PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

sponsored by
OUTLINE
Committee on Legislation and Taxation

SEMINAR on
I. Time, Place and Manner of Filing of
“Tax Updates and Court Decisions”
Holiday Inn & Suites Makati
Annual ITR and Audited FS
March 4, 2016
II. Payment of Income Tax
III. Attachments to Annual ITR
IV. Financial Statements
Tax Filing Reminders V. Computation of Income Tax
ATTY. LUIS JOSE P. FERRER, CPA
Partner, Business Tax Services VI. Others

Page 2 Year-end Tips and Reminders

T i m e Of F i l i n g

 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.

I. Time, Place and Manner of Filing of  Late filing of ITR will be subject to a 25% surcharge,
Annual ITR and Audited FS 20% interest per annum and compromise penalty.

Page 3 Year-end Tips and Reminders Page 4 Year-end Tips and Reminders

1
Signatory of the ITR Where to File the ITR and Pay the Tax
GENERAL RULES:
For Individuals:
 The taxpayer himself No Payment:
 File the ITR with the Revenue District Office (RDO) / BIR
For Corporations: office where registered as taxpayer.
President
Vice-President or With Payment:
Other principal officer  File the ITR with the BIR authorized agent bank (“AAB”)
The ITR shall be sworn by such officer and by the having jurisdiction over the location of the principal office of
treasurer or assistant treasurer the corporation.
[Section 52(A), Tax Code].  If there are no AABs, file the ITR with the Collection Agent
Accredited tax agent or duly authorized Treasurer of the city or municipality
having jurisdiction over the principal office of the
Corporation.

Page 5 Year-end Tips and Reminders Page 6 Year-end Tips and Reminders

Electronic Filing and Payment System (eFPS) Electronic Filing & 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)

Page 7 Year-end Tips and Reminders Page 8 Year-end Tips and Reminders

2
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).
Page 9 Year-end Tips and Reminders
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
Page 11 Year-end Tips and Reminders
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]
Page 10 Year-end Tips and Reminders
Electronic BIR Forms
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
Page 12 Year-end Tips and Reminders
3
Electronic BIR Forms
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.
Page 13 Year-end Tips and Reminders
Electronic BIR Forms
RR No. 6-2014, as amended by RR No. 5-2015
► 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
Page 15 Year-end Tips and Reminders
Electronic BIR Forms
RR No. 6-2014, as amended by RR No. 5-2015
► 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.
Page 14 Year-end Tips and Reminders
Electronic BIR Forms
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
Page 16 Year-end Tips and Reminders
4
Electronic BIR Forms eFPS Filing
RMC No. 58-2015: Availability of Electronic eBIRForms General Rule:
Package Version 5.1
 Taxpayers who shall avail of eFPS shall submit their Audited
► The new eBIRForms package has the following modifications:
FS, Certificates of Withholding Tax (CWT) (in DVD-R), Tax
A. BIR Form No. 1707-A (Annual Capital Gains Tax Return for Onerous
Debit Memo (TDM) utilized in the payment of taxes, if any, to
Transfer of Shares of Stock Not Traded Through the Local Stock
Exchange) is included in the package and thirty seven (37) returns are the RDO or LTS (LTAD) or LTDO where they are
now available in eBIRForms; registered within 15 days from date of filing of the ITR
B. BIR Form Nos. 1601E, 1702-MX and 2000 were enhanced; and (RMO No. 05-02; RR No. 02-2015).
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.

Page 17 Year-end Tips and Reminders Page 18 Year-end Tips and Reminders

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.
Where to File the ITR and Pay the Tax
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.

Page 19 Year-end Tips and Reminders Page 20 Year-end Tips and Reminders

5
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)
Page 21 Year-end Tips and Reminders
Manner of Filing
Revenue Memorandum Order (RMO) No. 06-10, as amended by RMO Nos. 13-10 and 13-11
- not applicable to eFPS taxpayers
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.
Page 23 Year-end Tips and Reminders
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
Page 22 Year-end Tips and Reminders
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.
Page 24 Year-end Tips and Reminders
6
Certified True Copies of ITR and Audited
Financial Statement (“AFS”)
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 AFS
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.

