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The Benefits of the Ease of Paying Taxes Act

Are you interested in investing in the Philippines?

You and other foreign-owned companies see the potential in doing business in the Philippines. The country is one of the top outsourcing destinations in the region for reasons such as high English proficiency, skilled and cost-effective workforce, and employees that have certifications that meet international standards. Companies like Manila Bookkeepers can assist you as you navigate your way around the country’s rules, regulations, and tax compliance requirements.

Why do business in the Philippines?

According to Manila Bookkeepers, the Philippines is a prime outsourcing destination for the following reasons:

  1. The workforce has a high proficiency in English. This makes it easier to train them and coordinate with your main office. Filipinos also rank high among Asians who can speak English fluently.
  2. Potential employees have certifications and skills that can meet international standards. You can find an employee that can do sales and marketing, IT, analytics, accounting and bookkeeping, finance, auditing, and other skills you might need to build your company. You can also keep training them to reach the standards you established. Certification programs or training abroad can help broaden the skills of your Filipino workforce.
  3. Filipinos are familiar with Western culture. It’s easy for Filipinos to adapt to Western companies setting up shop in the country. They can easily relate to their peers and bosses even if the discussion isn’t work-related.
  4. The country is strategically located in the Pacific. It makes it easier for you to visit other offices in the region because they’re a few hours flight away from the Philippines.
  5. You get first-rate output at a cost-effective price. You get a skilled workforce at a substantially lower cost. This allows you to allocate your resources to other aspects of your business.

There are other reasons to consider outsourcing and establishing your company in the Philippines. The government is doing its part to incentivize and make doing business in the country smoother and easier. They have implemented acts such as the Ease of Paying Taxes Act to attract more investors and companies.

What is the Ease of Paying Taxes Act?

President Ferdinand “Bongbong” R. Marcos Jr. signed the EOPT Act or Republic Act No. 11976 or also known as the Ease of Paying Taxes Act on January 5, 2024. It took effect on January 22, 2024. The Act amends the 1997 National Internal Revenue Code or the NIRC. Its objectives are to:

  • Protect the rights and welfare of taxpayers
  • Improve compliance
  • Update the tax system
  • Revamp tax administration
  • Implement best practices

These are some of the notable provisions mentioned in the Ease of Paying Taxes Act:

  1. The act determines taxpayer classifications into:

·         Micro

·         Small

·         Medium

·         Large

  1. The government grants special concessions for micro and small taxpayers such as lower penalties and a two-page maximum for income tax returns.
  2. Taxpayers can file their tax returns and payments electronically or manually to the BIR (Bureau of Internal Revenue). They can also do so through any authorized tax software provider or agent bank.
  3. The act removes the requirement that a withholding tax or tax be deducted from income payments and remitted to the BIR for deductibility of income payments to apply.
  4. A taxpayer shall withhold taxes once income payments are payable.
  5. Value-added tax or VAT refund claims are classified into high-risk, medium, and low.
  6. VAT on services will now be accounted for on an accrual basis.
  7. Every sale of goods and services requires a taxpayer to issue a VAT invoice.
  8. Reduced requirement by the BIR to keep the taxpayers’ books of accounts and related documents from ten (10) to five (5) years.
  9. Taxpayers are no longer required to pay the P500 annual registration fee.
  10. Taxpayers can now apply for registration with their respective RDO or Revenue District Office online or manually.
  11. The BIR shall develop a digitalization roadmap. This allows for:

·         Easier tax, rules, and regulations compliance

·         Streamlining of tax processes

·         Simplified tax returns

·         Reduced tax or documentary requirements

·         Digitalization of BIR services

These are only some of the provisions you need to learn more about. You can read more about the Ease of Paying Taxes Act here: Republic Act No. 11976

What are the benefits of the Ease of Paying Taxes Act?

Now that you know a bit about the Ease of Paying Taxes Act, you can start identifying the benefits it provides taxpayers. Manila Bookkeepers cites the following advantages of this act:

  1. It allows both foreign-owned and Filipino-owned businesses to comply with local tax laws more easily. The simplified regulations reduce the hurdles companies have to go through to just pay their taxes on time.
  2. Taxpayer classifications are now simpler, making it easier for everyone to comply. The government has also introduced reduced rates to ease the burden on micro and small taxpayers.
  3. The filing and paying of taxes are now possible through an agent bank or an authorized tax software provider. This means that you don’t have to pay taxes strictly within the jurisdiction where you registered your business.
  4. Self-employed professionals and individuals will have a simplified business registration process and compliance. The government is also waiving the P500 annual registration fee. Companies will have one less fee to pay for.
  5. It’s now easier and faster to register a business with the simplified regulations and requirements.
  6. The EOPT aims to digitize BIR services which makes it easier for taxpayers to comply with rules and regulations.

These are just some of the benefits of the Ease of Paying Taxes Act the Philippine government has enforced. Knowing these allows you to generate and increase profits for your company while complying with local tax laws. You’ll also be able to reduce costs and maximize your finances when you’re aware of the advantages of the Ease of Paying Taxes Act.

Manila Bookkeepers is the company you can turn to when it comes to local tax compliance. Our accounting services allow you to focus on your core strengths or provide support for your own in-house team. With our years of experience in the industry, we can assist you navigate the rules and regulations when it comes to taxes in the Philippines. Our team makes sure you comply with requirements so that you avoid incurring penalties and fines.

In conclusion, the Philippine government is continually looking for ways to modernize and simplify its tax compliance and business registration regulations and processes. This approach can improve the competitiveness of the country with others in the region.

Manila Bookkeepers

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