EoPT dates to remember for CAS taxpayers

“An ounce of prevention is worth a pound of cure.” This applies to many aspects of everyday life. It is always better to prevent damage than to be sorry about it in the future. For students or reviewees, it is best to read and study routinely rather than cram to cover the entire topic the night before the exam. For car owners, preventive maintenance means having the vehicle inspected regularly, not only to prolong the vehicle’s good condition but, more importantly, to ensure a safe ride for the passenger. Thus, preventive measures can help us avoid problems.

The same goes for taxpayers. Preventive measures help us avoid possible problems or issues in the future, particularly with tax rules changing so regularly. As we probably know by now, the Ease of Paying Taxes (EoPT) Act has introduced significant amendments, especially on VAT reporting. For VAT purposes, sellers of services must report the VAT based on gross sales and no longer based on collections. As such, sellers of services must now issue VAT Invoices and not VAT ORs. These VAT Invoices will now become the basis for input VAT credits to be claimed by their customers. Moreover, in relation to the EoPT Act, Revenue Regulations (RR) 07-2024 contain several crucial dates for taxpayers who use Computerized Accounting Systems (CAS).

One of the dates to remember is April 27, 2024. For VAT taxpayers engaged in the sales of services and who have already registered their full CAS (with e-receipting or e-invoicing) prior to April 27 (let’s call them affected taxpayers), RR 07-2024 requires them to revisit their system and ensure compliance with the provisions of the EoPT Act (i.e., the affected taxpayers are to report VAT based on gross sales, and are required to issue VAT invoices). This change will have a direct effect on the taxpayer’s financials, not only with regard to the simple naming convention of the primary document, from “OR” to “Invoice.” Hence, this is considered a major enhancement, which would require a new application with the submission of the relevant templates and samples of the system-generated documents and accounting records for the issuance of a new Acknowledgement Certification from the BIR.

Another important date is June 30, 2024. The affected CAS taxpayers have until June 30 to reconfigure or enhance their systems to comply with the EoPT Act. During this period, the affected taxpayers must ensure, among others, that different and proper modules are added to the CAS system to generate invoices on their sales based on gross sales. Also, certain adjustments must be made in case there are branches of the taxpayer using the same system and generate separate invoices, as well as the need to declare the relevant components or middleware in generating the required invoices.

Under RR 07-2024, during the transition period, or until June 30, 2024, the affected taxpayers may still issue their VAT ORs pursuant to their previously approved permit or Acknowledgment Certificate. However, take note that under RR 07-2024, VAT ORs issued beginning April 27, 2024, are not considered valid for claim of input tax by the buyer or purchaser. Consequently, if the CAS taxpayer finds that the needed enhancements cannot be made on or before June 30, the taxpayer may request an extension by seeking approval from the Regional Director or Assistant Commissioner overseeing Large Taxpayers. However, the approved extension to perform the enhancements must be completed on or before Oct. 27, 2024.

Noncompliance by the affected CAS taxpayer with the prescribed issuance of Invoices for the sale of services could lead to violations and penalties. So, after June 30, if the taxpayer still issues an OR, such an issuance will not be considered evidence of sales of goods or services and thus considered a violation for failure to issue or non-issuance of an invoice, subject to civil and criminal penalties. What if the taxpayer has successfully secured the required approval for an extension between July 1, 2024, and Oct. 27, 2024? Will he still be subject to the same penalty? Taxpayers hope that this query will be categorically addressed by the BIR.

In the meantime, as the violation could result in civil and criminal penalties, prevention and awareness are vital to all affected taxpayers. Although there are still issues and questions that taxpayers wish to be enlightened on, including the transitory timeline to comply with RR 07-2024 in relation to the corresponding provisions in the EoPT Act itself, the affected CAS taxpayers may find it prudent to remember and act early on the important dates to prevent possible future disputes with the BIR. After all, it is still much easier to prevent the problem from taking place rather than solving it later; hence, prevention is still better than cure.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

Ma. Jessica A. Guevarra is a manager from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com