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 Note: The underlined text is amended by RMC No. 36-2010, stating that the AFS shall be duly stamped by the BIR
prescribed, pursuant to RMO No. 54-2010. or AABS ONLY on the first page.

Page 25 Year-end Tips and Reminders Page 26 Year-end Tips and Reminders

Certified True Copies of ITR and AFS 2016 Schedule of Filing of AFS with SEC

► If the second option is selected, the taxpayer shall request for a SEC Memorandum Circular No. 1 dated January 11, 2016
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 Audited FS of companies whose fiscal year ends on December 31,
set of AFS and DST of Fifteen Pesos (PhP15.00) shall be paid for 2015 shall be filed depending on the last numerical digit of their
each set of AFS certified as true copy by the BIR. SEC registration or license number in accordance with the
► In case that the taxpayer shall desire to request for a certified true copy schedule provided by the Circular.
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 Last numerical digit of SEC registration
Date of Filing
certified as true copy by the BIR.
► It is NOT MANDATORY that certified true copies of the ITR and AFS April 18, 19, 20, 21, 22 1 and 2
be secured. It is the option of the taxpayer to secure these or not. 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

Page 27 Year-end Tips and Reminders Page 28 Year-end Tips and Reminders

7
 Establishment of eLounge Facilities in Revenue
2016 Schedule of Filing of AFS with SEC District Offices or RDOs (RMO 18-2012)

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.
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.

Page 29 Year-end Tips and Reminders Page 30 Year-end Tips and Reminders

Establishment of eLounge Facilities in Revenue Individuals Earning Purely Compensation

District Offices or RDOs (RMO 18-2012) Income (BIR Form No. 1700)

3. Mandatory requirements for the creation of an eLounge facility: Who are required to file?
• The eLounge shall be set up at or near the Taxpayer Service Area at the Taxpayer  The return shall be filed, in triplicate copies, by every resident citizen
Service Section (TSS). deriving compensation income from all sources, or resident alien and
4. The eLounge shall be manned by personnel under TSS. non-resident citizen with respect to compensation income from within
5. A queuing system shall be installed in the eLounge, to support the mandate of the RDO to the Philippines, except the following:
provide fast and accurate frontline service to BIR clients.
1. An individual whose gross compensation income does not
6. An electronic logbook (e-logbook) shall be maintained to monitor the number of taxpayers
exceed his total personal and additional exemptions;
who avail of the eLounge facility.
7. The eLounge shall be open from 8am to 5pm or beyond office hours depending on the 2. An individual with respect to pure compensation income derived
from sources within the Philippines, the income tax on which has
needs of taxpayers.
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.

Page 31 Year-end Tips and Reminders Page 32 Year-end Tips and Reminders

8
Individuals Earning Purely Compensation
Income (BIR Form No. 1700)

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, II. Payment of Income Tax
in which case signature of one of the spouses would suffice.

Page 33 Year-end Tips and Reminders Page 34 Year-end Tips and Reminders

Payment of Tax Through AABs 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.

Page 35 Year-end Tips and Reminders Page 36 Year-end Tips and Reminders

9
Payment of Tax Through AABs Sample Check
3. TIN
c) "Checks" refers to a bill of exchange or Order Instrument
drawn on a bank payable on demand.
1. Collecting Bank
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: 2. “For the Account
1) presenting/collecting bank or the bank where the payment is Of”
to be coursed and
2) FAO (For the Account Of) Bureau of Internal Revenue as
payee;
XYZ Bank
And under the "ACCOUNT NAME" the:
3) taxpayer identification number (TIN).

Page 37 Year-end Tips and Reminders Page 38 Year-end Tips and Reminders

Authority of Revenue Collection Officer (“RCO”) to

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

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.

