Year-End Tax Requirements and Procedures

Closing the Taxable Year:
Year-end tax requirements and

reminders
03 December 2020
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Page 2
Discussion outline
PEZA Year-End Requirements
Income Tax
 Propriety and validity of deductions/expenses

 Substantiation and deductibility requirements
 Propriety of computation and availment
 NOLCO
 OSD
 MCIT and excess MCIT credits
 CWTs and excess CWTs
 Preparation of ITR
 Completeness of the required attachments
 Reconciliation procedures related to income tax
Page 3
Discussion outline
Local Business Tax (LBT)

Real Property Tax (RPT)
Information Returns
Other Matters
Calendar of Deadlines
Page 4
PEZA Year End Requirements
Page 5
Year-end Reportorial Requirements under IRR to
implement RA 7916
Rules and Regulations to Implement Republic Act No. 7916
Audited Financial
Statements
Income Tax Returns and

attachments
Annual Reports under

PEZA IRR
Page 6
Audited Financial Thirty (30) calendar days

Statements from the date of filing with
the BIR.
Balance Income Statement of Operating Statement of

Sheet Statement & Administrative Cost of Sales
Expenses
Breakdown/Schedule of Sales per Activity, Breakdown/Schedule of Other Income, and Data

on Revenues and Taxes Paid are Deferred under Memorandum Circular No. 2016-014
dated 11 April 2016.|
Page 7
PEZA Memorandum Circular No. 015-12 and PEZA Memorandum Order No. 012-17 dated September 27, 2017
Income Tax Returns Thirty (30) calendar days

and attachments from the date of filing with
the BIR.
Attachments
Copy of the Official

Receipt of payment of
PEZA Certificate PEZA Certificate PEZA Notice of 3% of the 5% GIT to the
of Available of Entitlement of Confirmation of BIR and the Official
Incentives 5% GIT Entitlement to ITH
Receipt of payment to
All PEZA-registered enterprises entitled to income tax the Local Government
incentives are required to attach to their respective Income Unit of the 2% of the 5%
Tax Returns, upon filing thereof, copy of a Certification from
PEZA that the enterprise is a bona fide PEZA-registered GIT
enterprise and is entitled to the Income Tax Holiday and/or the
5% Tax on Gross Income.
Breakdown/Schedule of Sales per Activity, Breakdown/Schedule of Other Income, and Data
on Revenues and Taxes Paid are Deferred under Memorandum Circular No. 2016-014
dated 11 April 2016.|
Page 8
Annual Reports Ninety (90) Days after the

90 end of the accounting
under PEZA IRR
period.
 Inventory Report of Finished Goods, Raw  List of Stockholders

Materials and Work-in-Process  List of Principal Officers
 Value-Added  List of Foreign Nationals /
 Net Dollar Earnings Technicians
 Dollar Cash Flow Statement  List of Training Program
 Report on Long Term Loan  List of Machinery and Equipment
 Report on Capital Account and Shares of
Equity
Deferred under Memorandum Circular No. 2016-014 dated

11 April 2016.
Page 9
Reportorial Requirements under Tax Incentives
Management and Transparency Act (TIMTA)
PEZA Memorandum Order No. 2016-003 dated August 4, 2016 and PEZA Memorandum Order No. 2017-009 dated June 30, 2017
Annex A.1 Annual Tax

Incentives Report: Income
Based Tax Incentives

Incentives Report: VAT, Excise
Tax and Duty-Based Incentives
Other Relevant Data or

Information (Benefits) as required
for the Cost Benefit Analysis to be
conducted by NEDA
Page 10
Tax Incentives Management and Transparency Act
(TIMTA) Reportorial Requirements
PEZA Memorandum Order No. 2016-003 dated August 4, 2016

Incentives Report: Income
Based Tax Incentives
 Email the accomplished Report (still in Excel format) to PEZA

through timta@peza.gov.ph
 Submit a printed copy of the accomplished Report, certified and

signed by two of the highest responsible officials of the enterprise,
to the PEZA Zone Office
Due date
 Within 30 days from the
statutory deadline for
filing of the Final Return for
Income Tax
Page 11
PEZA Memorandum Order No. 2016-003 dated August 4, 2016

Incentives Report: VAT, Excise
Tax and Duty-Based Incentives
 Email the accomplished Report (still in Excel format) to PEZA

through timta@peza.gov.ph
 Submit a printed copy of the accomplished Report, certified and

signed by two of the highest responsible officials of the
enterprise, to the PEZA Zone Office
MARCH
Due date
 On or before
15 March 15 of the
following year
Page 12
PEZA Memorandum Order No. 2017-009 dated June 30, 2017
Other Relevant Data or

Information (Benefits) as required
for the Cost Benefit Analysis to be
conducted by NEDA
 Email the Soft copy in Excel format together with the

scanned copy of the excel worksheet certified by two (2)
highest responsible officials of the enterprise
Due date
 Within 90 days from
90 the statutory
deadline for
filing of the Final
Return for Income
Tax
Page 13
Penalties for Noncompliance with Filing and Reportorial
Requirements under TIMTA
RA No. 10708, as implemented by DOF JAO No. 1-2016 and as circularized by BIR RMC No. 86-16 – The TIMTA
Noncompliance with filing and reportorial requirements and/or failure to

show proof of filing of tax returns using the electronic system for filing
and payment of taxes of the BIR is imposed to penalty as follows:
 1st violation –
fine amounting to
P100,000
 2nd violation – fine

PENALTY amounting to P
500,000
 3rd violation –
cancellation of
registration
Provided, that if the failure to show such proof is not due to the fault of the
registered business entity, the same shall not be a ground for the
suspension of the ITH and/or other income-based tax incentives availment.
Page 14
Implementing Rules and Regulations (IRR) of the
TIMTA
DOF-DTI JAO No. 1-2016 (“IRR of TIMTA”) (circularized by RMC No. 86-16), as amended and clarified by JMC No. 1-
2016 (circularized by PEZA Memorandum Circular No. 2016-35)
REMINDERS
► RBEs employing the fiscal year accounting period shall state in the title of their
Annual Tax Incentive Report – Income-based Tax Incentives (Annex A.1) the ending
date of their fiscal year.
► RBEs shall file returns on time using BIR eFPS.
► If the eFPS is unavailable, as evidenced by written advice from the BIR, the RBEs
shall file and/or pay the taxes due thereon manually. However, upon written advice
from the BIR of the availability of the eFPS, RBEs shall file the tax returns initially
filed manually within 15 days from the date of the written advice.
► All RBEs are urged to refer to the Notes to the Annual Tax Incentives Report of the
PEZA Memorandum Circular No. 2016-35 which provides the description of each
column in order to avoid inaccurate reports.
Page 15
Implementing Rules and Regulations (IRR) of the
TIMTA
DOF-DTI JAO No. 1-2016 (“IRR of TIMTA”) (circularized by RMC No. 86-16), as amended and clarified by Joint
Memorandum Circular (JMC) No. 1-2016 (circularized by PEZA Memorandum Circular No. 2016-35)
► Only RBEs availing of incentives are mandated to submit the

Annual Tax Incentives Report to their respective IPA.
► The following are no longer required to submit the Annual Tax

Incentive Reports:
 International organizations invoking tax treaties or international
agreements to which Philippines is a signatory
 Business entities registered with an IPA but are not qualified for
incentives
 Business entities registered with an IPA that are qualified for
incentives but have not availed or applied for any incentive during the
taxably year
 Business entities registered with an IPA but are no longer availing any
incentives after their incentives entitlement period
 Business entities registered with an IPA that utilize special of
preferential treatment by virtue of Free Trade Agreements
 Regional or Area Headquarters and Regional Operating Headquarters
under Book III of EO No. 226, as amended by RA No. 8756
Page 16
Income Tax
Page 17 #SGVforABetterPhilippines
P P
Check propriety and validity of

deductions/expenses subject to
ceilings/limitations
Page 18
Propriety and validity of
deductions/expenses
Ceilings or
Limitations Interest Expense
Charitable and Other

Contributions
Income Tax
EAR
Deductions
Expense
Retirement
Expense
Page 19
Interest Expense - Limitation
Section 34 (B) (1) NIRC of 1997, as

amended
Reduced by 33% of the interest income subjected to final
tax
BIR Ruling No. 6-00 dated January 5, 2000
As long as, during the taxable year, an interest expense was

incurred on one side and an interest earned on the other
side, which income was subjected to final tax.
Page 20
Interest Expense - Reminders
Interest Income subjected tax

• Foreign Currency Denominated Unit (FCDU)
bank – 15% FWT – Grossed up using 85% rate
(RR No. 11-18)
Interest on unpaid Business Related

Taxes
• Deductible in FULL
• Not Subject to Limitation (RR No. 13-00)
Page 21
Interest Expense - Illustration
Interest income subject to 20% final tax (Peso) – net PhP 80,000
Interest income subject to 15% final tax (Dollar) - net PhP 76,500
Interest expense incurred from loan (Peso) PhP 70,000
Interest expense paid from deficiency income tax PhP 15,000
Peso Account Dollar Account
Interest income subject to final tax - net PhP 80,000 PhP 76,500
Divided by 80% 85%
Grossed-up Amount PhP 100,000 PhP 90,000
Multiplied by 33% 33%
Interest expense limitation PhP 33,000 PhP 29,700
Total interest expense limitation (peso and dollar) PhP 62,700
Interest Expense Interest Expense from
from Loan Deficiency Tax
Interest expense PhP 70,000 PhP 15,000
Total interest expense limitation PhP 62,700 N/A
Deductible interest expense PhP 7,300 PhP 15,000

Total deductible interest expense PhP 22,300
Page 22
Retirement Expense – Limitation
Section 34 (J) of the NIRC 1997, as amended

 Employer maintains pension trust
Contributions to the pension trust during the taxable year
Reasonable amount transferred or paid into such trust in excess of such
contributions during the taxable year
a. Has not theretofore been allowed as a deduction, and
b. Is apportioned in equal parts over a period of ten (10) consecutive
years beginning with the year in which the transfer or payment is
made
It is necessary that there must be actual payments and the

contribution must be made to a trusteed fund for the
employer to claim deduction of its total contribution.
Page 23
Retirement Expense – Limitation
(continued)
Section 118 of the RR No. 2

Employer adopts a reasonable pension plan, actuarially sound and
who establishes, or has established, and maintains a pension trust
for the payment of reasonable pensions to his employees shall be
allowed to deduct from gross income reasonable amounts paid to
such trust
 If the plan contemplates the payment to the trust, in advance of the time when
pensions are granted, of amounts to provide for future pension payments
a. reasonable amounts paid to the trust during the taxable year representing
the pension liability applicable to such year, determined in accordance with
the plan, and in addition
b. one-tenth of a reasonable amount transferred or paid or in part the pension
liability applicable to the years prior to the taxable year, or so transferred or
paid to place the trust on a sound financial basis, shall be allowed as a
deduction for the taxable years and for each of the nine succeeding
taxable years.
Page 24
Retirement Expense – Illustration
If Funding Requirement Report is available:

Particular Amount
Normal cost PhP XXX,XXX
Add: 1/10 of Current Year Past XXX,XXX
Service Cost (PSC)
Amortization of PSC XXX,XXX
Deductible retirement expense PhP XXX,XXX
Computation of Past Service Cost (PSC)
Particular Amount
Actual contribution PhP XXX,XXX
Less: Normal cost XXX,XXX
Past service cost* PhP XXX,XXX
Retirement expense may be claimed as deduction only when there is an actual contribution to the
fund. Note that a mere accrual of retirement expense may not be allowed as deduction.
*Contributions to the fund pertaining to the PSC should be amortized over a period of 10 years. The
periodical amortization or 1/10 of the PSC may be claimed as deduction during the year.
Page 25
(continued)
Computation of deductible retirement expense if Funding
Requirement Report is not available:
[Use Actuarial Valuation Report pursuant to International Accounting
Standards (IAS) 19]
Particular Amount
Current service cost PhP XXX,XXX
Add: 1/10 of Current Year PSC XXX,XXX
Amortization of PSC XXX,XXX
Deductible retirement expense PhP XXX,XXX
Retirement expense may be claimed as deduction only when there

is an actual contribution to the fund. Note that a mere accrual of
retirement expense may not be allowed as deduction.
Page 26
(continued)
Computation of PSC if using Actuarial Valuation Report:
Particular Amount
Actual contribution PhP XXX,XXX
Less: Current service cost XXX,XXX
Past service cost* PhP XXX,XXX
*Contributions to the fund pertaining to the PSC should be

amortized over a period of 10 years. The periodical
amortization or 1/10 of the PSC may be claimed as deduction
during the year.
Page 27
(continued)
Computation of the reconciling item:
Particular Amount
Retirement expense per books PhP XXX,XXX
Less: Deductible retirement expense XXX,XXX
Reconciling item PhP XXX,XXX
Page 28
Charitable and other contributions
Donations to the following shall be allowed full deductibility:
To the Philippine To foreign To NGOs To those covered

Government institutions or accredited by the Philippine by special laws
Council for NGO Certification,
or to any of its agencies or international Inc. (PCNC) (per RR No. 02-
political subdivisions, including
organizations 03) and subject to conditions
fully owned government
to whom the Philippine set forth in RR No. 13-98
corporations
Government has treaties or
commitments with
Page 29
(continued)
Donations deductible in full under Special Laws (examples):
Aquaculture
Development Department State
Integrated
Academy of of SEA colleges and Cultural
Bar of the
the Fisheries & universities Center of the
Philippines
Philippines Development (Various Philippines
(PD No. 181)
(PD No. 205) Centers charters)
(PD No. 292)
National
International Department Athletes
Commission
Rice of Science (Section 1
for the
Research and of RA No.
Culture and
Institute Technology 7549)
the Arts
Page 30
(continued)
Donations to accredited non-stock, non-profit corporations shall be
allowed limited deductibility as follows:
Individual donor Corporate donor

not in excess of 10% not in excess of 5%
of the donor’s income of the donor’s
derived from trade, income derived from
business or profession trade, business or
computed before the profession computed
donation before the donation
Page 31
Charitable and other contributions –
Conditions for full deductibility
Donations to accredited non-stock,
non-profit corporation/NGO
• Submission of Certificate/s of Donation to BIR
(RMC No. 86-14 clarifying RR No. 13-98)
P1 P2
Donee Certification Donor’s Statement of Values
Receipt of the subject matter on a Description, acquisition costs, NBV of
certain date properties per donor’s FS subject to
further confirmation by the BIR
Description of properties Accompanied by deed/bill of sale
Signed by done or authorized Signed by donor or authorized
representative representative
Page 32
Charitable and other contributions –
Conditions for full deductibility
RR No. 02-03
YES Notice of donation to the RDO*
+
Certificate of Donation (BIR Form No. 2322)
Is the amount *should be given within 30 days after the

of donation donor received the Certificate of Donation
at least
PhP 50,000?
Certificate of Donation (BIR Form No. 2322)

NO
Page 33
WHAT MAY BE DONATED For the sole and exclusive purpose of combatting
RR No. 9-2020 dated April 6, 2020 COVID-19 during the period of the state of national
emergency (under Bayanihan Act – RA 11469)
 Cash
 Critical or needed healthcare equipment

or supplies
(PPEs, medical supplies, tool and
consumables like alcohol, cleaning
materials, common medicines, testing kits,
etc.)
 Relief goods (food packs, water, etc.)
 Use of property, whether real or personal

(shuttle service, use of lots/buildings)
Page 34
Donations to GOVERNMENT and ACCREDITED
INSTITUTIONS
RR No. 9-2020 dated April 6, 2020
Conditions to claim FULL deductibility & Donor’s tax EXEMPTION:
Must be donated to:
 Government;
 Government agencies not for profit (including
public hospitals);
 Political subdivisions (including fully-owned
government corporations);
 Accredited NSNP educational, charitable
institutions*;
 Accredited NGOs;
 Trust, philanthropic or research institutions
* Educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited
NGOs, trust or philanthropic organization or research institution or organization
Page 35
Donations to GOVERNMENT and ACCREDITED
INSTITUTIONS (continued)
Execute a DEED OF DONATION

(for donations to Government)
or CERTIFICATE OF DONATION /
BIR FORM 2322
(for donations to Accredited
NSNP, NGOs, etc.)
No longer required:
NEDA Certification (priority program)
Notice of Donation
Page 36
Donations to PRIVATE HOSPITALS and NON-ACCREDITED
INSTITUTIONS

Must be donated to:
 Private hospitals;
 NSNP educational, charitable institutions*;
 Non-accredited NGOs;
 Trust, philanthropic or research institutions;
 Local private corporations;

 Civic organizations;
 International institution
*Educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited
NGOs, trust or philanthropic organization or research institution or organization.
Page 37
A. For Private hospitals, Non-accredited institutions:

DOCUMENTARY REQUIREMENTS
Donor to execute SWORN

CERTIFICATION (Annex B) Attach Donee to fill up a
stating: ACKNOWLEDGEMENT LIQUIDATION
 Name of donee RECEIPT* by the Donee
REPORT (Annex A)
 Date of donation
 Value of donation For donations in kind,
 Donation was made solely for attach PROOF OF
the purpose of supporting PURCHASE
efforts to fight COVID-19 *BIR-registered or using template
during the period of the State in Annex C
of National Emergency
Page 38
B. For Local Private Corporation, Civic Organization,

International institutions:
CONDITIONS
Donee must be:
Actually, directly and  Accredited NGOs,

exclusively distribute  National
or transfer donations
to government,
 Gov. agencies not
&/or for profit, or
 Political subdivisions
Partner as
conduit/logistical
machinery with
Page 39
B. For Local Private Corporation, Civic Organization,

International institutions:
DOCUMENTARY REQUIREMENTS
Donee (ultimate Attach ACKNOWLEDGEMENT Donee to fill up a

beneficiary) to execute RECEIPT* by the ultimate LIQUIDATION
CERTIFICATE OF beneficiary
REPORT (Annex A)
DONATION (BIR Form
2322); or DEED OF For donations in kind, attach
DONATION PROOF OF PURCHASE
*BIR-registered or using template in
Annex C
Above requirements are not required on donations to international institutions. Rather,
donations shall be subject to verification rules under Sec 34(H)(4) of the Tax Code.
Page 40
BIR SUBMISSION OF ALL DOCUMENTARY

REQUIREMENTS
All documentary requirements

shall be submitted to the RDO
60 where the Donor and Donee are
registered within sixty (60) days
from the lifting of the ECQ
Page 41
Entertainment, amusement and
recreational (EAR) expense - Limitation
Section 5 There shall be allowed a deduction from gross

income for EAR expense, in an amount equivalent
of RR No. to the actual EAR expense paid or incurred within
10-02 the taxable year by the taxpayer, but in no case
shall such deduction exceed:
Sale of services
Sale of goods Including exercise of profession
and use or lease of properties
0.5% of net sales
(i.e., gross sales less sales 1% of net revenue
returns/allowances and sales
discounts) (i.e., gross revenue less discounts)
Page 42
EAR expense - Limitation
(continued)
Engaged in both sale of

goods/properties and services
Use the apportionment Formula
Net sales/Net revenues

x EAR expenses
Total net sales and net revenues
Page 43
EAR expense - Reminders
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.
GUESTS - persons or entities with which the taxpayer has direct

business relations, such as but not limited to, clients/customers or
prospective clients/customers.
Shall not include employees, officers, partners, directors, stockholders,

or trustees of the taxpayer.
Contrary to law, morals, public policy or public order shall in no case be

allowed as a deduction.
Page 44
EAR expense – Reminders
(continued)
Sections 2 and
3 of RR No. The following expenses are not considered
10-02 EAR expenses:
For attending or
Compensation For bona fide For events
sponsoring an
or fringe business organized for Other
For charitable employee to a
benefits under meeting of promotion, expenses of
or fund raising business league
an employer- stockholders, marketing a similar
events or professional
employee partners or and nature
organization
relationship directors advertising
meeting
Page 45
EAR expense – Reminders
(continued)
Maintain receipts and adequate
records
Amount of expense
Date and place of expense
Purpose of expense
Professional or business relationship of

expense
Name of person and company entertained with

contact details
Page 46
EAR Expense - Illustration
► XYZ Corporation is engaged in the sale of goods and services with net sales
and net revenue of PhP 400,000 and PhP 200,000, respectively.
► The actual EAR expense for the taxable year totaled to PhP 6,000.
Net sales/Net EAR expense based Maximum Claimable EAR
revenue on apportionment percentage ceiling Expense (Lower
formula* of EAR expense** between 2 & 3)
(1) (2) (3) (4)
Sale of PhP 400,000 PhP 4,000 PhP 2,000 PhP 2,000
goods
Sale of 200,000 2,000 2,000 2,000
services
Total PhP 600,000 PhP 6,000 PhP 4,000 PhP 4,000
* APPORTIONMENT FORMULA:
Sale of Goods (PhP 400,000/ PhP 600,000) x PhP 6,000
Sale of Services (PhP 200,000/ PhP 600,000) x PhP 6,000
** MAXIMUM PERCENTAGE CEILING

Sale of Goods (PhP 400,000 x 0.50%)
Sale of Services (PhP 200,000 x 1%)
Page 47
P
Ensure that expenses claimed as
deductions are properly substantiated
and the requirements for deductibility are
complied with
Page 48
Substantiation and deductibility
requirements
General Requirements
Should be ordinary and necessary expenses paid/incurred
during the taxable year for the development, management,
operation and/or conduct of the trade, business or profession
Substantiated by adequate proof - documented by official

receipts (ORs) or adequate records which reflect the:
• Amount being deducted; and
• Connection or relation of expense to the business/trade of the taxpayer
Not contrary to law, morals, public policy or order (e.g.,

bribes, kickbacks or similar payments)
The taxes required to be withheld (if applicable) have

been properly withheld and remitted on time
Page 49
Timing of Claiming of Expenses
 When paid or incurred during the taxable year

