR clients.6. An electronic logbook (e-logbook) shall be maintained to monitor the number of taxpayers

who avail of the eLounge facility.7. The eLounge shall be open from 8am to 5pm or beyond office hours depending on the

needs of taxpayers.


Ind iv iduals Earn ing Pure ly Compensat ion

Income (BIR Form No. 1700)

Who are required to file?

The return shall be filed, in triplicate copies, by every resident citizen

deriving compensation income from all sources, or resident alien and

non-resident citizen with respect to compensation income from within

the Philippines, except the following:

1. An individual whose gross compensation income does not

exceed his total personal and additional exemptions;

2. An individual with respect to pure compensation income derived

from sources within the Philippines, the income tax on which has

been correctly withheld (tax due equals tax withheld);

3. An individual whose income has been subjected to FWT; and

4. A minimum wage earner or an individual who is exempt from

income tax.

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Who are required to file? An individual deriving compensation concurrently from two

or more employers at any time during the taxable year shall

file an income tax return.

In the case of married individuals who are still required to

file returns or in those instances not covered by the

substituted filing of returns, only one return for the taxable

year shall be filed by either spouse to cover the income

of the spouses, which return shall be signed by the

husband and wife, unless it is physically impossible to do so,

in which case signature of one of the spouses would suffice.

Ind iv iduals Earn ing Pure ly Compensat ion

Income (BIR Form No. 1700)


II. Payment of Income Tax


Payment of Tax Through AABs

Revenue Regulations No. 16-02

General Rule: “Pay as you file”

The payment of tax can be made either by cash, check or through the bank debit system.

a) "Over–the–counter cash payment" refers to payment of tax liabilities to the AAB in the currencies (paper bills or coins) that are legal tender in the Philippines. The maximum amount allowed per tax payment shall not exceed P10,000.00.


b) "Bank debit system" refers to the system whereby a

taxpayer, through a bank debit memo/advice, authorizes

withdrawals from its existing bank accounts for payment of

tax liabilities.

The bank debit system mode is allowed only if the

taxpayer has a bank account with the AAB branch where

it intends to file and pay its tax return / form / declaration,

provided said AAB branch is within the jurisdiction of

the BIR RDO where the tax payment is due and payable.


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c) "Checks" refers to a bill of exchange or Order Instrument

drawn on a bank payable on demand.

In the issuance and accomplishment of checks for the payment

of internal revenue taxes, the Branch shall indicate in the space

provided for "PAY TO THE ORDER OF" the following data:

1) presenting/collecting bank or the bank where the payment is

to be coursed and

2) FAO (For the Account Of) Bureau of Internal Revenue as

payee;

And under the "ACCOUNT NAME" the:

3) taxpayer identification number (TIN).



Sample Check

3. TIN

1. Collecting Bank

2. “For the Account Of”

XYZ Bank


Authority of Revenue Collection Officer (“RCO”) to

Accept Payment

RMO No. 4-2007, as amended by RMO 32-2008 and

further amended in RMO No. 8-2009 dated March 9, 2009

“The issuance of Revenue Official Receipts shall be limited

to tax payments, in cash not exceeding the amount of

Twenty Thousand Pesos (Php20,000.00) per return.

However, there shall be no limit on the amount if payment

is made thru checks".


The taxpayer must file a prior application with the BIR for the

use of its own TCC in the payment of income tax. The BIR

will issue a Tax Debit Memo (“TDM”) to be applied against

the taxpayer’s income tax due.

A TCC is no longer transferrable.

Other Mode of Payment - Tax Credit Certificate (“TCC”)

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Other Mode of Payment - Tax Credit Certificate (“TCC”)

TCCs can be applied against any internal revenue tax (except withholding tax) through the issuance of a TDM.

A TDM is a letter from the DOF addressed either to the BIR or the BOC, authorizing the debit of tax credit amount as indicated in the letter.

The TDM contains:

1. The TDM number,

2. TCC number,

3. its date of issue,

4. original TCC value; and

5. outstanding TCC value


Other Mode of Payment - Use of Tax Credit Certificate (TCC)

TDMs should be processed every time the TCC is used for

payment of taxes

Although the taxpayer can legally use the TCC in paying its

full tax liability, the BIR and the BOC, in practice, allow only

25% of the tax liability to be paid with TCC and the rest with

cash


Penalties

A. Surcharge of 25% for each of the following

violations:1. Late Filing: Failure to file the return and pay the amount

of tax or installment due on or before the due dates;

2. Wrong Venue: Unless otherwise authorized by the

Commissioner, filing the return with a person or office

other than those with whom it is required to be filed;

3. Non-Payment of Full Amount of Income Tax Due:

Failure to pay the full or part of the amount of tax shown

on the return on or before the due date


Penalties

B. Interest at 20% per annum on any unpaid amount

of tax, from the date prescribed for the payment until

it is fully paid.

