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New BIR ITR Forms

New BIR ITR Forms (Revenue Memorandum Circular No. 40-2011)

The BIR has officially released the June 2011 versions of  BIR Form 1700 (for individuals  earning compensaiton income), BIR Form 1701 (for self-employed individuals, individuals with mixed income, and  estates and trusts), and BIR Form 1702 (for corporations and partnerships).
The enhanced BIR Forms 1700 and 1701 incorporate a new Part IV requiring disclosure of details  on income subjected to final tax and  income exempt from income tax.

Note that in the new forms, the BIR has removed the new requirement for certain individuals to file income tax returns as provided under the guidelines and instruction of BIR Forms 1700 and 1701 which were earlier released by the BIR.  Hence, under  the new forms, the following individuals shall continue to be exempt from filing an annual income tax return:

     a)     pure compensation income earners whose  income has been correctly withheld (hence qualified for substituted filing) whose annual taxable income exceeds P500,000.

     b)    individual taxpayers whose sole income has been subjected to final withholding tax with aggregate final tax withheld exceeding P125,000 annually (whether remitted or not remitted to the BIR) including employees of regional or area headquarters and regional operating headquarters subject to the 15% final tax.

     c)    individuals whose sole income is exempt from income tax and whose total annual income (exempt) exceeds P500,000
The new returns shall be used for the annual income tax filing covering  calendar year 2011, which is due  on or before April 15, 2012. The new versions shall also be required for juridical entities following fiscal year of reporting starting with  fiscal year ending January 31, 2012.

Taxpayers’ concerns:

     1.    The  requirement for the filing of an Annual Information Return (AIR) under RR 2-2011 which was suspended by RR 06-2011 has effectively been lifted for certain indificuals with the inclusion of Part IV in the revised income tax returns,  by issuing amendatory regulations through the lifting of suspension of Revenue Regulations No. 2-2011.
     2.    Taxpayers required to file annual income tax returns (BIR Forms 1700 and 1701) should start to diligently keep track of detailed information on theie  income subjected to final withholding taxes or exempt from income tax.  Documents pertaining to these income should also be maintained in case of future audit.