 The terms “paid or incurred” and “paid or accrued” will be construed according to the
method of accounting upon the basis of which the net income is computed by the
taxpayer.
 The deductions and credits must be taken for the taxable year in which “paid or
accrued” or “paid or incurred”, unless in order to clearly reflect the income such
deductions or credits should be taken as of a different period.
 For companies using the accrual method of accounting, deductions

and credits must be taken in the year when it is accrued.
 All-Events Test
1. All events have occurred which determine the liability; and
2. The amount of liability can be determined with reasonable accuracy. (Mertens Law
of Federal Income Taxation, Chap. 12A, p. 80)
3. In addition, the taxpayer must show that the economic performance test has been
met, i.e., activities giving rise to the taxpayer’s obligations are actually performed or
when property is provided. (Mertens, Chap. 12A, p. 16)
Page 50
Reminder
Prior year’s accrued bonus not allowed as deduction in the current year
(year of payment)
CTA Case No. 8372 dated March 31, 2016
Issue:
Whether Company A is liable for deficiency income tax for claiming as
deduction accrued bonus paid and subjected to withholding tax in the
current year
Held:
 Company A is liable for deficiency income tax on the over-claimed
salaries and allowances in the current year.
 Section 45 of the 1997 Tax Code, as amended, provides deductions
shall be claimed for the taxable year in which “paid or accrued” or
“paid or incurred”, dependent upon the method of accounting upon the
basis of which the net income is computed, unless in order to clearly
reflect the income, the deductions should be taken as of a different
period.
Page 51
Reminder (continued)
Held (cont’d):
 Revenue Audit Memorandum Order (RAMO) No. 1-00 provides that
under the accrual method of accounting, expenses not being claimed
as deductions by a taxpayer in the current year when they are
incurred cannot be claimed as deduction from income for the
succeeding year.
 Thus, a taxpayer who is authorized to deduct certain expenses and
other allowable deductions for the current year but failed to do so
cannot deduct the same for the next year.
 Accordingly, for income tax purposes, Company A should have
deducted the accrued bonus in the year it was accrued, provided that
it was subjected to proper withholding taxes.
Page 52
Withholding Requirement
 Only if it is shown that the tax to be deducted and withheld has been
paid to the BIR.
 The obligation of the payor to deduct and withhold the tax arises at the
time an income is paid or payable, or accrued or recorded as an
expense or asset, whichever is applicable in the payor’s books,
whichever comes first.
 The term “payable” was defined to refer to the date the obligation becomes
due, demandable, or legally enforceable. However, where income is not yet
paid or payable but the same has been recorded as an expense or asset,
whichever is applicable, in the payor’s books, the obligation to withhold shall
arise in the last month of the return period in which the same is claimed as
an expense or amortized for tax purposes.
Page 53
Withholding Tax Requirement
Cases
CTA Case No. 7597 dated November 25, 2009 and March 17, 2010
Issue:
► Before the Court is a Petition for Review that seeks the cancellation of
the assessments issued by respondent, CIR, against petitioner,
Company B, for alleged deficiency income tax arising from the
deductions (i.e., rentals, professional fees, repairs and maintenance,
arrastre and B/L charges and Subcon salaries) which were disallowed
because these were not subjected to EWT. However, petitioner was
able to prove that it has paid the BIR the deficiency EWT, upon being
assessed thereof.
Held:
► The deficiency income tax should, in its entirety, be sustained.
Page 54
Cases (continued)
Held (cont’d):
► One of the requirements for the deductibility of an expense from the
taxpayer's gross income, is that "the tax required to be deducted and
withheld therefrom has been paid" to the BIR. This provision obliges
the withholding agent to file the withholding tax return and pay to the
BIR the withheld tax at a certain period, which as required under RR
No. 2-98, as amended RR No. 6-01, should be within ten (10) days or
five (5) days [(in case of electronic filing and payment system (eFPS)]
after the end of each month. Simply put, the taxpayer must remit
within the said period the tax withheld. Otherwise, the
corresponding expense may not be allowed as a deduction from his or
its gross income.
► In this case, petitioner paid the supposed tax withheld only when
respondent had made an assessment thereon or at a time already
beyond the said ten-day or five-day period. Thus, even when petitioner
paid the deficiency EWT, upon being assessed thereof, it shall not be
allowed to deduct the subject expenses or income payments to the
pertinent withholding tax rates were applied.
Page 55
Cases
CTA En Banc (EB) Case No. 526 dated September 7, 2010
Issue:
► Whether the expenses incurred by Company M for rent and
advertising and sales promotion were not valid deductions for failure to
withhold the corresponding taxes at the time they were claimed as
expenses.
Held:
► It was ruled that the accrued expenses for rent and advertising and
sales promotion were not treated as valid deductions for failure of
the taxpayer to withhold the corresponding taxes at the time the
expenses were claimed. In this case, the taxpayer paid the
withholding tax on accrued expenses on the succeeding year (upon
the year of payment of accrued expenses). In addition, the taxpayer
did not pay the corresponding surcharges, interest and penalties for
non-withholding of the corresponding tax.
Page 56
Cases
SC GR No. 167679 dated July 22, 2015
Issue:
► Whether Company I is liable for withholding taxes on bonuses
accruing to its officers and employees during taxable years 1996 and
1997.
Held:
► Yes. The SC held that the obligation of the payor/employer to deduct
and withhold the related withholding tax arises at the time the income
was paid or accrued or recorded as an expense in the payor’s/
employer’s books, whichever comes first.
► Company I accrued or recorded the bonuses as deductible expense in
its books. Therefore, its obligation to withhold the related
withholding tax due from the deductions for accrued bonuses
arose at the time of accrual and not at the time of actual payment.
Page 57
Reminder
RR No. 12-13
Disallowance of expense for income

Expenses not
= tax notwithstanding payments of
subjected to proper
withholding tax at the time of the
withholding taxes
audit
RR No. 6-18
Allowed deduction for income tax

Expenses not = provided that the deficiency taxes
subjected to proper are paid including interest and
withholding taxes surcharges, if any
Page 58
Substantiation of Income Tax Deductions
Depreciation
Interest Taxes
Bad Debts
Forex Gains
Losses
/ Losses
Page 59
Losses
Section 34 (D) (1) of the 1997

Tax Code, as amended
Actually Of property
sustained and connected with
charged-off the trade,
during the business, or
taxable year Incurred in profession, if the Sustained in a
and not trade, loss arises from closed and
compensated profession or fires, storms, completed
for by business shipwreck or other transaction
insurance or casualties, or from
other forms of robbery, theft, or
indemnity embezzlement
Page 60
Inventory Losses
Ensure that write-off of inventories are supported by Certificates of

Destruction issued by the BIR
► The application for inventory assets disposal/destruction loss shall be filed with and
processed by the concerned large taxpayer (LT) or revenue district office (RDO) where
the principal place of business of the taxpayer is registered.
► In case where the inventories, machineries or equipment applied for destruction or

disposal are located outside the territorial jurisdiction of the LT or RDO where the
taxpayer is registered, the physical/ocular inspection and supervision over the
destruction/disposal or verification of casual loss thereof may be conducted by the LT or
RDO having territorial jurisdiction over the place where the said items are located in order
to save travel expenses, upon the request of, and with the proper coordination by the
concerned LT or RDO where the principal office of the taxpayer is registered.
For this purpose, no destruction or disposal of any inventory, machinery or

equipment shall be made without the presence and supervision of the
authorized BIR representative.
Page 61
Inventory Losses
(continued)
Policies and guidelines for destruction/disposal of the inventories,
machineries or equipment
(RMO No. 21-2020 dated July 10, 2020)
Proof of disposal/
Witnessing destruction** Certificate of
Application for 1) BIR (Notarized Sworn Deductibility of
Representative – Declaration of Asset
Destruction/ Disposal, photographs Goods/Assets
Disposal physical or virtual
means and videos before, Destructed/
during and after the Disposed
2) Third Party activity)
*To be submitted within 7 days before the scheduled date of

destruction/disposal
**To be submitted within 3 days after the completion of the actual
destruction/disposal of the inventory/assets
Page 62
Casualty Losses
Ensure that casualty losses are supported by Sworn Declaration of Loss
Should be filed within forty-five (45) days after the date of the event that gave
rise to the casualty, stating the following:
Items needed to
compute the loss(es)
such as: Amount of
Nature of the Description and  cost or other basis of insurance or
event and the location of the the property(ies) other
time of its damaged  depreciation allowed, compensation
if any
occurrence property(ies)  value of the
received or
property(ies) before receivable
and after the event
 cost of repair
Page 63
Casualty Losses
(continued)
Requirements for the filing of claims of casualty loss
RMO No. 31-09
Proof of the elements of the loss(es) claimed, such as, but not limited to, the
following:
Photographs of the Documentary Insurance policy, in Police report, in

property(ies) before evidence for the event that there cases of
and after the determining the is an insurance robbery/theft during
casualty (showing cost or valuation of coverage for the the typhoon and/or
the extent of the the damaged property(ies) as a consequence
damage sustained) property(ies) of looting
All documents and other evidence submitted to prove such loss(es) shall be
subject to verification by the concerned Bureau office and shall be kept by the
taxpayer as part of his tax records and be made available to the duly-authorized
Revenue Officer(s) (ROs) upon audit of his ITR and the declaration of loss.
Page 64
Bad Debts
Ensure that bad debts written-off are properly supported
RR No. 05-99, as amended by RR No. 25-02
► Before a taxpayer may charge off and deduct a debt, he must ascertain and
be able to demonstrate with reasonable degree of certainty the
uncollectibility of the debt. The CIR will consider all pertinent evidence,
including:
 The value of the collateral, if any, securing the debt and the financial condition of
the debtor in determining whether the debt is worthless, or;
 The assigning of the case of collection to an independent collection lawyer who

is not under the employ of the taxpayer and who shall report on the legal obstacle
and the virtual impossibility of collecting the same from the debtor and who shall
issue a statement under oath showing the propriety of the deductions thereon made
for alleged debts.
Page 65
Bad Debts
(continued)
RR No. 05-99, as amended by RR No. 25-02
► Also, in no case may a receivable from an insurance or surety company be
written-off from the taxpayer's books and claimed as bad debts deduction
unless such company has been declared closed due to insolvency or for any
such similar reason by the Insurance Commissioner (e.g. flight or
disappearance of debtor).
► Thus, where the surrounding circumstances indicate that a debt is worthless