C. Compromise penalty

RMO No. 07-2015: prescribes and implements the

revised consolidated Schedule of Compromise Penalties

for Violations of the National Internal Revenue Code

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III. Attachments to Annual ITR


Attachments to Annual ITR

1. Certificate of the independent CPA (if gross quarterly

sales, earnings, receipts or output exceed P150,000)

2. Statement of Management Responsibility

3. Summary Alphalist of Withholding Agents of Income

Payments subjected to Creditable Withholding Taxes

(SAWT)

4. Audited Financial Statements and/or Account

Information Form (AIF)

5. Certificate of Income payments not subjected to

withholding tax (BIR Form 2304)

6. Certificates of Creditable Tax Withheld at Source (BIR

Form 2307) – or in DVD-R for eFPS filers (RR No. 2-

2015)


7. Duly approved Tax Debit Memo, if applicable

8. Proof of prior years’ excess credits, if applicable

9. Proof of foreign tax credits, if applicable

10.For amended returns, proof of tax payment and the

return previously filed

11.Certificate of tax treaty relief, if applicable



RMC 21-2016 dated February 11, 2016

Circularizing the Professional Regulatory Board of Accountancy

Resolution No. 03, Series of 2016 entitled “Requiring the

Submission of Certificate by the Responsible Certified Public

Accountants on the Compilation Services for the Preparation of

Financial Statements and Notes Thereto”

The Board of Accountancy (BoA) has signed the rules on

Financial Statements (FS) preparation and the requirement for

the Certificate of Compilation Services for the preparation of

Financial Statements (FS) and notes thereto (“the Certificate”).


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RMC 21-2016 dated February 11, 2016The rules provide, among others, the following:• Requirement of the attachment to the annual FS of a Certificate on the compilation services rendered in the

preparation of FS and notes to the FS.• The Certificate shall be prepared only for issuers which/who have gross sales or revenues exceeding ten million

pesos (P10,000,000) for a particular accounting year.• The preparation of the FS and disclosure notes is a practice of accountancy in commerce and industry and shall be

done only by Certified Public Accountants (“CPAs”).• The reiteration of the rule that CPAs in public practice are prohibited from preparing or assisting in the

preparation of FS and disclosure note of their clients which engaged them to render attest services for the samedocuments.

• The CPAs in public practice who violate this prohibition rule shall be subject to stern sanctions by the Board ofAccountancy.



RMC 21-2016 dated February 11, 2016• The CPAs rendering the compilation services for the preparation of the FS and signing the Certificate shall

first be accredited with the Professional Regulatory Board of Accountancy after submitting the necessaryapplication and complying with the Continuing Professional Development (CPD) requirements.

• The Board of Accountancy approved the extension of the deadline of February 29, 2015 for the filing of theapplication for accreditation by CPAs in Commerce and Industry (C&I) in its meeting last February 11, 2016.The deadline for filing the accreditation application is extended to April 30, 2016.

• Completion of the Continuing Professional Development (CPD) requirements can be done not laterthan June 30, 2016 after signing an affidavit of undertaking to that effect.

• Accreditation applications can be done through authorized representatives.



RMC 21-2016 dated February 11, 2016

The applicability of the rules with respect to reporting periods is as follows:• for reporting period ending June 30, 2016 and subsequent periods -- MANDATORY• for reporting period ended December 31, 2015 and subsequent periods ending May

30, 2016 -- OPTIONAL• for reporting periods which end prior to December 31, 2015 -- NOT COVERED BY

THE RESOLUTION



Summary Alphalist of Withholding Agents of Income Payments

subjected to Creditable Withholding Taxes (SAWT)

RR No. 2-06 prescribed the mandatory filing of the SAWT with the BIR as an attachment upon filing the quarterly and annual ITRs.

Consolidated alphalist of withholding agents from whom income was earned or received and subjected to withholding tax to be submitted by the payee-recipient of income as attachment to its duly filed return for a given period.

Contains summary of information, showing among others:

1. total amounts of income/gross sales/gross receipts, and

2. claimed tax credits taken from all Certificates of Creditable Withholding Tax at Source issued by the payors of income payment.

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RR No. 2-2015 dated December 17, 2014:

Procedure in submitting BIR Forms 2307 and 2316 as attachments to SAWT

• Mandatory for taxpayer registered under the Large Tax

Services (LTS).

• Optional for non-LTS taxpayer.







1. Scan the original BIR Form 2307 (Certificate of

Creditable tax Withheld at Source);

2. Store/save the soft copy of the BIR Form (PDF file) in a

DVD-R with filename:

a. Registered BIR name of taxpayer

b. TIN with head/branch office code

c. Taxable period

Ex. Rizal Corporation_131042445_03192015



3. Label





4. Submit DVD-R to BIR where the taxpayer is registered,

with Notarized Certification



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Retention of the Hard Copy of the Certificates of Tax

Withheld (BIR Form No. 2306, BIR Form No. 2307, & BIR

Form No. 2316)

►The hard copy of the Certificates of Tax Withheld at

Source including withholding tax on compensation issued

by the payors of income payments to the payees shall

always be retained within the period prescribed in the

law for the preservation of books of accounts and

accounting records (10 years from date of last entry,

per RR 7-2013) and presentation of said hard copy may

be requested during audit to prove the tax credits arising

from withholding taxes which are being claimed in the tax

returns filed (RR No. 2-2006).




