The accounting period must follow a 12-month fiscal period but may or may not follow the calendar year. Most Philippine companies have a fiscal year that ends in December or March.
Corporations should file their returns and compute their income on the basis of an accounting period of 12 months.
Corporate taxpayers file self-assessed returns. Electronic filing and payment of taxes are available under the Electronic Filing and Payment System (eFPS) of the BIR.
The following corporate taxpayers who are not covered by eFPS are required to use Electronic BIR Forms (eBIRForms) in filing their tax returns:
- Accredited tax agents/practitioners and all their client-taxpayers who authorised them to file on their behalf.
- Accredited printers of principal and supplementary receipts/invoices.
- One-time transaction taxpayers.
- Those who shall file a ‘No Payment’ return, except senior citizens or persons with disabilities filing their own return, employees deriving purely compensation income and the income tax of which has been withheld correctly, employees qualified for substituted filing but opted to file for an income tax return and are filing for purposes of promotion (Philippine National Police and Armed Forces of the Philippines), loans, scholarships, foreign travel requirements, etc.
- Government-owned or controlled corporations.
- Local government units, except barangays.
- Cooperatives registered with the National Electrifications Administration and Local Water Utilities Administrations.
Taxpayers who are required to file their returns using eFPS or eBIRForms but fail to do so shall be subject to a penalty of PHP 1,000 per return and civil penalties equivalent to 25% of the tax due.
A domestic or resident foreign corporation is required to file income tax returns on a quarterly basis. Within 60 days from the close of the first three quarters of its taxable year, the corporation must file a return summarising its gross income and deductions for the year to date. A final annual income tax return must be filed on or before the 15th day of the fourth month following the close of the taxable year.
Corporate taxpayers must file their income tax returns using one of three different forms, depending on their tax regime (i.e. subject only to the regular income tax, tax exempt, or with mixed income subject to multiple tax rates or special/preferential rates).
Payment of tax
Every corporation files cumulative quarterly income tax returns for the first three quarters and pays the tax due within 60 days after each quarter. A final adjustment return covering the total taxable income of the preceding taxable year must be filed on the 15th day of the fourth month following the close of the taxable year. The balance of the tax due after deducting the quarterly payments must be paid, while the excess may be claimed as a refund or tax credit. Excess estimated quarterly income taxes paid may be carried over and credited against estimated quarterly income tax liabilities for succeeding taxable years. Once the option to carry over has been made, such option is irrevocable, and no cash refund or tax credit certificate (TCC) is allowed, except upon liquidation of the company.
Since additional modes of payment of taxes are now available through credit, debit, and prepaid cards under recently issued Revenue Regulations, taxpayers may choose from the available online payment facilities provided by the Electronic Payment Service Provider (EPSP) to process tax payments. However, only accredited Authorised Agent Banks (AABs) may accept such payments, and accreditation of AABs is subject to compliance with certain conditions under existing Regulations.
Payment of taxes through the Card Payment Facility shall be deemed made on the date and time appearing in the system-generated payment confirmation receipt issued to the taxpayer-cardholder by the AAB-acquirer, provided that the payment was actually received by the BIR. The taxpayer is not relieved of, and has a continuing liability for, such taxes until the payment is actually received by the BIR.
Annual statutory audit
An annual statutory audit is required for all corporations with authorised capital stock or paid-up capital exceeding PHP 50,000, including branches of foreign corporations. It is also required for any corporation whose gross sales or earnings exceed PHP 150,000 in any quarter.
Statute of limitations
There is no statutory obligation on the Tax Commissioner to make an assessment for internal revenue taxes, and most taxes are collected based on the taxpayer’s self-calculation. If an assessment is to be issued, however, it must be done within three years from the deadline or the date of actual filing of the return, whichever is later. The taxpayer and the Commissioner can, however, agree in writing to extend this period.
In the case of a false or fraudulent return or of failure to file a return, the tax may be assessed or a proceeding in court for collection may be commenced without assessment at any time within ten years from the discovery of the falsity, fraud, or omission.
Any internal revenue tax that has been assessed within the period of limitation may be collected by distraint or levy or by a proceeding in court within five years following the assessment of the tax.
The prescription periods are suspended in certain circumstances, such as when the offender is absent from the Philippines, when the Commissioner grants a taxpayer’s request for a reinvestigation, or when the taxpayer and the BIR agree to extend the prescriptive period for assessment through a written waiver.
In the case of overpayment of tax, a claim for refund or credit may be filed with the BIR within two years from the date of erroneous payment of the tax. If the claim is denied or no decision is received from the BIR, a petition for review may be filed with the Court of Tax Appeals (CTA). This must be filed before the two-year period expires, and in the case of a denied claim, within 30 days from the receipt of the denial.
Topics of focus for tax authorities
During audits, the BIR generally covers all applicable internal revenue taxes. With the issuance of certain regulations in recent years, assessment issues involving transfer pricing, inter-company advances, donor’s tax, and improperly accumulated earnings tax have become more prevalent.