Page 39 Year-end Tips and Reminders Page 40 Year-end Tips and Reminders

10
Other Mode of Payment - Tax Credit Certificate (“TCC”) Other Mode of Payment - Use of Tax Credit Certificate (TCC)

 TCCs can be applied against any internal revenue tax (except withholding tax) through  TDMs should be processed every time the TCC is used for
the issuance of a TDM. payment of taxes
 A TDM is a letter from the DOF addressed either to the BIR or the BOC, authorizing the  Although the taxpayer can legally use the TCC in paying its
debit of tax credit amount as indicated in the letter. full tax liability, the BIR and the BOC, in practice, allow only
 The TDM contains: 25% of the tax liability to be paid with TCC and the rest with
cash
1. The TDM number,
2. TCC number,
3. its date of issue,
4. original TCC value; and
5. outstanding TCC value

Page 41 Year-end Tips and Reminders Page 42 Year-end Tips and Reminders

Penalties 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
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

Page 43 Year-end Tips and Reminders Page 44 Year-end Tips and Reminders

11

III. Attachments to Annual ITR
Page 45 Year-end Tips and Reminders
Attachments to Annual ITR
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
Page 47 Year-end Tips and Reminders
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)
Page 46 Year-end Tips and Reminders
Attachments to Annual ITR
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”).
Page 48 Year-end Tips and Reminders
12
Attachments to Annual ITR Attachments to Annual ITR
RMC 21-2016 dated February 11, 2016 RMC 21-2016 dated February 11, 2016
The rules provide, among others, the following: • The CPAs rendering the compilation services for the preparation of the FS and signing the Certificate shall
• Requirement of the attachment to the annual FS of a Certificate on the compilation services rendered in the first be accredited with the Professional Regulatory Board of Accountancy after submitting the necessary
preparation of FS and notes to the FS. application and complying with the Continuing Professional Development (CPD) requirements.
• The Certificate shall be prepared only for issuers which/who have gross sales or revenues exceeding ten million • The Board of Accountancy approved the extension of the deadline of February 29, 2015 for the filing of the
pesos (P10,000,000) for a particular accounting year. application for accreditation by CPAs in Commerce and Industry (C&I) in its meeting last February 11, 2016.
• The preparation of the FS and disclosure notes is a practice of accountancy in commerce and industry and shall be The deadline for filing the accreditation application is extended to April 30, 2016.
done only by Certified Public Accountants (“CPAs”). • Completion of the Continuing Professional Development (CPD) requirements can be done not later
• The reiteration of the rule that CPAs in public practice are prohibited from preparing or assisting in the than June 30, 2016 after signing an affidavit of undertaking to that effect.
preparation of FS and disclosure note of their clients which engaged them to render attest services for the same • Accreditation applications can be done through authorized representatives.
documents.
• The CPAs in public practice who violate this prohibition rule shall be subject to stern sanctions by the Board of
Accountancy.

Page 49 Year-end Tips and Reminders Page 50 Year-end Tips and Reminders

Summary Alphalist of Withholding Agents of Income Payments

Attachments to Annual ITR subjected to Creditable Withholding Taxes (SAWT)

RMC 21-2016 dated February 11, 2016 RR No. 2-06 prescribed the mandatory filing of the SAWT with the BIR as an attachment
upon filing the quarterly and annual ITRs.
The applicability of the rules with respect to reporting periods is as follows:
• for reporting period ending June 30, 2016 and subsequent periods -- MANDATORY Consolidated alphalist of withholding agents from whom income was earned or received
• for reporting period ended December 31, 2015 and subsequent periods ending May and subjected to withholding tax to be submitted by the payee-recipient of income as
30, 2016 -- OPTIONAL attachment to its duly filed return for a given period.
• for reporting periods which end prior to December 31, 2015 -- NOT COVERED BY  Contains summary of information, showing among others:
THE RESOLUTION
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.

Page 51 Year-end Tips and Reminders Page 52 Year-end Tips and Reminders

13
Summary Alphalist of Withholding Agents of Income Payments Summary Alphalist of Withholding Agents of Income Payments
subjected to Creditable Withholding Taxes (SAWT) subjected to Creditable Withholding Taxes (SAWT)

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

Procedure in submitting BIR Forms 2307 and 2316 as attachments to SAWT 1. Scan the original BIR Form 2307 (Certificate of
Creditable tax Withheld at Source);

