With the year almost gone, entrepreneurs are advised to brush up on the tax-related developments and changes that will come into effect next year to ensure they are compliant with the latest regulations and orders of the Bureau of Internal Revenue (BIR).

Wendell Ganhinhin, a tax partner at audit and tax firm P&A Grant Thornton, in a recent webinar gave fresh updates on some of these BIR tax policies that will enter effectivity in early or mid-2023 and impact companies’ tax payments and filings.

Revenue Regulations (RR) No. 8-2018—issued on February 20, 2018 and implementing the amended provisions on income tax rates for individuals pursuant to Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion or TRAIN Law—provides for the reduction of income tax for individual taxpayers starting January 1, 2023.

For the income bracket of over P250,000 to not over P400,000 per year, the tax is to be reduced to 15% starting January 1. This is lower than the tax rate of 20% imposed from January 1, 2018 to December 31, 2022.

For taxable incomes of over 400,000 to not over 800,000, the new tax rate is 20% from the previous 25%, while incomes of over P800,000 to not over P2 million will carry a 25% tax rate from 30% previously. People earning over P2 million to not over P8 million will see their tax rate slashed to 30% from 32%.

On the other hand, incomes above P8 million will still retain the 35% tax rate, unchanged from the current, while taxable incomes of P250,000 or less annually will remain exempted from tax payment in the new year.

But Ganhinhin, who gave the updates on November 21 in a webinar of the Philippine Chamber of Commerce and Industry, said it is possible that the reduction might not take place next year.

The Department of Finance (DOF) has proposed delaying the implementation of the reduced individual tax rates from 2023 to 2025, with the proposal currently still up for discussion and approval, he explained.

“Considering that the government is trying to improve its revenue collection, there is an initial plan that instead that the lower rates will be implemented starting 2023 it will be deferred and it will be implemented in 2025. But it’s still a proposal and hopefully it will not prosper,” he said.

Meantime, under RR No. 13-2018, beginning January 1, the filing and payment of value-added tax (VAT) returns shall be done within 25 days following the close of each taxable quarter, or on a quarterly basis, using BIR Form No. 2550-Q (Quarterly Value-Added Tax Return).

RR 13-2018, issued on March 15, 2018, prescribes the regulations implementing the VAT and percentage tax provisions under the TRAIN Law, further amending RR 16-2005 (Consolidated VAT Regulations of 2005), as amended.

This ruling requires taxpayers to file just four VAT returns from 2023 compared to the normal 12 filings within the taxable year, an order seen to lessen the burden of tax filings for VAT returns of companies, said Ganhinhin.

At the same time, firms should take note that some subsidies extended to assist companies during the pandemic are slated to end by next year. One of these is the reduction in the minimum corporate income tax (MCIT), a benefit that will be stopped by the middle of 2023.

Ganhinhin said that under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and pursuant to RR No. 5-2021, the MCIT rate was lowered to 1% for the period July 1, 2020 up to June 30, 2023.

Thus, beginning July 1 next year, corporations, except for non-profit proprietary educational institutions and hospitals and non-resident foreign firms, will be subject to the original 2% MCIT rate based on their gross income.

Another government subsidy, this time extended to small and medium enterprises (SMEs) at the height of the pandemic, is also set to come to a close by the middle of next year.

Again pursuant to the CREATE Act, the 3% percentage tax for non-VAT taxpayers was lowered to 1% for the period July 1, 2020 to June 30, 2023. Effective July 1, 2023, the percentage tax rate will revert to 3%, said Ganhinhin.

Under the Tax Code, a percentage tax equivalent to 3% of the gross quarterly sales or receipts must be paid by any person who is not VAT-registered and whose sales or receipts are exempt from the payment of VAT.