Certification of Independent CPA

Corporations, companies, partnerships, or persons, whose

gross quarterly sales, earnings, receipts or output exceed

P150,000 shall have their books of accounts audited and

examined yearly by independent CPAs and their ITRs

accompanied with a duly accomplished Account Information

Form (AIF).

The AIF shall contain, among others, information lifted from

certified balance sheets, profit and loss statements,

schedules listing income-producing properties and the

corresponding income therefrom and other relevant

statements [Sec. 232(A), Tax Code].


Statement of Management Responsibility

Revenue Regulation No. 3-10

Contents and Format of Statement of Management

Responsibility

Since the annual ITR is primarily the responsibility of the

taxpayer, this shall be accompanied by a statement of

management’s responsibility.

All taxpayers required to file annual ITR under the 1997

Tax Code, as amended, shall be required to submit a

statement of management’s responsibility,:



“STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR ANNUAL INCOME TAX RETURN”

The Management of (name of taxpayer) is responsible for all information and representations contained in the Annual Income Tax Return for the year ended (date). Management is likewise responsible for all information and representations contained in the financial statements accompanying the (Annual Income Tax Return or Annual Information Return) covering the same reporting period. Furthermore, the Management is responsible for all information and representations contained in all the other tax returns filed for the reporting period, including, but not limited, to the value added tax and/or percentage tax returns, withholding tax returns, documentary stamp tax returns, and any and all other tax returns.

In this regard, the Management affirms that the attached audited financial statements for the year ended (date) and the accompanying Annual Income Tax Return are in accordance with the books and records of (name of taxpayer), complete and correct in all material respects. Management likewise affirms that:

(a) the Annual Income Tax Return has been prepared in accordance with the provisions of the National Internal Revenue Code, as amended, and pertinent tax regulations and other issuances of the Department of Finance and the Bureau of Internal Revenue;

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(b) any disparity of figures in the submitted reports arising from the preparation of financial statements pursuant to financial accounting standards and the preparation of the income tax return pursuant to tax accounting rules has been reported as reconciling items and maintained in the company’s books and records in accordance with the requirements of Revenue Regulations No. 8-2007 and other relevant issuances;

(c) the (name of taxpayer) has filed all applicable tax returns, reports and statements required to be filed under Philippine tax laws for the reporting period, and all taxes and other impositions shown thereon to be due and payable have been paid for thereporting period, except those contested in good faith.

Signature: ____________________(Name of the Individual Taxpayer/President/Managing Partner)

Signature: ____________________(Name of the Chief Executive Officer or its equivalent)

Signature: ____________________(Name of the Chief Financial Officer or its equivalent)

Take note of the signatories



► Aside from the Individual Taxpayer, President and Managing

Partner, the Chief Executive Officer and the Chief Financial

Officer or any officer performing similar functions regardless

of their designation are also required to affix their signatures in

the Statement.

► In the case of a foreign corporation with branch office in the

Philippines, the above Statement shall be signed by its who is in

charge of its operations, local manager.


Attachments to the Annual ITR

Revenue Memorandum Circular No. 21-2007

For taxpayers registered with the BOI, BOI-ARMM

and PEZA:

►Photocopy of the Certificate of Entitlement (CE) for ITH issued

by the BOI, BOI-ARMM stating therein that the concerned entity

is a bona fide BOI/BOI-ARMM-registered enterprise entitled to

ITH incentives; and

►Photocopy of the Certification issued by the PEZA stating therein

that the entity is a bona fide PEZA-registered enterprise entitled

to ITH and / or the 5% Gross Income Tax incentive.


IV. Audited Financial Statements

17


Revenue Regulation No. 07-2007, amending RR No. 21-2002

The AFS shall be composed of the following:

1. Balance sheet;

2. Income statement or Profit and Loss Statement;

3. Statement of Changes in Equity, showing either:

a. All changes in equity

b. Changes in equity; other than those arising from transactions with

equity holders acting in their capacity as equity holders;

4. Statement of Cash Flows;

5. Notes, comprising a summary of significant accounting policies and

other explanatory notes; and

6. Schedules attached to the afore-cited statements.

The submission of the above statements is mandatory even if there

is no income, retained earnings, and so on.

Audited Financial Statements (“AFS”)


Audited Financial Statements


The FS shall present the accounts in a descriptive manner

such that the nature of the specific transactions entered in the

accounts are known to the reader.

The account titles to be used must be specific and not control

accounts which must be completely enumerated in the FS.