• Mandatory for taxpayer registered under the Large Tax

2. Store/save the soft copy of the BIR Form (PDF file) in a
DVD-R with filename:
Services (LTS).
a. Registered BIR name of taxpayer
• Optional for non-LTS taxpayer.
b. TIN with head/branch office code
c. Taxable period
Ex. Rizal Corporation_131042445_03192015

Page 53 Year-end Tips and Reminders Page 54 Year-end Tips and Reminders

Summary Alphalist of Withholding Agents of Income Payments Summary Alphalist of Withholding Agents of Income Payments
subjected to Creditable Withholding Taxes (SAWT) subjected to Creditable Withholding Taxes (SAWT)

RR No. 2-2015 dated December 17, 2014: RR No. 2-2015 dated December 17, 2014:
3. Label
4. Submit DVD-R to BIR where the taxpayer is registered,
with Notarized Certification

Page 55 Year-end Tips and Reminders Page 56 Year-end Tips and Reminders

14
Summary Alphalist of Withholding Agents of Income Payments
subjected to Creditable Withholding Taxes (SAWT)
 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).
Page 57 Year-end Tips and Reminders
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,:
Page 59 Year-end Tips and Reminders
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].
Page 58 Year-end Tips and Reminders
Statement of Management 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;
Page 60 Year-end Tips and Reminders
15
Statement of Management Responsibility Statement of Management Responsibility

(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 ► Aside from the Individual Taxpayer, President and Managing
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; Partner, the Chief Executive Officer and the Chief Financial
(c) the (name of taxpayer) has filed all applicable tax returns, reports and statements required to be filed under Philippine tax Officer or any officer performing similar functions regardless
laws for the reporting period, and all taxes and other impositions shown thereon to be due and payable have been paid for the
reporting period, except those contested in good faith. of their designation are also required to affix their signatures in
the Statement.
Signature: ____________________
(Name of the Individual Taxpayer/President/Managing Partner)

Signature: ____________________ ► In the case of a foreign corporation with branch office in the
(Name of the Chief Executive Officer or its equivalent) Take note of the Philippines, the above Statement shall be signed by its who is in
Signature: ____________________ signatories charge of its operations, local manager.
(Name of the Chief Financial Officer or its equivalent)

Page 61 Year-end Tips and Reminders Page 62 Year-end Tips and Reminders

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 IV. Audited Financial Statements
to ITH and / or the 5% Gross Income Tax incentive.

Page 63 Year-end Tips and Reminders Page 64 Year-end Tips and Reminders

16
Audited Financial Statements (“AFS”) Audited Financial Statements
Revenue Regulation No. 07-2007, amending RR No. 21-2002 Revenue Regulation No. 21-02
 The AFS shall be composed of the following:
1. Balance sheet;
 The FS shall present the accounts in a descriptive manner
such that the nature of the specific transactions entered in the
2. Income statement or Profit and Loss Statement;
accounts are known to the reader.
3. Statement of Changes in Equity, showing either:
a. All changes in equity  The account titles to be used must be specific and not control
b. Changes in equity; other than those arising from transactions with accounts which must be completely enumerated in the FS.
equity holders acting in their capacity as equity holders;
4. Statement of Cash Flows;  The accounts must conform to the rules and requirements
5. Notes, comprising a summary of significant accounting policies and of regulatory agencies that have supervision over the
other explanatory notes; and taxpayer such as the Securities and Exchange Commission,
6. Schedules attached to the afore-cited statements. Bangko Sentral ng Pilipinas, Insurance Commission, etc.
 The submission of the above statements is mandatory even if there
is no income, retained earnings, and so on.

Page 65 Year-end Tips and Reminders Page 66 Year-end Tips and Reminders

Audited Financial Statements (AFS) Time and Place of filing AFS

Revenue Regulation No. 21-02
 The Income Statement shall show separately by segment
 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.
(there should be proper labeling), with breakdown of the
specific accounts, the following:  RMC 2-2003 clarified that attachments to a return is due 15
days after e-filing deadline and not from date of e-payment.
i. Cost of Goods Sold (for seller of goods)/Cost of
Services (for seller of services);  The taxpayer is required to file four copies of the AFS.
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.

