BIR’s AIR imposition mandatory by next year

The Bureau of Internal Revenue (BIR) has moved to next year the mandatory filing of a new requirement called Annual Information Return (AIR) that would list all income that should be subject to withholding tax of an individual earning at least P38,000 a month and which would accompany annual income tax returns (ITR).

The BIR said that the filing of AIR for this year, which among individual taxpayers will have a deadline in April, would be optional.

Internal Revenue Commissioner Kim Henares said the additional requirement is in preparation for an “impending government requirement for the submission of income tax returns to acquire loans, licenses and franchises.”

Malacañang backed the new BIR requirement by restating BIR Commissioner Kim Jacinto-Henares’ indication that Revenue Regulation No. 2-2011 recently signed by Finance Secretary Cesar Purisima is not the same as a statement of assets and liabilities and networth (SALN) required on public officials.

“This is not technically a SALN. It is only for you to declare your income and to declare, actually, certain information that you need to declare for purposes of transparency as well,” presidential spokesman Edwin Lacierda told reporters.

Lacierda cited the case of Ang Galing Pinoy party-list Rep. Juan Miguel “Mikey” Arroyo as an example who, during his term as congressman of Pampanga, was questioned for his undeclared real estate properties in the United States.

The new BIR order reportedly stipulates that every citizen who is making at least P38,461 a month shall be required to file a personal SALN to justify his or her gross income to the BIR covering the entire 2010 tax period.

The said order also warrants the private citizen to declare in details the amount of money he generated from the sale or exchange of real estate along with properties received through “gifts, bequests and devises.”

“What (the new BIR order) just asks is, for instance, with respect to the interest you’ve been earning from the bank, all you will ask the bank (to do) is to issue a certification that you earned so this much. This will also be helpful for a person who will be applying for a loan. It is also need to check the credit-worthiness (of a particular individual). So if you’re able to present these (documents), your loan transactions will be easier,” Lacierda explained.

Lacierda said Filipinos working overseas are not covered by the new BIR regulation which, he stressed, is intended really for purposes of transparency and clamping down rampant tax evasion especially among people who earn more than an average worker.

“(It is) meant to validate whether the income we are earning is really proportioned to the amount of tax that we should be paying,” he said.

Henares, meanwhile, said that the BIR will issue another order to effect the voluntary filing of the AIR this year.

“We are allowing the filing of the AIR on a voluntary basis for taxable year 2010. This will give affected taxpayers time to acquaint themselves with this new requirement and see how they can best effectively comply with the same. This will also allow the BIR to monitor its implementation on a pilot basis and make the necessary adjustments where needed,” she said.

“Starting taxable year 2011, the filing of the AIR will be mandatory,” she added.

She disclosed that RR 2-2011 was issued to resolve two issues: the non-inclusion on the list of top individual taxpayers of famous and wealthy personalities, many of whom earn income which are either subject to final withholding tax or exempt from tax; and the impending government requirement of Income Tax Returns as basis for the granting of loans, licenses, franchises, and the like.

Under RR 2-2011, individuals, estates and trusts required by law to file an Income Tax Return (ITR) should file the said tax return together with the AIR. The AIR shall include income subjected to final withholding tax and exclusions from gross income.

Individuals who are not required to file a tax return or those qualified for substituted filing may, however, file a tax return for loan, travel and other purposes in which case they should also file the AIR.

Others not required to file an ITR but are required under the regulations to file an AIR only are: pure compensation income earners whose annual taxable income derived from within the Philippines exceeds P500,000 tax and on which income the correct income tax has been correctly withheld; individuals, estates and trusts whose sole income has been subjected to final withholding tax in excess of P125,000 annually, whether remitted or not to the BIR; and individuals whose sole income is exempt where the aggregate amount exceeds P500,000 annually.

Pure compensation income earners who derive income from two or more employers are required to file an ITR together with the AIR.

The deadline for filing is April 15 each year for those filing the ITR (BIR Form No. 1700 or 1701) as well as the AIR and May 15 each year for those filing the AIR only. Those filing their returns electronically shall, in the meantime, submit in hard copies the e-filed ITR and the AIR within 10 days from the filing of the electronic return until such time that electronic filing of the AIR becomes available. –Aytch S. de la Cruz, Daily Tribune