The accounts must conform to the rules and requirements

of regulatory agencies that have supervision over the

taxpayer such as the Securities and Exchange Commission,

Bangko Sentral ng Pilipinas, Insurance Commission, etc.


Audited Financial Statements (AFS)


The Income Statement shall show separately by segment

(there should be proper labeling), with breakdown of the

specific accounts, the following:

i. Cost of Goods Sold (for seller of goods)/Cost of

Services (for seller of services);

ii. Selling and Administrative Expenses;

iii. Financial Expenses, if any;

iv. Special Deductions (e.g., NOLCO, if any;)

v. Deductions under Special Laws, if any.

Note: Deductions III, IV and V should be fully explained in the Notes to the

Financial Statements.


Time and Place of filing AFS

The paper copy of the AFS shall be filed with the BIR within

15 days from the date of filing of BIR Form No. 1702.

RMC 2-2003 clarified that attachments to a return is due 15

days after e-filing deadline and not from date of e-payment.

The taxpayer is required to file four copies of the AFS.

18



All the FS filed with accompanying auditor’s certificate shall

show the comparative figures of the current year and the

previous year. Thus, FS with no required Auditor’s

Certificate need not be presented in comparative format.

AFS Reportorial Requirements


Revenue Regulations (RR) No. 17-13, as amended by

RR No. 05-14 and 10-2015

All taxpayers are required to preserve their books of

accounts, including subsidiary books and other accounting

records, for a period of ten (10) years reckoned from the

day following the deadline in filing a return, or if filed after the

deadline, from the date of the filing of the return, for the

taxable year when the last entry was made in the books of

accounts. Within the first 5 years, the taxpayer shall retain hardcopies of

the books;

Thereafter, the taxpayer may retain only an electronic copy of

the hardcopy (paper) of the books in an electronic storage

system compliant with BIR rules.

Preservation of Books


Revenue Regulations (RR) No. 17-13, as amended by

RR No. 05-14 and 10-2015

Unless a longer period of retention is required under the 1997 Tax

Code or other relevant laws, the independent CPA who audited the

records and certified the financial statements of the taxpayer,

equally as the taxpayer, has the responsibility to maintain and

preserve electronic copies of the audited and certified financial

statements including the audit working papers for a period of ten

(10) years from the due date of filing the annual ITR or the actual

date of filing thereof, whichever comes later.

Preservation of Books


Additional Compliance Requirements for Taxpayers Adopting

Philippine Financial Reporting Standards (“PFRS”)


• Disparity between financial accounting and tax accounting

results from the application of PFRS. Hence, there is a need to

reconcile the disparity to avoid issues during BIR

investigations.

• Taxpayers are mandated to maintain books and records that

would reflect the reconciling items between Financial

Statements figures and/or data with those reflected / presented

in the filed ITR.

• In case of a BIR investigation, the records must provide in

sufficient detail the computation of the differences and the

reasons therefor aimed at bringing into agreement the PFRS

and ITR figures.

19


V. Computation of Income Tax


Revenues / Receipts

► All income for the year shall be declared in the Annual ITR

except those specifically excluded in the Tax Code.

► The amount of P30,000.00, specifically referring to the amount

of 13th month pay and other benefits as one of the exclusions

from gross compensation income received by an employee is

increased to P82,000.00, effective January 1, 2015. (RR No. 3-

2015 dated March 9, 2015)


Revenues / Receipts

► Match Gross Receipts per VAT / percentage tax returns with

Revenues per Quarterly ITR and FS and evaluate reason for

any discrepancy.

► A substantial underdeclaration of taxable sales, receipts or

income shall constitute prima facie evidence of a false or

fraudulent return. Failure to report sales, receipts or income in

an amount exceeding 30% of that declared per return shall

render the taxpayer liable for substantial underdeclaration of

sales, receipts or income.


Allowable Expenses / Deductions

► Allowable deductions from gross income are all ordinary and

necessary expenses paid or incurred during the taxable

year in carrying on or which are directly attributable to, the

development, management, operation and/or conduct of

the trade, business or exercise of a profession.

► The taxpayer must substantiate with sufficient evidence,

such as official receipts or other adequate records:

(i) the amount of the expense being deducted, and

(ii) the direct connection or relation of the expense being

deducted to the development, management, operation

and/or conduct of the trade, business or profession of the

taxpayer.

20


Allowable Expenses / Deductions

► A substantial overstatement of deductions shall constitute

prima facie evidence of a false or fraudulent return. A claim

of deductions in an amount exceeding thirty percent (30%)

of actual deductions shall render the taxpayer liable for

overstatement of deductions.

► RR No. 12-2013 dated July 22, 2013

No deduction from gross income will also be allowed notwithstanding

payment of withholding tax at the time of the investigation or

reinvestigation/reconsideration, in cases where no withholding of tax

was made in accordance with Sections 57 and 58 of the Code.► RMC 63-2013 dated September 63-2013 clarifies that RR 12-2013 shall

apply to audit/investigations for taxable year 2013 and onwards.


