2024 is almost on our doorsteps, but many things are still happening around us. Most are planning for their annual family reunion or Christmas parties; almost all the employees are looking forward to the upcoming Christmas break; while some are still thinking about the “big celebrity break-up” that was announced days ago.
Despite these events, taxpayers should still be mindful of their duties in complying with various compliance requirements. Taxpayers must comply with the reporting requirements of the Bureau of Internal Revenue (BIR) and Local Government Units (LGU), as discussed in the following sections.
BIR Compliance Requirements
Employers who have deducted and withheld taxes on the compensation of their employees shall file BIR Form No. 1604-C and submit the annual alphabetical list (alpha list) of employees based on the revised format on or before January 31, 2024. In computing the amounts to be reported in BIR Form No. 1604-C, the employer shall perform annualization of compensation paid to the employees in the last month of employment or in December of the current calendar year.
Likewise, taxpayers who deducted and withheld the final withholding tax shall file BIR Form No. 1604-F, together with the alpha list of payees, on or before January 31, 2024.
On the other hand, taxpayers who deducted and withheld expanded withholding tax shall file BIR Form No. 1604-E, together with the alpha list of payees, on or before March 1, 2024.
To ensure that all income payments subject to withholding tax were properly reported in the tax returns, taxpayers are advised to prepare a reconciliation of expenses and taxes reported in the tax returns and alpha lists vis-à-vis those recorded in the taxpayers’ books.
For taxpayers filing using the electronic filing and payment system (eFPS), it should be noted that the January 2018 version of BIR Form No. 1604-E is now available in the eFPS. As for BIR Form No. 1604-C and 1604-F, as there has been a BIR circular announcing their availability, taxpayers must check and look out when the said BIR forms will actually become available in the eFPS.
Employers shall sign and provide BIR Form No. 2316 to their employees. Upon receipt, the employees shall sign the certificate. Employees, including resident aliens, who qualify for substituted filing are exempt from filing their income tax returns. Instead, the employers shall submit their certificates, accompanied by a notarized and signed certification, to the BIR on or before February 28, 2024.
The annual registration fee (ARF) must be paid on or before January 31 in the amount of P500 for every head office and/or branch. The ARF is required for the annual updating of business permits.
Depending on the taxpayer’s registered books of accounts, the following shall be observed for subsequent registration:
Taxpayers may be required to register their books of accounts through the BIR’s Online Registration and Update System (ORUS), since they may still manually register the same upon the advice of the BIR office having jurisdiction over the taxpayer. Moreover, manual books of accounts are still allowed to be registered and stamped at the BIR office where the head office or branch is registered.
Taxpayers maintaining inventories are required to submit soft copies of the annual inventory list and applicable schedules, accompanied by a notarized and signed sworn declaration, within thirty (30) days following the close of the taxable year.
Taxpayers are advised to prepare a reconciliation of the inventory list and other applicable schedules with their records so that they can explain any differences to the BIR upon tax audit.
LGU Compliance Requirements
Aside from the requirements with the BIR, taxpayers are required to renew their business or mayor’s permit with the LGU annually and pay the local business tax (LBT) on or before January 20 where the business is registered and operates. Taxpayers also have the option to pay the local business tax quarterly, within the first 20 days of January and for the first month of each subsequent quarter.
However, under the CREATE law, registered business enterprises (RBE), which are subject to the 5% gross income tax, are exempt from local taxes. Nevertheless, such RBEs are not totally exempt from paying anything to the LGU because they are still required to pay fees and charges imposed by the LGUs.
For failure to pay the LBT, fees, or charges on time, the taxpayer will be subject to a 25% surcharge penalty and monthly interest of 2%. The total interest on unpaid LBT shall not exceed thirty-six (36) months. In case of non-compliance, the penalty and interest shall be computed beginning January 1 and not from the due date of payment. As an ultimate punishment for non-compliance, the taxpayer’s establishment may be closed by the LGU.
Taxpayers must familiarise themselves with the LBT rates since these depend on the ordinances of each LGU. Taxpayers must also be aware of the announcements made by the LGUs with respect to the process of securing assessment notices and payments because the extension of deadlines differs and is usually based on the discretion of each LGU.
The above-mentioned reminders may seem overwhelming. Nonetheless, taxpayers are still bound to comply with and follow the requirements set by the BIR and the LGU. Compliance with the requirements is inevitable, just like 2024 waits right before our doorsteps.
Let's Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
As published in BusinessWorld, dated 05 December 2023