and uncollectible and that legal action to enforce payment would in all
probability not result in the satisfaction of execution on a judgment, a showing
of these facts will be sufficient evidence of the worthlessness of the debt for
the purpose of deduction.
Page 66
Bad Debts
Cases
Documentation requirements for deductibility of bad debts
SC GR No. 118794 dated May 8, 1996
Issue:
► What are the requisites for debts to be considered as “worthless”, and
thereby qualify as “bad debts”?
Held:
► Before a debt can be considered worthless, the taxpayer is at least
expected to produce reasonable proof that the debts are uncollectible
although diligent efforts were exerted to collect the same.
► To prove that a taxpayer has exerted diligent efforts to collect the
debts, the following may be done:
(1) sending of statement of accounts;
(2) sending of collection letters;
(3) giving the account to a lawyer for collection; and
(4) filing a collection case in court.
Page 67
Interest
Ensure that interest is stipulated in writing
CTA Case No. 6356 dated June 9, 2009
 For interest payment to be deductible, the same must be supported

by a written agreement of the indebtedness the term of which
stipulates for the payment of an interest. (Article 1956 of the Civil
Code)
 The written agreement of the indebtedness is an indispensable
requirement to support a claim of deductibility of interest payment. For
how could a claimant prove concurrence of all the said requisites
without showing the written agreement of the indebtedness. (Delfin
Ma. V. Cruz, Jr., vs. The CTA and the CIR, supra)
Page 68
Interest
(continued)
Ensure that interest is stipulated in writing
CTA Case No. 6356 dated June 9, 2009 (cont’d)
 Although the promissory notes submitted by Company M in support of

its other interest payments to Bank C may be considered as valid
proofs of indebtedness, the Company failed to prove that the
corresponding loan proceeds were used in connection to its
business. Company M alleged that the proceeds of the loan were
used to pay for its foreign currency or working capital requirements
and to pay for the import cost of goods or services necessary in the
production of its goods; however, no documentary evidence was
submitted to prove such allegation.
Page 69
Taxes
Taxes paid or incurred within the taxable year

Section 34 (C) (I) of in connection with the taxpayer’s trade or
the 1997 Tax Code, as business shall be allowed as deduction for
amended income tax purposes, except:
► Philippine income tax

► Foreign income tax, if taxpayer avails of the Foreign Tax Credit (FTC)
► Estate and donor’s tax
► Taxes assessed against local benefits of a kind that tends to increase the
value of the property assessed
Page 70
Taxes – Foreign Income Taxes
Options: For Citizens and Domestic Corporations
Claim as Claim as FTC

deduction from against Philippine
gross income income tax due
 Non-resident citizens
 Aliens, whether residents or non-residents
 Foreign corporations, whether residents or non-residents
Page 71
(continued)
BIR requirements for FTC

Total amount of income derived from foreign
sources
Amount of income derived from each country, the

foreign tax paid or incurred, which is claimed as a
credit
All other information necessary for the verification

and computation of such credit
Page 72
Limit Computation
FTC limitation involving one country only
Allowable tax credit is the lower between:
Actual tax paid in the foreign Taxable income from foreign country Philippine
OR x
country Taxable income from all sources income tax
FTC limitation involving more than one country

Allowable tax credit is the lowest among:
Actual tax paid in the foreign country
OR
Total limitation Taxable income from foreign country (i.e., Country A
computed on a per Philippine limitation + Country
x
country basis Taxable income from all sources income tax B limitation + …)
OR
Total limitation Taxable income from outside sources
computed on an
Philippine
x
aggregate basis Taxable income from all sources income tax
Page 73
Depreciation
Ensure compliance with the additional requirements for deductibility of

depreciation and other expenses related to purchase of vehicle
RR No. 12-12, as clarified by RMC No. 02-13
► Applies to land vehicles purchased starting October 17, 2012.
► No deduction from gross income shall be allowed unless the taxpayer

substantiates the purchase with sufficient evidence, such as ORs or other
adequate records which contain the following:
 Specific Motor Vehicle Identification Number, Chassis Number; or other
registrable identification numbers of the vehicle;
 The total price of the specific vehicle subject to depreciation; and
 The direct connection or relation of the vehicle to the development,
management, operation, and/or conduct of the trade or business or
profession of the taxpayer.
Page 74
Depreciation
(continued)

► Only one vehicle for land transport is allowed for the use of an official or
employee the value of which should not exceed PhP 2,400,000;
► No depreciation shall be allowed for yachts, helicopters, airplanes and/or
aircrafts, and land vehicles which exceed the above threshold amount,
unless the taxpayer’s main line of business is transport operations or lease of
transportation equipment and the vehicles purchased are used in the
operations;
► All maintenance expenses on account of non-depreciable vehicles for taxation
purposes are disallowed in its entirely;
► The input taxes on the purchase of non-depreciable vehicles and all input
taxes on maintenance expenses incurred thereon are likewise disallowed for
taxation purposes.
Page 75
Depreciation
(continued)
► For income tax purposes, all expenses related to the non-depreciable vehicles
shall not be allowed as a deduction in its entirety such as but not limited to:
 repairs and maintenance
 oil and lubricants
 gasoline
 spare parts
 tires and accessories
 premium paid for insurance covering said vehicles
 registration fees
► Any loss that will be incurred as a result of a sale of the non-depreciable
vehicles shall not be allowed as a deduction from gross income.
Page 76
Foreign exchange gains/losses
Ensure foreign exchange gains/losses considered as taxable/deductible

are actually realized
► Foreign exchange gains and losses can only be recognized for tax purposes
when they are actually realized.
► Only foreign exchange gains/losses which were actually realized during the
taxable period as evidenced by closed and completed transactions (e.g.,
collection of receivable or payment of a liability) shall be taxable/deductible for
income tax purposes.
Page 77
Check the propriety of computation and
availment of NOLCO, OSD, and Tax
Credits
Page 78
Net Operating Loss Carry Over (NOLCO)
General Principles and Guidelines
Section 34 (D) (3) of the 1997 Tax Code, as amended

► NOLCO shall mean the excess of allowable deduction over gross income of the
business in a taxable year.
► The Net Operating Loss (NOL) of the business or enterprise for any taxable
year immediately preceding the current taxable year, which had not been
previously offset as deduction from gross income shall be carried over as a
deduction from gross income for the next 3 consecutive taxable years
immediately following the year of such loss.
► Any net loss incurred in a taxable year during which the taxpayer was exempt
from income tax shall not be allowed as a deduction.
Page 79
NOLCO
(continued)
General Principles and Guidelines
Section 2 of RR No.14-01
► In general, NOLCO shall be allowed as a deduction from the gross income of
the same taxpayer who sustained and accumulated the NOL regardless of the
change in its ownership. This rule shall also apply in the case of a merger
where the taxpayer is the surviving entity.
► The three-year reglementary period on the carry-over of NOLCO shall
continue to run notwithstanding the fact that the corporation paid its
income tax under the MCIT computation.
► NOLCO shall be availed of on a First-in First-out (FIFO) basis
Page 80
NOLCO
(continued)
Presentation
Section 7 of RR No. 14-01

► The NOLCO shall be separately shown in the taxpayer's annual ITR (also
shown in the Reconciliation Section of the annual ITR).
► The unused NOLCO shall be presented in the Notes to the Financial
Statements showing, in detail:
► the taxable year in which the net operating loss was sustained or incurred;
and
► any amount thereof claimed as NOLCO deduction within three (3)
consecutive years immediately following the year of such loss.
► In no case may NOLCO be claimed, as a part of the taxpayer's other itemized
deductions, like under deduction of "losses" in general.
► Failure to comply with this requirement will disqualify the taxpayer from
claiming the NOLCO.
Page 81
NOLCO
(continued)
NOLCO for TY 2020 and 2021 (IRR on the Bayanihan Act 2)
NOLCO for TY2020 and 2021
Deduction from gross income for the next

5 consecutive taxable years
Failure to comply with these requirements will disqualify

the taxpayer from claiming the NOLCO.
NOLCO Presentation Unused NOLCO Presentation
 ITR – separately show NOLCO (also  Notes to Financial Statements

shown in Reconciliation Section of  Taxable year loss was incurred
tax return)  Amount claimed as NOLCO
 Notes to AFS – separate TY 2020 deduction within 5 consecutive
years
and 2021 NOLCO from other years
Page 82
Optional Standard Deduction (OSD)
General principles and guidelines
RR No. 16-08
► Implements Section 34 of RA No. 8424, as amended by Section 3 of RA No.
9504
Domestic
corporation/Resident
Foreign Corporation
40% of gross income
Users of BIR Form No. 1702-MX and BIR Form No. 1702-EX (June 2013 Version) do not have
the option to elect OSD.
Page 83
OSD
(continued)
Making the election
RR No. 02-10
► 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.
► 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.
Any subsequent amendment of such ITR filed for the first/initial quarter of
the taxable year shall not affect the irrevocable character of the election to
avail of the OSD or itemized deduction, as the case may be.
Page 84
Minimum Corporate Income Tax (MCIT)
General principles and guidelines
Whenever such corporation has zero or

negative taxable income
OR
Whenever the amount of MCIT is greater

Domestic than the normal income tax due from such
corporations/ corporation
RFCs
► Only for domestic and RFCs subject to the normal corporate income tax.
► In the case of a domestic corporation whose operations or activities are partly
covered by the regular income tax system and partly covered under a special income
tax system, the MCIT shall apply on operations covered by the regular corporate
income tax system.
► In computing the MCIT due from an RFC, only the gross income from sources within
the Philippines shall be considered for such purpose.
Page 85
MCIT
(continued)
Computation of MCIT
Income tax payable will be RCIT On gross income, i.e., gross

or MCIT, whichever is higher. sales/gross receipts less
Any excess MCIT over RCIT shall

be carried forward and credited
2% sales returns, allowances,
discounts and cost of goods
sold, in case of sales of goods
against RCIT for the three and cost of services, in the
immediately succeeding case of sale of services, plus
taxable years. other taxable income.
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
1 2 3 4
Commencement
of business
operations
Any excess of MCIT over the normal income tax
can be carried forward on an annual basis.
Page 86
MCIT - Illustration
How to carry forward excess MCIT on an annualized basis

Year Normal income MCIT Excess MCIT Amount of tax
tax over normal payable
income tax
2011 PhP 50,000 PhP 75,000 PhP 25,000 PhP 75,000
2012 60,000 100,000 40,000 100,000
2013 100,000 60,000 - 100,000
Particular Amount The excess MCIT is creditable

Income tax due PhP 100,000 against the normal income tax
due in the next three taxable
Less:
years. Thus, the excess MCIT
2011 excess MCIT PhP 25,000
for 2010 can be claimed as a
2012 excess MCIT 40,000 PhP 65,000 tax credit against the normal
Net tax payable PhP 35,000 income tax due up to taxable
year 2013 and only when the
normal income tax is greater
than the MCIT for that year.
Page 87
Creditable Withholding Taxes (CWTs)
Ensure proper substantiation of CWTs
 Creditable only in the year in which the related income is earned and reported
in the ITR
 Properly supported with tax certificates dated within the covered taxable year.
 Section 2.58.3 of RR No. 2-98, as amended, provides that the amount of

creditable tax withheld shall be allowed as a tax credit against the income tax
liability of the payee in the taxable quarter in which the income was earned or
received.
 CWT certificates with lacking authorized signature of the issuer/payor,

registered name, address, etc. or dated outside the taxable year, are
considered as improperly substantiated CWTs.
Page 88
CWTs
Cases
CTA Case No. 8806 dated June 27, 2017
Issue:
► Whether Company H is entitled to claim TCC for the whole amount of
excess CWT
Held:
► Based on the report issued by the ICPA, CWTs amounting to PhP
27,146 shall be disallowed due to the following:
► CWTs related to income declared in other periods
► Improperly substantiated CWTs (i.e., no authorized signature of the

issuer/payor, or dated outside the taxable year)
Page 89
CWTs
(continued)
Filing of reporting requirements

► Attachment of a copy of the Certificate of Creditable Tax Withheld at Source
(BIR Form No. 2307) issued by the withholding agent to the quarterly and
annual ITRs.