Expenses with Limitations:

1. Interest Expense

The taxpayer's otherwise allowable deduction for interest expense shall

be reduced by 33% (effective January 1, 2009) of the interest income

subjected to final tax. Example:

► Interest Expense of PhP150,000 from Loan;

► Interest Income of PhP100,000 from Deposit

► Please take note of the Transfer Pricing Guidelines pursuant to RR 2-2013 dated

January 2, 2013.

Computation

Interest Expense from Loan PhP 150,000

Less: 33% of interest income from Deposit (33% x P100,000) 33,000

Deductible interest expense 117,000


2. Entertainment, Amusement, Recreation Expenses

Ceiling (RR No. 10-02)

0.50% of net sales (i.e., gross sales less sales

returns/allowances and sales discounts) for taxpayers

engaged in sale of goods or properties; and

1% of net revenue (i.e., gross revenue less discounts) for

taxpayers engaged in sale of services, including exercise

of profession and use or lease of properties.

Any expense incurred for EAR that is contrary to law,

morals, public policy or public order shall in no case be

allowed as a deduction. (Section 4 (c) of RR No. 10-02)



2. EAR Expenses

Representation Expenses are expenses incurred by a taxpayer

in connection with the conduct of his trade, business or exercise

of profession, in entertaining, providing amusement and

recreation to, or meeting with, a guest or guests at a dining place,

place of amusement, country club, theater, concert, play, sporting

event, and similar events or places.

The term “guests" shall mean persons or entities with which the

taxpayer has direct business relations, such as but not limited to,

clients/customers or prospective clients/customers. The term shall

not include employees, officers, partners, directors, stockholders,

or trustees of the taxpayer. (Sections 2 and 3 of RR No. 10-02)


21


The following are NOT considered EAR expenses:

1. Expenses treated as compensation or fringe benefits for services

rendered under an employer-employee relationship, pursuant to

RR No. 2-98, RR No. 3-98 and amendments thereto;

2. Expenses for charitable or fund raising events;

3. Expenses for bonafide business meeting of stockholders,

partners or directors;

4. Expenses for attending or sponsoring an employee to a business

league or professional organization meeting;

5. Expenses for events organized for promotion, marketing and

advertising including concerts, conferences, seminars,

workshops, conventions, and other similar events; or

6. Other expenses of a similar nature.



If a taxpayer is deriving income from both sale of goods/properties and services, the allowable EAR expense shall be determined based on the apportionment formula below, but in no case to exceed the maximum percentage ceilings provided earlier.

Apportionment Formula:


Net sales / net revenueX Actual Expenses

Total Net sales & net revenue


3. Donations

Donations entitled to Full Deductibility:

i. Donation to the Government or any of its agencies,

provided that the donation must be used in undertaking

priority activities in education, health, youth and sports

development, human settlements, science and culture and

in economic development according to a National Priority

Plan determined by the National Economic and

Development Authority (“NEDA”).

ii. Donations to Certain Foreign Institutions or International

Organizations.

Expenses with Limitations


iii. Donation to Accredited NGOs, provided that:

a. The accredited NGO must be organized and operated

exclusively for the purposes mentioned, and no part of its net

income must inure to the benefit of any private individual;

b. The donee must utilize the donation for the active conduct of

its purpose, not later than the 15th day of the third month after

the close of its taxable year in which the contribution is

received;

c. The donee’s level of administrative expense shall not exceed

30% of its total expenses; and the donee’s assets, in case of

its dissolution, would be distributed to the entities enumerated

in the provision.


22


RR No. 13-98Submit evidences or proofs to the BIR by showing the Certificate/s of

Donation and indicating therein the following:

- Actual receipt by the accredited non-stock, non-profit

corporation/NGO of the donation or contribution and the date of

receipt thereof; and

- The amount of the charitable donation or contribution, if in cash; if

property, whether real or personal, the acquisition cost of the said

property.

RR No. 02-03For donation worth over PhP 50,000, Notice to the RDO is required and

Certificate of Donation must be attached.



Donations to any candidate or political party or coalition of

parties for campaign purposes shall not be subject to the

payment of any gift tax.

► Section 13 of the R.A. No. 7166 (Election Code) specifically states

that any provision of law to the contrary notwithstanding any

contribution in cash or kind to any candidate or political party or

coalition of parties for campaign purposes, duly reported to the

Commission shall not be subject to the payment of any gift tax

(donor’s tax).



Donations to any candidate or political party or coalition of

parties for campaign purposes shall not be subject to the

payment of any gift tax.

► It is necessary, however, that, for every contribution received, an

official receipt (OR) shall be issued by the candidate or political party.