Page 67 Year-end Tips and Reminders Page 68 Year-end Tips and Reminders

17
AFS Reportorial Requirements
Revenue Regulation No. 21-02
 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.
Page 69 Year-end Tips and Reminders
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.
Page 71 Year-end Tips and Reminders
Preservation of Books
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.
Page 70 Year-end Tips and Reminders
Additional Compliance Requirements for Taxpayers Adopting
Philippine Financial Reporting Standards (“PFRS”)
Revenue Regulation No. 08-07
• 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.
Page 72 Year-end Tips and Reminders
18
 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)

V. Computation of Income Tax

Page 73 Year-end Tips and Reminders Page 74 Year-end Tips and Reminders

Revenues / Receipts Allowable Expenses / Deductions

► 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 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.

Page 75 Year-end Tips and Reminders Page 76 Year-end Tips and Reminders

19
Allowable Expenses / Deductions Expenses with Limitations:

► A substantial overstatement of deductions shall constitute 1. Interest Expense

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
 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

No deduction from gross income will also be allowed notwithstanding Computation

payment of withholding tax at the time of the investigation or Interest Expense from Loan PhP 150,000
reinvestigation/reconsideration, in cases where no withholding of tax Less: 33% of interest income from Deposit (33% x
was made in accordance with Sections 57 and 58 of the Code. P100,000) 33,000
► RMC 63-2013 dated September 63-2013 clarifies that RR 12-2013 shall
apply to audit/investigations for taxable year 2013 and onwards. Deductible interest expense 117,000

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

Page 77 Year-end Tips and Reminders Page 78 Year-end Tips and Reminders

Expenses with Limitations: Expenses with Limitations:

2. Entertainment, Amusement, Recreation Expenses 2. EAR 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)
 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)

Page 79 Year-end Tips and Reminders Page 80 Year-end Tips and Reminders

20
Expenses with Limitations: Expenses with Limitations:
The following are NOT considered EAR expenses:  If a taxpayer is deriving income from both sale of goods/properties and services, the
1. Expenses treated as compensation or fringe benefits for services allowable EAR expense shall be determined based on the apportionment formula below,
rendered under an employer-employee relationship, pursuant to but in no case to exceed the maximum percentage ceilings provided earlier.
RR No. 2-98, RR No. 3-98 and amendments thereto;
2. Expenses for charitable or fund raising events;  Apportionment Formula:
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;
Net sales / net revenue
5. Expenses for events organized for promotion, marketing and X Actual Expenses
advertising including concerts, conferences, seminars, Total Net sales & net revenue
workshops, conventions, and other similar events; or
6. Other expenses of a similar nature.

Page 81 Year-end Tips and Reminders Page 82 Year-end Tips and Reminders

Expenses with Limitations Expenses with Limitations

3. Donations iii. Donation to Accredited NGOs, provided that:

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.
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.

Page 83 Year-end Tips and Reminders Page 84 Year-end Tips and Reminders

21
Expenses with Limitations Expenses with Limitations

RR No. 13-98 Donations to any candidate or political party or coalition of

Submit evidences or proofs to the BIR by showing the Certificate/s of parties for campaign purposes shall not be subject to the
Donation and indicating therein the following: payment of any gift tax.

- 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.
► 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).

RR No. 02-03
For donation worth over PhP 50,000, Notice to the RDO is required and
Certificate of Donation must be attached.

Page 85 Year-end Tips and Reminders Page 86 Year-end Tips and Reminders

Expenses with Limitations Expenses with Limitations

Donations to any candidate or political party or coalition of Donations entitled to Limited Deductibility:
parties for campaign purposes shall not be subject to the
payment of any gift tax. 1. Donations which do not meet the conditions for full deductibility
2. Donations to accredited domestic corporations or associations
► It is necessary, however, that, for every contribution received, an organized and operated exclusively for religious, charitable,
official receipt (OR) shall be issued by the candidate or political party. scientific, youth and sports development, cultural or educational
Otherwise, the contribution may be subject to tax. The Bureau of purposes or for the rehabilitation of veterans, or to social welfare
Internal Revenue (BIR) may construe the same as donation subject to institutions
donor’s tax or unaccounted source of income subject to regular 3. Donations to non-accredited NGOs.
income tax. If contributions are in kind, those shall be valued at their
cash equivalent or fair market value
Type of Taxpayer Limit
Individual Donor 10% of Taxable Income
Corporate Donor 5% of Taxable Income

