In line with the implementing rules of the Ease of Paying Taxes (EOPT) Act intending to streamline the procedure and promote fairness across business sizes, the Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Order No. 37-2020 last September 4, 2024, to publish procedures and guidelines in taxpayer classification.
Taxpayer Classification under EOPT
Based on their gross sales, the new classification system categorizes business taxpayers into four distinct groups:
Initial Classification Process
Taxpayers registered in 2022, and preceding years will be classified based on the gross sales reported in their Income Tax Returns (ITR). Taxpayers who have not submitted their ITRs will be initially categorized as MICRO, except for VAT-registered enterprises, which will be classified as SMALL. New taxpayers registering in 2023 and 2024, prior to the effectivity of RR No. 8-2024 on April 27, 2024, will similarly be classified as MICRO unless they are VAT-registered, in which case, they are classified as SMALL.
Internally, the BIR, through its Data Warehousing and Systems Operations Division (DWSOD), shall classify taxpayers by extracting total sales data for 2022 and categorizing them according to established criteria. These classifications will then be tagged by the Administrative Systems Division (ASD) in the Internal Revenue Integrated System.
Reclassification Process and Guidelines
Taxpayers can request reclassification based on specified thresholds, either initiating it themselves or having the BIR initiate it.
Taxpayers seeking reclassification from a lower to a higher tier may submit their requests online through the Online Registration and Update System (ORUS) or manually at their local Revenue District Office (RDO), accompanied by supporting documents. These requests will be processed automatically. Conversely, for taxpayers requesting a reclassification from a higher to a lower classification, submissions must also be made via ORUS or at the RDO, with supporting documentation required. If the reclassification occurs between April 27, 2024, and July 26, 2024—or 90 days from the effectivity of RR No. 8-2024—taxpayers must provide proof of gross sales from their 2022 Income Tax Return (ITR). For requests made after this period, supporting documentation such as ITRs and income statements from the last two years is required.
Taxpayers seeking reclassification from a lower to a higher tier through ORUS shall be automatically approved by the concerned BIR office. Meanwhile, taxpayers seeking reclassification from a higher to lower tier may have to wait for the notification of approval or disapproval from the concerned BIR office.
Conversely, the BIR National Office may conduct periodic reclassifications of taxpayers every two years, using the most recently filed ITR or VAT returns as the basis. Additionally, regional offices or the large taxpayer’s service also have the authority to recommend reclassifications for specific taxpayers whose gross sales fall below the current classification thresholds; these recommendations will be subject to approval or denial by the Regional Director or Assistant Commissioner, as applicable. Taxpayers may be notified by the Client Support Section of their respective BIR offices of the change in their classification.
Importantly, once a taxpayer is reclassified by the BIR, they cannot request another reclassification within the same taxable year unless there are compelling reasons to do so. Any such requests must be submitted to the Regional Director, whose decision on the matter is final.
Please be guided accordingly.
Source:
P&A Grant Thornton
Certified Public Accountants
P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd
As published in SunStar Cebu, dated 03 October 2024
