Tax Articles

Ease of Doing Business

By: Atty. Mabel L. Buted

Mabel L. Buted Junior Partner   +632 8403-2001 loc.160 This email address is being protected from spambots. You need JavaScript enabled to view it. View Profile

“Ease of doing business” is multi-faceted. It does not begin and end in enabling individuals and entities to register, establish, and start their businesses. The more important aspect is the support and help given to businesses, in the most effective and efficient ways for them to continue and grow their operations, achieve their goals, and contribute to the economy.

Over the past few years, we saw the government’s initiatives in easing the doing of business in the country in relation to taxation – both through legislations and administrative issuances. The recently enacted Ease of Paying Taxes Act (“EOPT”) made it easier for taxpayers to comply with their tax-related obligations, including the transfer, updating, and cancellation of registrations.

Also, to recall, in the year 2021, the BIR relaxed some of the procedures required from taxpayers when they seek approval to adopt their own accounting system. Our tax authority simplified the requirements in the registration of computerized accounting systems and books of accounts by removing the prior requirement of system demonstration or pre-evaluation of the system before the same gets to be approved. With the revised procedures, taxpayers only need to submit the requirements for the evaluation by the BIR and the latter will only conduct a post-evaluation check on the system.

The government went on to remove the requirement of prior application or approval of the tax exemption or incentives to which the taxpayers are already entitled pursuant to the provisions of the applicable law. In the same year, when the Corporate Recovery and Tax Incentives for Enterprises (“CREATE”) Act was enacted, in tax-free mergers and transfers or exchanges of assets or properties not subject to tax, the previous requirement of a prior confirmation or tax ruling for purposes of availing the tax exemption was eliminated.

Also, early this year, the tax authority, through a circular, clarified that the retirement fund set up by the employer can enjoy the tax benefits (exemption from income tax of the retirement benefits and the income of the fund and the deductibility of the contributions), pending the application with the BIR that the fund qualifies as a reasonable private benefit plan.

For registered business enterprises (“RBEs”) to avail of the VAT zero-rating on their purchases of goods and services, prior application or approval from the BIR before they can enjoy the said benefit was already dispensed with. Qualified RBEs can now avail of VAT-zero rating on their local purchases on the basis of the Certification of VAT-Zero Rating issued in their favor.

With EOPT, taxpayers may transfer their registrations by merely filing an update, either electronically or manually. This is a huge improvement from the previous process where the transfer of office of taxpayers needs to be approved first by the BIR district office in which the taxpayer is registered. Previously, transfer of registrations took time because a number of procedures must have to be completed. For instance, both the old and the new RDO offices need to conduct ocular inspections of the business premises before the transfer is completed.

The same is true with the cancellation of registration. Under EOPT, cancellation is effected by the mere filing for business closure or dissolution, either electronically or manually. With the new rule, procedures for closure are not dispensed with, such as the examination of the taxpayer. These can proceed even after the filing for closure. But the concerned taxpayer need no longer comply with the requirements for an active taxpayer, as its closure is effected upon application.

We appreciate and welcome all these kinds of initiatives. There are still many other areas where our government, especially our tax authority, needs to introduce changes. For instance, the present policies and procedures on the availment by our taxpayers of the benefits under tax treaties and of the tax-sparing rule on dividend income could be relaxed. Since the exemptions and preferential rates are already provided in the tax treaties and/or in the Tax Code, the benefits should be enjoyed with less hassles on the part of the taxpayers.

The goal is for taxpayers to see that our government is their partner, and the procedures required by our government should not serve as hindrance to doing businesses. Para piliin nila ang Pilipinas.