Page 87 Year-end Tips and Reminders Page 88 Year-end Tips and Reminders

22
Expenses with Limitations
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.
Page 89 Year-end Tips and Reminders
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.
Page 91 Year-end Tips and Reminders
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.
Page 90 Year-end Tips and Reminders
Optional Standard Deduction (OSD)
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.
Page 92 Year-end Tips and Reminders
23
Optional Standard Deduction (OSD)
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.
Page 93 Year-end Tips and Reminders
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
Page 95 Year-end Tips and Reminders
Optional Standard Deduction (OSD)
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.
Page 94 Year-end Tips and Reminders
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”)
Page 96 Year-end Tips and Reminders
24
Pre-Audit of Annual Income Tax Returns Pre-Audit of Annual Income Tax Returns

3. Correctness and validity of the following deductions/ 6. Claimed creditable withholding taxes against tax due and
expenses subject to the ceiling/limitations prescribed under substantiation of claims through the certificates of withholding
existing law and regulations: taxes attached to the tax returns or submitted electronically to
a) Interest expense the BIR;
b) Charitable and other contributions 7. Correct utilization of Tax Credit Certificates which should be
c) Representation expense duly supported by an approved Tax Debit Memo issued by
the authorized Revenue Official;
d) Miscellaneous expense
8. Correctness of deductions claimed by taxpayers who opted
4. Validity of claims for income tax holiday, tax exemption and for Optional Standard Deduction (“OSD”)
other claimed tax incentives which resulted to non-payment or
reduced payment of tax due. 9. Accuracy and applicability of the computation of the Net
Operating Loss Carry-Over (“NOLCO”); and
5. Correctness of the application of the minimum corporate
income tax (MCIT); 10. Completeness of the required attachments to annual ITRs as
prescribed under existing revenue issuances.

Page 97 Year-end Tips and Reminders Page 98 Year-end Tips and Reminders

Advances
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
V. Others any such agreement, bill of exchange, draft, certificate of deposit, or note xxx

Page 99 Year-end Tips and Reminders Page 100 Year-end Tips and Reminders

25
Deposit for Future Subscription Related Party Disclosure

Financial Reporting Bulletin No. 6 Financial Reporting Bulletin No. 13

The following requirements under Philippine Accounting Standard 24 must be observed
A company should not consider a deposit for future subscription as an by corporations:
1. The required disclosures on transactions and outstanding balances shall be made
equity instrument unless all of the following elements are present: separately for each of the following categories: (a) the parent; (b) entities with joint
1. There is a lack or insufficiency of authorized unissued shares control or significant influence over the entity; (c) subsidiaries; (d) associates; (e) joint
of stock to cover the deposit; ventures in which the entity is a venture; (f) key management personnel of the entity
2. The company’s Board of Directors and stockholders have or its parent; and (g) other related parties.
2. For each of said category, the following information shall be provided:
approved an increase in capital stock to cover the shares a. the amount of the transactions;
corresponding to the amount of the deposit; and b. the amount of outstanding balances and their terms and conditions, including
3. An application for the approval of the increase in capital stock whether they are secured, and the nature of the consideration to be provided in
has been presented for filing or filed with the Commission. 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
If any or all of the foregoing elements are not present, the transaction due from related parties.
should be recognized as a liability. 3. The presentation shall be made in columnar format according to the above categories
and disclosure items.

