Large taxpayers - a privilege?

The busy season has begun. Long and extended hours of work in an auditing firm is a normal thing in order to meet the April 15 filing deadline. The Bureau of Internal Revenue (BIR), in its desire to ensure an orderly payment of taxes, issued late last year Revenue Regulations No.17-2010 prescribing the place for payment of internal revenue taxes by large taxpayers as well as providing the coverage and criteria for the determination thereof.

So what makes a taxpayer a “large taxpayer?”

A large taxpayer is a taxpayer, regardless of its location in the country, which has been classified and notified in writing by the Commissioner of Internal Revenue as one that has satisfied the criteria for determining large taxpayers (LT). The indispensable requirement here is the “Dear Taxpayer” correspondence from the Commissioner of Internal Revenue.

The BIR in issuing the said regulation is finicky enough to select those that will qualify as such. First, the following taxpayers shall be automatically classified as a candidate to be an LT and will be notified in writing:

a. All branches of a taxpayer under the Large Taxpayers Service;

b. Subsidiaries, affiliates and entities of conglomerates/group of companies of an LT initially listed as such;

c. The surviving company in case of merger/consolidation involving a large taxpayer;

d. Any corporation that absorbs the operation/business in case of spin-off/s of any large taxpayer;

e. Corporations with an authorized capitalization of at least P300 million registered with SEC;

f. Multi-national enterprises (MNE) with an authorized capitalization or assigned capital of at least P300 million;

g. Publicly-listed corporations;

h. Universal, Commercial and foreign banks;

i. Industries such as banks, Insurance, Telecommunications, Utilities, Petroleum, Tobacco and Alcohol with an authorized capitalization of at least P100 million;

j. Corporate taxpayers engaged in the production of metallic minerals.

k. Other taxpayers as may be selected and notified by the BIR.

The second criteria are with respect to the tax payment and financial conditions and results of operation. For purposes of tax payment, any taxpayer with net VAT paid or payable of at least P200,000 per quarter for the preceding year or an annual excise tax paid or payable of at least P1 million for the preceding year or with an annual income tax paid or payable of at least P1 million for the preceding year or with annual withholding tax payment/remittance from all types of withholding taxes of at least P1 million (except those with branches or units the basis of which is the annual taxes withheld by the Head Office) or with percentage taxes paid or payable of at least P200,000 per quarter for the preceding year or with aggregate annual documentary stamp tax of at least P1 million is already considered a candidate for an LT category. With respect to the financial conditions and result of operations, any taxpayer with total annual gross sales/receipts of at least P1 billion for the preceding year or with a total net worth at the close of each calendar or fiscal year of at least P300 million or with a total annual gross purchase of at least P800 million for the preceding year or top corporate taxpayers listed and published by (Securities and Exchange Commission (SEC) are also candidates for the said LT category.

Once notified, the LTs are mandatorily covered by the Electronic Filing and Payment System (EFPS) in filing and paying their internal revenue taxes. Payments are made only through the use of a bank debit memo, electronic fund transfer instruction scheme or the use of a tax debit memo against the unutilized portion of the tax credit certificate. The manual filing and payment or over the counter is acceptable only in situations where the EFPS systems are down. Once the systems are available, the LT is required to e-file the said return within fifteen days from the date of manual filing. Newly-notified LTs are required to adopt and secure the accreditation of a Computerized Accounting System (CAS) within six months from the time of notification of their status as an LT.

Finally, the BIR is not precluded from modifying the criteria as discussed above, taking into consideration relevant factors such as inflation, volume of business, wage and employment levels, nature of business and affiliation, tax payments, financial condition and results of operation and similar economic factors.

It is then hoped that the classification as a large taxpayer will not be cumbersome on the part of these entities. The BIR itself recognizes the fact that they are paying huge amount of taxes that contributes to the economic development of our nation. Otherwise, the BIR will kill the “goose that lays the golden egg”.

(Melody Macaraig-Binag is a Supervisor for Tax of Manabat Sanagustin & Co., CPAs, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG in the Philippines. For comments or inquiries, please email [email protected]or [email protected])