► The certificate of withholding tax shall be filed within fifteen (15) days from
the date of filing of any of the following BIR Form Nos.: a) 1702; b) 1702Q; c)
2550M; d) 2550Q; and e) 2551. The taxpayer is required to file three (3)
copies of the certificate of withholding tax.
► The certificate of withholding tax of income payments made to a LT shall be
filed with the Large Taxpayer Service (LTS) or the Large Taxpayer
Division Office (LTDO) as the case may be and with their respective RDO,
in the case of Non-Large Taxpayers.
Page 90
Excess CWTs / Overpayment
Remedies for excess/overpayment
Section 76 of the 1997 Tax Code, as amended
Allowed as automatic
credit against his
income tax due for the
taxable quarters/years
immediately Cash refund/TCC
succeeding the
taxable quarters/years
in which the excess
credit arose
Once the option to carry-over and apply the excess credits against the
tax due of succeeding taxable quarters/years has been made, such
option shall be considered irrevocable for that taxable period and no
application for cash refund or issuance of a TCC shall be allowed
therefor.
Page 91
Excess CWTs / Overpayment
Cases
Remedies for excess/overpayment
SC GR No. 181298 dated March 2, 2011
Issue:
► Whether Company B may be allowed to refund its excess income tax
payments even though it had already carried-over the same
Held:
► No. The Court held that since the Company already carried over its 1997
excess income tax payments to the succeeding taxable year, it may no
longer file a claim for refund of unutilized tax credits for taxable year
1997.
► Once the option to carry-over excess income tax payments to the
succeeding years has been made, it becomes irrevocable. Thus,
applications for refund of the unutilized excess income tax payments
may no longer be allowed. However, it may apply the excess income tax
payments as a tax credit to the succeeding taxable years until fully
utilized.
Page 92
Check proper submission of ITRs of
corporate taxpayers
Page 93
Mandatory Use of eBIR Forms
RR No. 6-2014, as amended by RR

Nos. 5-2015 and 9-2016 and
clarified by RMC Nos. 11-2015 and Only those non-eFPS filers are
19-2015 covered:
Accredited Tax Agents/Practitioners and all its client-taxpayers;
Accredited Printers of Principal and Supplementary Receipts/Invoices;
ONETT taxpayers who are classified as real estate dealers/developers; those
who are considered as habitually engaged in the sale of real property and
regular taxpayers already covered by eBIRForms. Thus, taxpayers who are
filing BIR Form Nos. 1706, 1707, 1800, 1801 and 2000-OT (for BIR Form No.
1706 only) are excluded in the mandatory coverage from using the
eBIRForms
Those who shall file a "No Payment Return";
Government-Owned-or-Controlled Corporations (GOCCs);
Local Government Units (LGUs), except barangays; and
Cooperatives registered with National Electrification Administration (NEA)
and Local Water Utilities Administration (LWUA).
Page 94
Mandatory Enrollment and Availment of
eFPS Facility
RMC Nos. 69-2009 and 19-2015 and

RR Nos. 1-2010, 10-2012, 1-2013 Following taxpayers are mandated
and 10-2014 to file and pay taxes through
eFPS:
Large Taxpayers (RR No. 2-2002)
All Government bidders (RR No. 3-2005)
Corporations with paid-up capital stock of PhP 10,000,000 and
above (RR No. 10-2007)
Corporations with complete CAS (RR No. 10-2007)
Taxpayers belonging to the list of the Top 10,000 (now Top 20,000)
Private Corporations (RR No. 2-1998, as last amended by RR No.
14-2008, in relation to RR No. 5-2004)
Taxpayers belonging to the Top 5,000 Individual Taxpayers
(RR No. 6-2009)
Page 95
eFPS Facility (continued)
RMC Nos. 69-2009 and 19-2015 and

eFPS:
Enterprises enjoying fiscal incentives granted by other
government agencies such as:
a) PEZA
b) BOI
c) Subic Special Economic Zone, Clark Special Economic Zone and
Clark Freeport Zone, Poro Point Freeport Zone, Morong Special
Economic Zone, John Hay Special Economic Zone
d) Cagayan Special Economic Zone Authority
e) Export Development Council
f) Tourism Infrastructure and Enterprise Zone Authority
g) PHIVIDEC Industrial Authority (RR No. 1-2010)
Page 96
eFPS Facility (continued)
RMC Nos. 69-2009 and 19-2015 and

eFPS:
All licensed local contractors (RR No. 10-2012 and RMC No. 19-
2015)
NGAs mandatorily required to use the electronic remittance advise
(eTRA) insofar as remittance of withheld VAT and business tax is
concerned (RR No. 1-2013)
Procuring Government Agencies with respect to withholding VAT and
percentage taxes (RR No. 3-2005)
TAMP taxpayers (RR No. 10-2014)
Accredited importer and prospective importer required to secure the
BIR-ICC and BIR-BCC (RR No. 10-2014)
Insurance companies and stock brokers (RMC Nos. 71-2004 and
19-2015)
Page 97
Mandatory Use of eBIR Forms or eFPS
Penalties
PhP 1,000 per return pursuant to Section 250 of the NIRC of

1997, as amended.
In addition, the taxpayer, shall be imposed civil penalties

equivalent to 25% of the tax due to be paid = Wrong
Venue Filing
Inclusion in the priority audit program of the RDO
Q22: I am both mandated to use eFPS and eBIRForms, which one should I use?
A22. Use eFPS. However, for forms not available in eFPS, use eBIRForms. In
which case, enrollment to eBIRForms is required. (RMC No. 19-2015)
Page 98
Filing and Payment Deadlines
Manual and eFPS taxpayers
BIR Form Nos. 1700 and 1701 BIR Form No. 1702
15th 15th
day of April each year day of the fourth month
following the close of the
taxable year
Installment payment: When the
tax due exceeds PhP 2,000, the
taxpayer may elect to pay in two
equal installments, the first
installment to be paid at the
time the return is filed and the
second, on or before October
15 of the same year.
Page 99
Filing and Payment Deadlines
Tentative Annual ITRs
► Considered as a final return, unless a final amended return is filed by the
concerned taxpayer.
► Once an electronic Letter of Authority (LOA) or any other notice of audit is
received, taxpayers are barred from making amendments to the filed tentative
tax returns.
► ITRs marked as “Tentative” may also be the subject of examination pursuant
to Section 6 (A) of the 1997 Tax Code, as amended.
Page 100
Payment of Internal Revenue Taxes
Additional Modes of Payment
Policies and Guidelines on the Adoption of Credit/Debit/Prepaid Card
Payments as Additional Modes of Payment of Internal Revenue Taxes
RR No. 3–2016
► Payment of taxes by credit/debit/prepaid card
► Only the Philippine-issued credit/debit/prepaid cards under the name of the taxpayer-
cardholder shall be used in payment of its/his/her tax liabilities.
► Shall be voluntary or optional on the part of the taxpayer. As such, the taxpayer
shall bear the convenience fee and other fees being charged by the banks and/or
credit card companies for the use of this payment facility; and, that such fees,
including the “Merchant Discount Rate” (MDR), shall, in no case, be deducted from
any amount of tax due to the BIR.
► Deemed made on the date and time appearing in the system-generated
payment confirmation receipt issued to the taxpayer-cardholder by the AAB-
Acquirer.
Page 101
Payment of Internal Revenue Taxes
Additional Modes of Payment (continued)
Policies and Guidelines on the Adoption of Credit/Debit/Prepaid Card
Payments as Additional Modes of Payment of Internal Revenue Taxes
RR No. 3–2016 as amended by RR No. 2-17

► However, in case of late remittance or non-remittance of taxes to the BIR,
despite the timely issuance of a valid confirmation receipt by the AAB-Acquirer
to the taxpayer-cardholder, the liability to pay the tax rests upon the AAB-
Acquirer considering that from the time of issuance of a valid confirmation
receipt to the taxpayer-cardholder, the AAB-Acquirer becomes the trustee of
the government with the obligation to remit the payment on time to the BIR.
► Erroneous tax payment transaction through this prescribed payment mode, the
same shall not give rise to any automatic “charge back” to the taxpayer-
cardholder’s account. In meritorious cases, the taxpayer shall apply for
refund/tax credit with the BIR in accordance with existing revenue issuances.
Page 102
Ensure completeness of the required
attachments to the Annual ITRs
Page 103
Attachments to the Annual ITR
Attachment 1702-RT 1702-EX 1702-MX

Certificate of independent CPA duly accredited by the
BIR (The CPA Certificate is required if the gross quarterly
sales, earnings, receipts or output exceed PhP 150,000)
AIF and/or AFS, including the following schedules
prescribed under existing revenue issuances which must
form part of the Notes to the AFS:
• Taxes and Licenses
• Other information prescribed
Statement of Management’s Responsibility (SMR) for

Annual ITR
Certificate of Income Payments Not Subjected to
Withholding Tax (BIR Form No. 2304)
Certificate of Creditable Tax Withheld at Source (BIR
Form No. 2307)
Duly approved TDM, if applicable
Proof of prior year’s excess credits, if applicable
Page 104
Attachments to the Annual ITR
(continued)
Attachment 1702-RT 1702-EX 1702-MX
Proof of FTC, if applicable
For amended return, proof of tax payment and the return

previously filed
SAWT, if applicable
Proof of other tax payment/credit, if applicable
Schedule of returns filed by GP
Certificate of Tax Treaty Relief/Entitlement issued by

the concerned Investment Promotion Agency (IPA)
Page 105
SAWT and Certificates of Creditable Tax
Withheld at Source (BIR Form No. 2307)
Contains summary of information, showing among others:

► total amounts of income/gross sales/gross receipts, and
► claimed tax credits taken from all Certificates of Creditable Withholding Tax
at Source issued by the payors of income payment.
► For purposes of applying the creditable taxes withheld against the taxes due
on the returns to be filed by the payee, it shall attach a copy of the
Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) issued
by the withholding agent to the quarterly and annual ITRs.
Page 106
SAWT and BIR Form No. 2307
(continued)
Persons required to submit SAWT:
</= 10 Withholding Agents-Payor per return

period – Manually
> 10 withholding Agents-Payor per return

period – Electronically
eFPS Filers (regardless of number of

Withholding Agents-Payor - Electronically
Page 107
(continued)
► The SAWT is required to be filed/submitted to the concerned RDO through the
applicable modes of submission:
Question eFPS attachment e-Submission E-mail Submission
Data Entry and Yes Yes Yes
validation module
requirement?
Who may avail of Only taxpayers All taxpayers, whether or Taxpayers who are
the submission enrolled with eFPS not enrolled with eFPS neither enrolled with
mode? or interactive forms eFPS or Inter-Active
Forms (IAFs)
What is the Through eFPS as By e-mail through single By e-mail at the

specific manner attachment to the e-mail address at dedicated e-mail
of submission of annual information esubmission@bir.gov.ph address of the RDO
the alphalist? return where the taxpayer is
duly registered
Page 108
Submission
1) Scan the original copies of the forms;

2) Store in “PDF” file format in a DVD-R (arranged alphabetically) with the following
naming convention:
► BIR-registered name of the taxpayer-payor
► TIN, including the HO code or branch code of the payor, whichever is applicable
► Taxable Period
Example: Rizal Mfg Corp_131885220000_09312014
Mandatory for LTs and

Optional for Non-Large Taxpayers
Once the option to submit electronically is taken by Non-Large Taxpayers,
Non-Large Taxpayers will no longer be allowed to submit its BIR Form No.
2307 in hardcopies (Effectivity date: March 21, 2015)
Page 109
Submission (continued)
3) Label the DVD-R in the format prescribed in Annex “A” of RR No. 2-2015:
4) Submit the DVD-R to the BIR office where the taxpayer is registered together with a
notarized Certification using the format in Annex “C” of RR No. 2-2015, duly signed by
the authorized representative of the taxpayer certifying that the soft copies of the said
BIR from contained in the DVD-R are the complete and exact copies of the original
thereof.
Page 110
Clarification on the Submission of Scanned Copies of BIR Form No. 2307
RMC No. 24-15
► Retention of the hard copies shall remain in force and effect, and the
presentation thereof may be requested during audit for purposes of validating
the tax credits claimed by the income recipients in their ITRs.
► For corporate entities, the representative thereof who is authorized to sign the
notarized Certification and the label of the DVD-R containing the softcopies of
the scanned BIR Form No. 2307 prescribed by RR No. 2-2015 shall be any of
the PRINCIPAL OFFICERS duly designated through a Board Resolution
issued for the purpose , and sworn to by such officer and by the corporate
treasurer or assistant treasurer.
Page 111
SMR for ITR
Submission
Required for all those Taxpayers required to file

Annual ITR
To be signed by:
Individual Taxpayer
President and Managing Partner
Chief Executive Officer
Chief Financial Officer
Any Office Performing Similar Functions
Branch of Foreign Corporations – Local Manager who is
in charge of Operations
Page 112
Audited Financial Statements (AFS)
Submission
Time and place of filing the AFS
days from the deadline of filing of the BIR Form
No. 1702 or the actual electronic filing thereof,
15 whichever comes later
(clarified under RMC No. 35-2016) Pages to be stamped
 Audit Certificate
BIR shall receive three 3 copies of the returns  Statement of
and attachments. Financial Position
Any copies of the return in excess of 3 copies (Balance Sheet)
shall not be stamped "RECEIVED" by the RDO,  Statement of
LTD and AAB. Comprehensive
Income (Income
In the case of corporations and other juridical Statement)
persons, there shall be stamped "RECEIVED" in  Statement of
at least two (2) extra copies of AFS for filing Management's
SEC. Responsibility
Page 113
AFS
RR No. 21-02
Reportorial requirements
Composition of AFS (Comparative presentation of current and previous year)

 Balance sheet
 Income statement or Profit and Loss Statement
 Statement of Changes in Equity, showing either:
 All changes in equity
 Changes in equity; other than those arising from transactions with equity holders
acting in their capacity as equity holders
 Statement of Cash Flows
 Notes, comprising a summary of significant accounting policies and other
explanatory notes
 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.
Page 114
AFS
Additional Disclosures
Disclosure of taxes, duties and licenses paid or accrued
RR No. 15-10 and RMC No. 17-11

Notes to Financial Statements shall include information on taxes, duties and
license fees paid or accrued during the taxable year, particularly the following:
Page 115
AFS
Additional Disclosures (continued)
Disclosure of taxes, duties and licenses paid or accrued
Page 116
AFS
Maintenance of Books and Records
RR No. 08-07
► The Philippines has adopted the International Financial Reporting Standard
(IFRS) as the PFRS that should be observed by big corporate taxpayers in
the recording of their business transactions and preparation of Financial
Statements starting year 2005.
► This has resulted to disparity of reports for financial accounting vis-à-vis tax
accounting.
► Concerned taxpayers are thus mandated to maintain books and records that
would reflect the reconciling items between FS figures and/or data with those
reflected/presented in the filed ITR.
Page 117
AFS
Functional Currency Reporting
Notification requirements for corporate tax-filer electing to use as functional
currency for financial reporting purposes a currency other than the Philippine
peso:
► Submit to the RDO or LTDO or LTS that has jurisdiction over the taxpayer, a
copy of the duly received notification sent to the SEC (as provided in SEC
Memorandum Circular 1 Series of 2006) for the use of such functional
currency within 30 days from the filing of the notification to the SEC, but
may be subject to extension on meritorious grounds.
► Such copy of the SEC notification duly stamped received by the BIR must
also be attached to the ITR upon filing of said return.
► The information on functional currency shall form part of the taxpayer’s
registration database.
Page 118
Perform reconciliation procedures related
to income tax
Page 119
Reconciliation Procedures
CWTs
• Validate amounts per ITR ties up Reconcile any
with per Books and per AFS differences to
determine if there
Sales
was an under- /
• Validate amounts per ITR ties up
with per Books and per AFS
over- declaration
• Per VAT Returns – if VAT returns of income or
is based on accrual expenses
ITR amounts
• Tie up with the amounts in the
AFS disclosures
Page 120
Other Reminders
Differences PFRS and Income Tax Treatment

• Income and expenses
Nature of Reconciling Items

• Non-Deductible Expenses – added back to financial
income
• Non-Taxable Income – deducted to financial Income
ITR amounts
• Follow tax rules
Page 121
Local Taxes
Page 122
Mayor’s permit
Secured within
January 1-20
Page 123
Real Property Tax
Page 124
Payment of RPT
► Accrues January 1
► Basic RPT:
• Province – not exceeding 1% of assessed value (AV)
• City or municipality within Metro Manila Area (MMA)
RPT – not exceeding 2% of AV
PEZA ENTERPRISES UNDER ITH

• SUBJECT TO RPT on land and/or buildings
• EXEMPT from payment of RPT on machineries and equipment for use in
production operations during the first 3 years use of such machinery and
equipment
PEZA ENTERPRISES UNDER 5% GIT

• EXEMPT from RPT except RPT on land own by Developers
Page 125
Submission of
Information Returns
Page 126
Information Returns Related to PEZA Year-End
Requirements
BIR Form No.1604-E

Annual Information Return of Creditable Income Taxes Withheld (Expanded)/ Income
Payments Exempt from Withholding Tax
 This form consist of the summary of withholding tax – expanded (BIR Form 1601E) paid and
filed to the BIR during the taxable year
 Venue for filing:
a. Through eFPS for eFPS filers
Attachments
a. Alphalist of Payees Subjected to Expanded Withholding Tax.
b. Alphalist of Other Payees Whose Income Payments Are Exempt from
Withholding Tax but Subject to Income Tax.
Due date for filing and
Venue for submission of submission of attachments
attachments
MARCH On or before 1
 Electronic attachment for eFPS March following
 Email to esubmission@bir.gov.ph 01 the calendar year
Page 127
Ensure that certificates of withholding/non-withholding
are issued to suppliers/payees
Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307)
Section 2.58 (B) of RR No. 02-98, as amended by RR No. 03-02
► Distribution to payees the income payments made and the amount of taxes
withheld therefrom, for every month of the quarter, should be within twenty (20)
days following the close of the taxable quarter employed by the payee in filing
his/its quarterly ITR.
► Failure to furnish the certificates shall be a ground for the mandatory audit of the
payor’s income tax liabilities (including withholding tax) upon verified complaint of
the payee.
Page 128
Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307)
RMC No. 85-12
► Every payor required to deduct and withhold taxes under RR No. 2-1998 shall
furnish in triplicate, each payee, whether individual or corporate, with a withholding
tax statement, using BIR Form No. 2307, showing the income payments made and
the amount of taxes withheld therefrom, for every month of the quarter, in twenty
(20) days following the close of taxable quarter employed by the payee in filing
his/her quarterly ITR.
► The payor, nonetheless, should always retain a copy of the duly issued BIR Form
No. 2307.
Page 129
Certificate of Income Payment Not Subject to Withholding Tax

(Excluding Compensation Income) (BIR Form No. 2304)
RR No. 17-77 and as clarified by RMC No. 05-95
► Distribution to payees of the Certificate of Income Payment Not Subject to

Withholding Tax (Excluding Compensation Income) (BIR Form No. 2304) should
be on or before 31 January of the succeeding year following the year in which the
income payment was made.
Page 130
Ensure to obtain Tax Exemption Certificate or Ruling by
Exempt Individuals and Entities from its suppliers/payees
Revenue Memorandum Circular No. 08-14
► Concerned withholding agents shall require all individuals and entities

claiming tax exemption to provide a copy of a valid, current and
subsisting tax exemption certificate or ruling.
► Failure on the part of the taxpayer to present the said tax exemption
certificate or ruling as herein required shall result to payments of the
appropriate withholding taxes due on the transactions.
► The withholding agent’s failure to withhold notwithstanding the lack of

tax exemption certificate or ruling shall cause the imposition of
penalties under Section 251 and other pertinent Sections of the 1997
Tax Code.
►The requirement to present tax exemption certificate or ruling

pursuant to RMC No. 8-14 does not apply to GPPs.
Page 131
Requirements
BIR Form No. 1604-C

Annual Information of Income Taxes Withheld on
Compensation
 This form consist of the summary of withholding tax – compensation (1601-C)

paid and filed to the BIR during the taxable year
 Venue for filing: Through eFPS for eFPS filers
Attachments
1. Acknowledgement Receipt/Validation Successful message as proof of submission thru
electronic attachment for eFPS or email to esubmission@bir.gov.ph of the following:
a. Alphalist of Employees (declared and certified using BIR Form No. 2316)
b. Alphalist of Minimum Wage Earners (declared and certified using BIR Form No.
2316).
2. Authorization letter, if return is filed by an authorized representative.
Due date for return Venue for submission of