Page 101 Year-end Tips and Reminders Page 102 Year-end Tips and Reminders

Improperly Accumulated Earnings Tax Improperly Accumulated Earnings Tax

Revenue Memorandum Order 35-2011 Revenue Regulation No. 02-01

By way of illustration, Improperly Accumulated Taxable Income (IATI) is computed as follows:
Taxable Income for the year (e.g., 2010) Pxxxx SECTION 6. Period for Payment of Dividend/Payment of IAET. —The
Add:
(a) Income subjected to Final Tax Pxxx
dividends must be declared and paid or issued not later than one year
(b) NOLCO xxx following the close of the taxable year, otherwise, the IAET, if any, should
(c) Income exempt from tax xxx
(d) Income excluded from gross income xxx xxxx
be paid within fifteen (15) days thereafter.
–––––--- ----–––––
Pxxxx
Less:
SECTION 7. Determination of Purpose to Avoid Income Tax. —xxx
Income Tax paid Pxxx Xxx xxx xxx
Dividends declared/paid xxx xxxx
–––––--- ––----–––
In order to determine whether profits are accumulated for the reasonable
Total Pxxxx needs of the business as to avoid the imposition of the improperly
Add: Retained Earnings from prior years
Accumulated Earnings as of December 31, 2010
accumulated earnings tax, the controlling intention of the taxpayer is that
Less: Amount that may be Retained which is manifested at the time of accumulation, not subsequently declared
(100% of Paid-Up Capital as of December 31, 2010) xxxx
–––––
intentions which are merely the product of afterthought. A speculative and
IATI Pxxxx indefinite purpose will not suffice. The mere recognition of a future problem
=====
The resulting "Improperly Accumulated Taxable Income" is thereby multiplied by 10% to arrive at the Improperly Accumulated Earnings Tax
or the discussion of possible and alternative solutions is not sufficient.
(IAET). Definiteness of plan/s coupled with action/s taken towards its
consummation are essential.

Page 103 Year-end Tips and Reminders Page 104 Year-end Tips and Reminders

26
Appropriation of RE for Business Expansion
Financial Reporting Bulletin No. 15
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.
Page 105 Year-end Tips and Reminders
Reconciliation of Retained Earnings
Financial Reporting Bulletin No. 14
 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.
Page 107 Year-end Tips and Reminders
RE Available for Dividend Declaration
SEC Memorandum Circular No. 11, Series of 2008
Page 106 Year-end Tips and Reminders
Reconciliation of Retained Earnings
Financial Reporting Bulletin No. 14
Items Amount
Unappropriated Retained Earnings, beginning P xxx
Adjustments:
(see adjustments in previous year’s Reconciliation) xxx
Unappropriated Retained Earnings, as adjusted, beginning P xxx
Net Income based on the face of AFS
Less: 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 xxx
Unappropriated Retained Earnings, as adjusted, ending Pxx x
Page 108 Year-end Tips and Reminders
27
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

Page 109 Year-end Tips and Reminders Page 110 Year-end Tips and Reminders

Submission of Inventory List and Other Submission of Inventory List and Other
Reportorial Requirements Reportorial Requirements

RMC 57-2015 dated September 16, 2015 Amended by RMC 61-2015 RMC 57-2015 dated September 16, 2015 Amended by RMC 61-2015
on September 29, 2015 on September 29, 2015

► Provide guidance on how financial accounting information, in addition ► All taxpayers with tangible asset-rich balance sheets, often with at
to the annual inventory list required to be filed under Section 13 of RR least half of their total assets in working capital assets, e.g., accounts
No. V-I, should be reported to the Bureau. receivable and inventory, shall submit, in addition to the annual
inventory list, schedules/lists prescribed in the Circular, in hard and
► The additional reports or schedules to be submitted and filed with the soft copies.
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.

Page 111 Year-end Tips and Reminders Page 112 Year-end Tips and Reminders

28
Submission of Inventory List and Other
Reportorial Requirements
RMC 57-2015 dated September 16, 2015 Amended by RMC 61-2015
on September 29, 2015
► 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.

Page 113 Year-end Tips and Reminders Page 114 Year-end Tips and Reminders

BIR Audit Program BIR Audit Program

RMO 19-2015 dated September 15, 2015 RMO 19-2015 dated September 15, 2015

The said audit/investigation shall include, but not be limited to the Priority Taxpayers/Industries:
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:

Page 115 Year-end Tips and Reminders Page 116 Year-end Tips and Reminders

29
BIR Audit Program
RMO 19-2015 dated September 15, 2015

Priority Taxpayers/Industries:

Questions?

Page 117 Year-end Tips and Reminders Page 118 Year-end Tips and Reminders

30