Otherwise, the contribution may be subject to tax. The Bureau of

Internal Revenue (BIR) may construe the same as donation subject to

donor’s tax or unaccounted source of income subject to regular

income tax. If contributions are in kind, those shall be valued at their

cash equivalent or fair market value



Donations entitled to Limited Deductibility:

1. Donations which do not meet the conditions for full deductibility

2. Donations to accredited domestic corporations or associations

organized and operated exclusively for religious, charitable,

scientific, youth and sports development, cultural or educational

purposes or for the rehabilitation of veterans, or to social welfare

institutions

3. Donations to non-accredited NGOs.


Type of Taxpayer Limit

Individual Donor 10% of Taxable Income

Corporate Donor 5% of Taxable Income

23



4. Depreciation of Vehicle and Related Expense (RR No.

12-2012)

Only one vehicle for land transport is allowed for use of an official

or employee, the value of which should not exceed

PhP2,4000,000.00.

No depreciation is allowed for yacht, helicopters, airplanes, and/or

aircrafts, and land vehicles which exceed the threshold UNLESS

the taxpayer’s main line of business is transport operations or

lease of transport equipment and the vehicles purchased are

used in operations.

All maintenance expense on account of the non-depreciable

Vehicle for tax purposes are disallowed in its entirety.


Net Operating Loss Carry Over (NOLCO)

The NOLCO shall be separately shown in the ITR. It must

likewise be shown in the Reconciliation Section of the Tax

Return.

The unused NOLCO shall be presented in the Notes to FS

showing in detail:

1. The taxable year in which the net operating loss was

sustained or incurred

2. Any amount thereof claimed as NOLCO deduction

within 3 consecutive years immediately following the

year of such loss.

Failure to comply with this disclosure requirement will

disqualify the taxpayer from claiming the NOLCO.


Minimum Corporate Income Tax (MCIT)

Any amount paid as excess MCIT shall be recorded in the

books as an asset "deferred charges-MCIT".

It shall be carried forward and may be credited against the

normal income tax due for a period not exceeding 3 taxable

years immediately following the taxable year/s in which the

same has been paid.

Any amount of excess MCIT which has not or cannot be so

credited against the normal income taxes due for the 3-year

period shall lose its creditability; and shall be removed from

"deferred charges-MCIT" account by a debit to "retained

earnings" and a credit to "deferred charges-MCIT" since this

tax is not allowable as deduction from gross income, it being an

income tax.


RR No. 16-08

The items of gross income under Section 32 (A) of the 1997 Tax Code which are required to be declared in the ITR of the taxpayer for the taxable year are part of the gross income against which the OSD may be deducted in arriving at the taxable income.

Passive incomes which have been subjected to a final tax at source shall not form part of the gross income for purposes of computing the 40% OSD.

For other taxpayers allowed by law to report their income and deductions under a different method of accounting (e.g. percentage of completion basis, etc.) other than cash and accrual method of accounting, the “gross income” shall be determined in accordance with said acceptable method of accounting.

Optional Standard Deduction (OSD)

24


RR No. 2-10

Manner of Electing OSD or Itemized Deduction:

The election to claim either the OSD or the itemized

deduction for the taxable year must be signified by

checking the appropriate box on the ITR filed for the first

quarter of the taxable year.

Once the election to avail of the OSD or itemized

deduction is signified in the return, it shall be irrevocable

for the taxable year for which the return is made.



RR No. 2-10

Making the Election:

Once the election is made, the same type of deduction must be

consistently applied for all the succeeding quarterly returns

and in the final ITR for the taxable year.

Any taxpayer who is required but fails to file the quarterly ITR

for the first quarter shall be considered as having availed of

the itemized deductions for the taxable year.



ITR Reconciling Items

Examples of Non-Taxable Income:

►Interest income already subjected to final

withholding tax

►Dividend income of a domestic corporation from

another domestic corporation

Examples of Non-Deductible Expense:

►Allowance for doubtful accounts

►Allowance for inventory obsolescence


Pre-Audit of Annual Income Tax Returns

Revenue Memorandum Order No. 25-2012 dated October

3, 2012

Coverage: All ITRs filed by individual taxpayers engaged in business

or in the practice of their profession and corporate taxpayers.

Pre-audit is conducted without field investigation or Electronic

Letter of Authority (“eLA”) or Tax Verification Notice (“TVN”).

The Revenue Officer shall verify the following during audit:

1. Mathematical computation of income tax due and payments;

2. Correctness and applicability of personal and additional

exemptions claimed by individuals against the registration

records per Integrated Tax System (“ITS”)

25



3. Correctness and validity of the following deductions/

expenses subject to the ceiling/limitations prescribed under

existing law and regulations:

a) Interest expense

b) Charitable and other contributions

c) Representation expense

d) Miscellaneous expense

4. Validity of claims for income tax holiday, tax exemption and

other claimed tax incentives which resulted to non-payment or

reduced payment of tax due.