JANUARY and attachments attachments
31 On or before 31 January of the  Electronic attachment for eFPS or
year following the calendar year  Email to esubmission@bir.gov.ph
Page 132
Requirements
BIR Form No. 1604-F

Annual Information Return of Income Payments Subjected to Final Withholding
Taxes
 This form consist of the summary of withholding tax – final (1601-FQ), withholding tax on interest
payments (1602Q) and withholding tax on fringe benefits (1603Q) paid and filed to the BIR during the
taxable year
 Venue for filing: Through eFPS for eFPS filers
Attachments
 Acknowledgement Receipt/Validation Successful message as proof of submission thru
electronic attachment for eFPS or email to esubmission@bir.gov.ph of the following:
a. Alphalist of Payees Subjected to Final Withholding Tax.
b. Alphalist of Employees Other than Rank & File Who Were Given Fringe Benefits During
the year.
c. Alphalist of Other Payees Whose Income are Exempt from Withholding Tax but Subject to Income Tax.
 Authorization letter, if return is filed by an authorized representative
JANUARY
Due date for return Venue for submission of
and attachments attachments
31 On or before 31 January of the  Electronic attachment for eFPS or
 Email to esubmission@bir.gov.ph
year following the calendar year
Page 133
Availability of Various Revised BIR Forms
RMC No. 73-2019 dated July 23, 2019 and RMC No. 118-2020 dated November 5, 2020
Form No. Description
Annual Information Return of Income Taxes Withheld on
1604-C
Compensation
Annual Information Return of Creditable Income Taxes Withheld
1604-E
(Expanded)/ Income Payments Exempt from the Withholding Tax
Annual Information Return of Income Payments Subjected to Final
1604-F
Withholding Taxes
RMC No. 100-2019 dated September 10, 2019

2316 Certificate of Compensation Payment/Tax Withheld
RMC No. 74-2019 dated July 23, 2019

2306 Certificate of Final Tax Withheld at Source
2307 Certificate of Creditable Tax Withheld at Source
Not yet available in eFPS as of date
Page 134
Certificate of Final Tax Withheld At Source (BIR Form No. 2306)
► Distribution to the payees of the Certificates of Final Tax Withheld At Source (BIR
Form No. 2306) should be on or before 31 January of the succeeding year following
the year in which income payment was made or upon request of the payee.
Page 135
Refund excess taxes withheld, if any, to employees
Refund of Excess Tax (Annualized Withholding Tax Method)

Section 2.80 (A) (3) of RR No. 02-98
Deadline for refunding excess tax

JANUARY
On or before 25 January of the following year*
25 *In case of termination of employment before December, the refund
shall be given to the employee at the payment of the last
compensation during the year.
In return, the employer can deduct the amount refunded from the remittable amount of
taxes withheld from compensation income in the current month in which the refund
was made and in the succeeding months thereafter until the amount refunded by the
employer is fully repaid.
Penalty for failure or refusal to refund excess tax

ADMINISTRATIVE PENALTIES
Amount of refund which was not refunded to the employee

Page 136
Distribute the certificate of compensation/tax
withheld to employees
Certificate of Compensation Payment/Tax Withheld (BIR
Form No. 2316)
RMC No. 01-03
BIR Form No. 2316 is a statement signed by both the employee and the employer and
serves the same purpose as if BIR Form No. 1700 had been filed. This, however, is not
to be submitted or filed with the BIR if the employee is qualified for substituted filing.
NOTES
Requirement to furnish the certificate is generally applicable to all employers.
The withholding agents/employers are required to retain copies of the BIR

Form No. 2316 duly signed by both the employee and employer for a
period of three (3) years
Deadline for distribution to employees

JANUARY
On or before 31 January of the following calendar year
31 *In case of termination of employment before December, the certificate
shall be given to the employee at the payment of the last compensation
during the year.
Page 137
Submission of Hard Copy of the Certificate of Compensation
Payment/Tax Withheld (BIR Form No. 2316) Covering
Employees Who are Qualified for Substituted Filing
Revenue Regulation No. 11-13
Deadline for submission of hard copy

FEBRYARY
On or before 28 February following the close of calendar year
28
PhP 1,000 for each such failure; Provided,
however, that the aggregate amount to be
imposed for all such failures during a calendar
year shall not exceed PhP 25,000.
In case of failure for two (2) consecutive years

PENALTY may be dealt with in accordance with Section
255 of the 1997 Tax Code and be punished by
a fine of not less than ten thousand pesos
(PhP 10,000) and suffer imprisonment of not
less than one (1) year but not more than ten
(10) years.*
*In settlement under this situation, the compromise fee
shall be PhP 1,000 for each BIR Form No. 2316 not filed
without any maximum threshold.
Page 138
Submission of the Certificate of Compensation Payment/Tax
Withheld (BIR Form No. 2316) Covering Employees Who are
Qualified for Substituted Filing*
► Scan the original copies of the forms (BIR Form No. 2316);
► Store in “PDF” file format in a DVD-R (arranged alphabetically) with the following naming
convention:
► Surname of the employee
► TIN of the employee
► Taxable Period
► Example: Dela Cruz_131885220000_12312014
► Label the DVD-R in the format

prescribed in Annex “B” of RR No. 2-2015
► Submit the DVD-R to the BIR office where the taxpayer

is registered together with a notarized Certification** using
the format in Annex “C” of these Regulations, duly signed
by the authorized representative of the taxpayer certifying that the soft copies of the said BIR
from contained in the DVD-R are the complete and exact copies of the original thereof.
*Mandatory for LTs and Optional for Non-Large Taxpayers – once the option to submit electronically is taken by Non-Large Taxpayers, Non-
Large Taxpayers will no longer be allowed to submit its BIR Form No. 2316 in hardcopies (Effectivity date: March 21, 2015)
** The representative thereof who is authorized to sign the notarized Certification and the label of the DVD-R containing the softcopies of the
scanned BIR Form No. 2316 prescribed by RR No. 2-2015 shall be any of the PRINCIPAL OFFICERS duly designated through a Board
Resolution issued for the purpose , and sworn to by such officer and by the corporate treasurer or assistant treasurer.
Page 139
Section divider over
two lines
Other or three lines
Matters
Page 140
Payment of annual registration
► An annual registration fee (ARF) in the

amount of PhP 500 for every separate or
distinct establishment or place of business JANUARY
shall be paid upon registration and every
year thereafter on or before 31
January by every person subject to any
internal revenue tax.
► The ARF shall be paid to an AAB located

with the RDO, or to the RCO, or duly
authorized Treasurer of the City or
Municipality where each place of business
or branch is registered, subject to the eFPS
rules and regulations, if applicable.
[RR No. 11-08, as amended by RR No. 07-12]
Page 141
Submission of Inventory Lists and Other
Reporting Requirements
► This 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).
[RMC No. 57-15, as amended by RMC No. 61-15]
► Data/information contained in the said

schedules/lists should be reconciled with the
amount declared in the financial statements and
annual income tax returns.
Page 142
Reporting Requirements (cont’d.)
Prescribed format
► In addition to the annual inventory list, the
schedules/lists prescribed in this RMC (both
hard and soft copies) should be in
accordance with the format prescribed in
Annex “A” (for manufacturing/
merchandising/retail companies), Annexes
“B” and “B-1” (for real estate companies)
and Annex “C” (for construction companies).
Taxpayers not belonging to the above-
described industries shall adopt the herein
prescribed format that is applicable to their
existing inventory.
Page 143
Prescribed format
► The soft copies shall be stored/saved in
DVD-R properly labeled and submitted,
together with a notarized certification, as
shown in Annex “D”, duly signed by the
authorized representative of the taxpayer
certifying that the data/information contained
in the DVD-R are true and correct.
Page 144
Deadline for
submission
► Initial Filing - on or before
October 31, 2015
(covering ending inventory
as of December 31, 2014)
► Subsequent filings - every
30th day following the
close of the taxable year
(depending on the
accounting period adopted
by the taxpayer)
[RMC No. 57-15, as amended by RMC

No. 61-15]
Page 145
Venue for submission

• Non-Large Taxpayers –
Concerned RDO
• Large Taxpayers – LTAD,
ELTRD or LTD-Makati/Cebu
BIR
Page 146
Penalties for non-compliance

► Section 250 of the Tax Code - PhP 1,000 for each document not submitted, made
or filed with the BIR (maximum of PhP 25,000 per year)
► Section 255 of the Tax Code - PhP 1,000 to PhP 25,000 depending on the
amount of gross sales, earnings or receipts (criminal penalty equivalent to fine of
not less than PhP 10,000 and imprisonment of not less than 1 year but not more
than 10 years may also be imposed)
Page 147
BIR Form 1709: Information
Return on Transactions
with Related Party
BIR Form 1709: Information Return on Transactions with
Related Party
RR No. 19-2020 dated July 8, 2020 as clarified by RMC No. 76-2020 dated July 29, 2020 and RMC No. 98-2020 dated September 14, 2020
SUMMARY OF RELATED PARTY TRANSACTIONS
FOREIGN RELATED
PARTY
LOCAL RELATED PARTY
Page 149
Related Party (cont’d.)
Parent
Other Related Parties Subsidiary
RELATED
Entities with Joint Associate
Control PARTIES
Required disclosure Joint Venture

of RPTs per
CATEGORY KMP
Page 150
KEY MANAGEMENT PERSONNEL
NAME
ADDRESS
TIN
TAX WITHHELD
SHORT TERM EMPLOYEE BENEFITS
POST EMPLOYMENT BENEFITS
OTHER LONG TERM BENEFITS
TERMINATION BENEFITS
SHARE-BASED PAYMENTS
OTHERS
Page 151
REQUIRED
ATTACHMENTS
► Certified true copy of

contracts and proof of
transactions
► Withholding Tax Returns
► Foreign Taxes Paid
OR ruling issued by
foreign tax authority
► Advance Pricing
Agreement
► Any Transfer Pricing
Documentation
Page 152
Covered Persons: Effectivity:

All taxpayers with Related Party Transactions (RPT)
regardless of amount or volume of transaction Required to be submitted by taxpayers
Individuals who are considered related starting with those following fiscal year
parties of a reporting company are also required to submit
the RPT Form in their individual capacities.
ended March 31, 2020
Filing: Penalty for Non-filing:

eFPS filers: manually filed 15 days from the statutory due
date or actual date of electronic filing of the AITR, Failure to file due to reasonable cause: Fine of
whichever comes later. P1,000-P25,000
Repetition of offense: P25,000