5. Correctness of the application of the minimum corporate

income tax (MCIT);



6. Claimed creditable withholding taxes against tax due and

substantiation of claims through the certificates of withholding

taxes attached to the tax returns or submitted electronically to

the BIR;

7. Correct utilization of Tax Credit Certificates which should be

duly supported by an approved Tax Debit Memo issued by

the authorized Revenue Official;

8. Correctness of deductions claimed by taxpayers who opted

for Optional Standard Deduction (“OSD”)

9. Accuracy and applicability of the computation of the Net

Operating Loss Carry-Over (“NOLCO”); and

10. Completeness of the required attachments to annual ITRs as

prescribed under existing revenue issuances.


V. Others


Commissioner Of Internal Revenue vs. Filinvest Development Corporation, G.R. No. 163653. July 19, 2011.

“(I)nstructional letters as well as the journal and cash vouchers evidencing the advances xxx qualified as loan agreements upon which documentary stamp taxes may be imposed.”

Revenue Memorandum Circular No. 048-11 dated October 6, 2011

Circularizes the relevant portion of Supreme Court Decision in the case Commissioner of Internal Revenue vs. Filinvest Development Corporation, G.R. Nos. 163653 and 167689 dated July 19, 2011, concerning Documentary Stamp Tax on Inter-corporate Loans.

SEC. 180. Stamp Tax on All Bonds, Loan Agreements, Promissory Notes, Bills of Exchange, Drafts, Instruments and Securities Issued by the Government or Any of its Instrumentalities, Deposit Substitute Debt Instruments, Certificates of Deposits Bearing Interest and Others Not Payable on Sight or Demand. xxx documentary stamp tax of Thirty centavos (P0.30) [now P1.00] on each Two hundred pesos (P200), or fractional part thereof, of the face value of any such agreement, bill of exchange, draft, certificate of deposit, or note xxx

Advances

26


Financial Reporting Bulletin No. 6

A company should not consider a deposit for future subscription as an

equity instrument unless all of the following elements are present:

1. There is a lack or insufficiency of authorized unissued shares

of stock to cover the deposit;

2. The company’s Board of Directors and stockholders have

approved an increase in capital stock to cover the shares

corresponding to the amount of the deposit; and

3. An application for the approval of the increase in capital stock

has been presented for filing or filed with the Commission.

If any or all of the foregoing elements are not present, the transaction

should be recognized as a liability.

Deposit for Future Subscription



The following requirements under Philippine Accounting Standard 24 must be observed

by corporations:

1. The required disclosures on transactions and outstanding balances shall be made

separately for each of the following categories: (a) the parent; (b) entities with joint

control or significant influence over the entity; (c) subsidiaries; (d) associates; (e) joint

ventures in which the entity is a venture; (f) key management personnel of the entity

or its parent; and (g) other related parties.

2. For each of said category, the following information shall be provided:

a. the amount of the transactions;

b. the amount of outstanding balances and their terms and conditions, including

whether they are secured, and the nature of the consideration to be provided in

settlement, and details of any guarantees given or received;

c. provisions for doubtful debts related to the amount of outstanding balances;

d. the expense recognized during the period in respect of bad or doubtful debts

due from related parties.

3. The presentation shall be made in columnar format according to the above categories

and disclosure items.

Related Party Disclosure


Revenue Memorandum Order 35-2011

Improperly Accumulated Earnings Tax

By way of illustration, Improperly Accumulated Taxable Income (IATI) is computed as follows:Taxable Income for the year (e.g., 2010) PxxxxAdd:(a) Income subjected to Final Tax Pxxx(b) NOLCO xxx(c) Income exempt from tax xxx(d) Income excluded from gross income xxx xxxx

–––––--- ----–––––Pxxxx

Less:Income Tax paid PxxxDividends declared/paid xxx xxxx

–––––--- ––----–––Total PxxxxAdd: Retained Earnings from prior yearsAccumulated Earnings as of December 31, 2010Less: Amount that may be Retained(100% of Paid-Up Capital as of December 31, 2010) xxxx

–––––IATI Pxxxx

=====The resulting "Improperly Accumulated Taxable Income" is thereby multiplied by 10% to arrive at the Improperly Accumulated Earnings Tax (IAET).



Improperly Accumulated Earnings Tax

SECTION 6. Period for Payment of Dividend/Payment of IAET. —The

dividends must be declared and paid or issued not later than one year

following the close of the taxable year, otherwise, the IAET, if any, should

be paid within fifteen (15) days thereafter.

SECTION 7. Determination of Purpose to Avoid Income Tax. —xxx

Xxx xxx xxx

In order to determine whether profits are accumulated for the reasonable

needs of the business as to avoid the imposition of the improperly

accumulated earnings tax, the controlling intention of the taxpayer is that

which is manifested at the time of accumulation, not subsequently declared

intentions which are merely the product of afterthought. A speculative and

indefinite purpose will not suffice. The mere recognition of a future problem

or the discussion of possible and alternative solutions is not sufficient.

Definiteness of plan/s coupled with action/s taken towards its

consummation are essential.

27



Appropriation of RE for Business Expansion

Pursuant to PAS 1, the following disclosures are relevant to provide

an understanding on the impact of the retention of earnings on the

financial statements and thus, must be provided therein:

1. Details of the expansion (e.g., description of the project,

timeline) to render the project definite;

2. The date of the approval by the Board of Directors of the

project.


SEC Memorandum Circular No. 11, Series of 2008

RE Available for Dividend Declaration



Under paragraph 4(C) of SRC Rule 68, as amended, issuers of

securities to the public, and stock corporations with unrestricted

retained earnings in excess of 100% of paid-in capital stock, are

mandated to submit with their audited financial statements a

Reconciliation of Retained Earnings Available for Dividend

Declaration which should present the prescribed adjustments.

Reconciliation of Retained Earnings



Reconciliation of Retained Earnings

Items Amount

Unappropriated Retained Earnings, beginning P x x xAdjustments:(see adjustments in previous year’s Reconciliation) x x x

Unappropriated Retained Earnings, as adjusted, beginning P x x x

Net Income based on the face of AFSLess: Non-actual/unrealized income net of tax

• Equity in net income of associate/joint venture• Unrealized foreign exchange gain - net (except those attributable to Cash and Cash Equivalents) Unrealized actuarial gain• Fair value adjustment (M2M gains)• Fair value adjustment of Investment Property resulting to gain Adjustment due to deviation from PFRS/GAAP-gain• Other unrealized gains or adjustments to the retained earnings as a result of certain transactions accounted for under the PFRS

Add: Non-actual losses• Depreciation on revaluation increment (after tax)• Adjustment due to deviation from PFRS/GAAP – loss

Loss on fair value adjustment of investment property (after tax)Net Income Actual/Realized

P x x x

Unappropriated Retained Earnings, as adjusted, ending Pxx x

28


Creditable Withholding Taxes (CWTs)

►CWTs should be substantiated by Certificates of

Creditable Taxes Withheld at Source (BIR Form 2307)

►CWTs should pertain to the year subject of the ITR

Option to Carry-over or Refund Excess Taxes

►Option to carry-over: The taxpayer shall exercise his

option by marking with an “x” the appropriate box,

which option shall be considered irrevocable for that

taxable period.


The ITR filed by an accredited tax agent on behalf of a

taxpayer shall bear the following information:

A. For CPAs and others (individual practitioners and

members of GPPs):

► TIN

► Certificate of Accreditation Number, Date of Issuance,

and Date of Expiry

B. For Members of the Philippine Bar (individual

practitioners, members of GPPs):

► TIN

► Attorney’s Roll number or Accreditation Number, if any


Submission of Inventory List and Other

Reportorial Requirements

RMC 57-2015 dated September 16, 2015 Amended by RMC 61-2015

on September 29, 2015

► Provide guidance on how financial accounting information, in addition

to the annual inventory list required to be filed under Section 13 of RR

No. V-I, should be reported to the Bureau.

► The additional reports or schedules to be submitted and filed with the

annual inventory list shall cover companies maintaining inventory of

stock-in-trade, raw materials, goods in process, supplies and other

goods such as manufacturing, wholesaling, distributing/retailing

sectors including real estate dealers/developers, service companies,

e.g., construction companies, building contractors, etc.






► All taxpayers with tangible asset-rich balance sheets, often with at

least half of their total assets in working capital assets, e.g., accounts

receivable and inventory, shall submit, in addition to the annual

inventory list, schedules/lists prescribed in the Circular, in hard and

soft copies.

29






► The schedules and inventory list shall be submitted every 30th day

following the close of the taxable year (depending on the accounting

period adopted by the taxpayer) as enunciated under Section 13 of

Revenue Regulations No. V-I, otherwise known as the Bookkeeping

Regulations, which provides for the filing of an annual inventory of

stocks-in-trade, raw materials, goods in process, supplies and other

goods not later than 30 days following the close of the taxable year, to

wit:


BIR Audit Program

RMO 19-2015 dated September 15, 2015

This Order prescribes the policies, guidelines and

procedures to be observed in the audit/investigation of

tax returns to enhance taxpayers’ voluntary compliance

by encouraging the correct payment of internal revenue

taxes through the exercise of the enforcement function

of the Bureau.

In general, all taxpayers are considered as possible

candidates for audit. To cover the audit/investigation of

taxpayers, electronic Letters of Authority (eLAs) shall be

issued.


BIR Audit Program


The said audit/investigation shall include, but not be limited to the

mandatory cases and priority taxpayers/industries specified in this

Order including other priority audit that may be identified by the

Regional Director (RD)/Assistant Commissioner, Large Taxpayers

Service (ACIR-LTS).

Mandatory Cases:


BIR Audit Program


Priority Taxpayers/Industries:

30


BIR Audit Program


Priority Taxpayers/Industries:


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