Where: Revenue office where the taxpayer is registered
Failure or negligence to produce the attachment
after receiving valid summons: Fine of P5,000-
P10,000 and imprisonment of 1-2 years
Page 153
ANNUAL INCOME TAX RETURNS EXTENDED DEADLINE
FY ENDING MARCH 31, 2020 & APRIL 30, 2020 December 29, 2020
FY ENDING MAY 31, 2020 & JUNE 30, 2020 January 31, 2021
FY ENDING JULY 31, 2020 & AUGUST 31, 2020 March 1, 2021
FY ENDING SEPTEMBER 30, 2020 & OCTOBER 31, 2020 March 31, 2021
April 30, 2021*

FY ENDING NOVEMBER 30, 2020 & *Please note that the extended deadline
indicated in RMC 98-2020 is April 30,
CALENDAR YEAR ENDING DECEMBER 31, 2020 2020. We believe that the intention of the
BIR is to extend the deadline to April 30,
2021
Page 154
The RPT Form and its attachments shall be submitted manually and stamped
“received” at the revenue office where the taxpayer is registered.
All taxpayers with RPTs, regardless of amount and volume, are required to attach a
Transfer Pricing Documentation (TPD), local or otherwise, with the TPD
indicating the date of its creation or preparation. Such TPD need not be updated
yearly if there are no significant changes in the business model, the factors, or
conditions considered in drafting the TPD , and the nature of the RPT.
All contracts, regardless of volume, are required to be attached; electronic

copies may be submitted under certain conditions. Contracts executed in the
previous year, but are still enforceable and applicable to the RPTs in the taxable
year concerned, have to be attached.
Page 155
IN LIEU OF SUBMISSION OF HARD COPIES

► Scan and save the original copies in PDF file and rename each file using the following format: registered name
of the taxpayer_type of document_taxable year. In case of multiple contracts, the filename of each contract
shall contain the following information: registered name of the related party_name of contract.
► All files shall be stored in a digital versatile

disk-recordable (DVD-R).
► Label the DVD-R containing the soft copies BIR Form No. 1709 and its Attachments
of the required attachments in accordance
with the format prescribed in Annex A of RR Name and TIN of Taxpayer
No. 19-2020.
► Submit the DVD-R to the BIR Office where
the taxpayer is registered, together with a
Sworn Certification duly signed by the Period Covered No. of Files
Company’s authorized representative, stating
that the soft copies of the required
attachments to the RPT Form contained in
the DVD-R are the complete and exact
copies of the original thereof which shall be Signature and Printed Name of
made available during audit for verification
purposes. Authorized Representative
Page 156
Calendar of
Deadlines
Page 157
JANUARY (cont’d.)
S M T W T F S 20 Mayor’s Permit
1 2 30 Inventory List
Affidavit on the Post Reporting
3 4 5 6 7 8 9 Requirements for CAS in Lieu of
Hardbound Computer-Generated
Books of Accounts, Receipts and
Invoices and Other Accounting
10 11 12 13 14 15 16 Records/Documents for CY2020
17 18 19 20 21 22 23 31 Annual Registration Fee

E-Filing/Filing of BIR Forms
no. 1604C and 1604F
24 25 26 27 28 29 30
RPT (annual payment)
31
#SGVforABetterPhilippines
MARCH
S M T W T F S 01 eFiling/Filing of BIR Form

1604-E
1 2 3 4 5 6 Scanned copy of BIR Form 2316
saved in DVD-R properly labelled
together with Notarized
7 8 9 10 11 12 13 Certification as to accuracy &
correctness
14 15 16 17 18 19 20 CY2020 Certified List of

Employees Qualified for
Substituted Filing of ITR with
21 22 23 24 25 26 27 copies of Form 2316 [for Large
Taxpayers - scanned copies of
28 29 30 31 Form 2316 on storage media (i.e.,
USB, CD, etc.)]
15 Submission to PEZA of TIMTA

Annual Tax Incentive Report
Annex A.2 - VAT, excise tax and
duty-based incentives
YE 31 December 2020
Page 159 3 December 2020 PEZA Year-end requirements #SGVforABetterPhilippines

APRIL
S M T W T F S 15 eFiling/Filing of Annual Income Tax

Return (BIR Form 1702RT/
1 2 3 1702MX/1702EX) for CY2020
SAWT, as applicable
4 5 6 7 8 9 10 30 Attachments to e-Filed BIR Form

1702RT/1702MX/1702EX) for
CY2020
11 12 13 14 15 16 17 BIR Form 2307 including soft
copy/ies of return/s contained in
DVD-R with sworn declaration
18 19 20 21 22 23 24 stating that the softcopies are the
complete and exact copies
of the original for large taxpayers (or
25 26 27 28 29 30 15 days from e-filing of the return)
Submission to SEC of the AFS for

CY2020 (generally based on the last
numerical digit of SEC Registration
Number; subject to the issuance of a
Memorandum Circular by SEC)
Page 160 3 December 2020 PEZA Year-end requirements #SGVforABetterPhilippines

MAY
S M T W T F S 15 Submission to PEZA of AFS

and ITR filed with the BIR on
15 April 2021 for YE 31 December
1 2020
Submission to PEZA of TIMTA

2 3 4 5 6 7 8 Annex A.1 for YE 31 December
2020
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31
#SGVforABetterPhilippines
Questions?
The better the question. The better the answer.

The better the world works.
Josenilo G. Mendoza
Partner
Global Compliance Reporting
Tel +63 2 878 7902

Fax +63 2 891 0429
Mobile +63918 878 7902
Email Josenilo.G.Mendoza@ph.ey.com
Professional qualifications Background Relevant experience

► He graduated with a degree in ► Josenilo is a Tax Partner within the Global Compliance ► Tax
compliance reviews and tax due diligence of companies engaged in retail and
Business Administration and and Reporting practice, specializing in providing merchandising, manufacturing, power and utilities and other sectors
Accountancy, magna cum laude, diverse tax and audit support services such as tax
► Taxreturn preparation and filing of companies engaged in business process
from the University of the compliance reviews, tax due diligence, tax return
outsourcing, travel and tours, semiconductor, construction, manufacturing,
Philippines – Diliman in 2002. preparation and filing, tax accounting, tax advisory
consulting, insurance broker, and other sectors
services, tax planning and restructuring for clients.
► He also obtained his Master in ► Tax accounting and provisioning advisory, tax planning and restructuring for
Management, with distinction, ► He has worked with clients involved in different
clients in the shared service, manufacturing, mining, retail, consumer products,
from the AIM in 2012. industries including power and utilities, semiconductor,
travel and export-oriented industries
mining, logistics, real estate, agriculture, construction,
► He placed 15th in the 2003 CPA ► Audit support services
including income tax and deferred income tax review of
business process outsourcing, insurance broker,
Board Examinations and joined consumer products, travel and tours, retail and other various clients engaged in power, agriculture, beverage and other industries
SGV in the same year. sectors.
► Input
VAT verification of companies engaged in distribution of construction
► Member of Philippine Institute of ► He has also handled clients duly registered under equipment, manufacturing, and other sectors
Certified Public Accountants. Special Laws such as the PEZA and the BOI.
► Financial Statements compilation of companies engaged in consulting, insurance
► He is also actively involved in the Firm’s internal and brokerage, travel and tours and other industries
external training programs on tax-related subjects.
Page 163
SGV | Assurance | Tax | Transactions | Advisory
About SGV & Co.

SGV is the largest professional services firm in the Philippines. We
provide assurance, tax, transaction and advisory services. In
everything we do, we nurture leaders and enable businesses for a
better Philippines. This Purpose is our aspirational reason for being
that ignites positive change and inclusive growth. Our insights and
quality services help empower businesses and the economy, while
simultaneously nurturing our people and strengthening our
communities. All this leads to building a better Philippines,
and a better working world. SGV & Co. is a member firm of Ernst &
Young Global Limited.
EY refers to the global organization, and may refer to one or more, of

the member firms of Ernst & Young Global Limited, each of which is a
separate legal entity. Ernst & Young Global Limited, a UK company
limited by guarantee, does not provide services to clients.
For more information about our organization, please visit ey.com/ph.
© SyCip Gorres Velayo & Co.
All Rights Reserved.
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Year-End Tax Requirements and Procedures

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Year-End Tax Requirements and Procedures

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Closing the Taxable Year:

Year-end tax requirements and

PEZA Year-End Requirements

 Propriety and validity of deductions/expenses

Local Business Tax (LBT)

Income Tax Returns and

Annual Reports under

Audited Financial Thirty (30) calendar days

Balance Income Statement of Operating Statement of

Breakdown/Schedule of Sales per Activity, Breakdown/Schedule of Other Income, and Data

Income Tax Returns Thirty (30) calendar days

Copy of the Official

Annual Reports Ninety (90) Days after the

 Inventory Report of Finished Goods, Raw  List of Stockholders

Deferred under Memorandum Circular No. 2016-014 dated

Annex A.1 Annual Tax

Annex A.2 Annual Tax

Other Relevant Data or

Annex A.1 Annual Tax

 Email the accomplished Report (still in Excel format) to PEZA

 Submit a printed copy of the accomplished Report, certified and

Annex A.2 Annual Tax

 Email the accomplished Report (still in Excel format) to PEZA

 Submit a printed copy of the accomplished Report, certified and

Other Relevant Data or

 Email the Soft copy in Excel format together with the

Noncompliance with filing and reportorial requirements and/or failure to

 2nd violation – fine

► RBEs shall file returns on time using BIR eFPS.

► Only RBEs availing of incentives are mandated to submit the

► The following are no longer required to submit the Annual Tax

Check propriety and validity of

Charitable and Other

Section 34 (B) (1) NIRC of 1997, as

BIR Ruling No. 6-00 dated January 5, 2000

As long as, during the taxable year, an interest expense was

Interest Income subjected tax

Interest on unpaid Business Related

Deductible interest expense PhP 7,300 PhP 15,000

Section 34 (J) of the NIRC 1997, as amended

It is necessary that there must be actual payments and the

Section 118 of the RR No. 2

If Funding Requirement Report is available:

Retirement expense may be claimed as deduction only when there

*Contributions to the fund pertaining to the PSC should be

Donations to the following shall be allowed full deductibility:

To the Philippine To foreign To NGOs To those covered

Donations deductible in full under Special Laws (examples):

Individual donor Corporate donor

Is the amount *should be given within 30 days after the

Certificate of Donation (BIR Form No. 2322)

 Critical or needed healthcare equipment

 Relief goods (food packs, water, etc.)

 Use of property, whether real or personal

Conditions to claim FULL deductibility & Donor’s tax EXEMPTION:

Must be donated to:

Conditions to claim FULL deductibility & Donor’s tax EXEMPTION:

Execute a DEED OF DONATION

Conditions to claim FULL deductibility & Donor’s tax EXEMPTION:

 Local private corporations;

A. For Private hospitals, Non-accredited institutions:

Donor to execute SWORN

B. For Local Private Corporation, Civic Organization,