Tax Changes You Should Take Note Of For 2024 | CloudCFO PH
Tax Changes You Should Take Note Of For 2024

Tax Changes You Should Take Note Of For 2024

Posted on April 2, 2024
3 min mins read

The Bureau of Internal Revenue (BIR) recently announced several tax changes for 2024 that clients and business owners should take note of. Two Revenue Memorandum Circulars (RMC) have been released concerning and to further explain these tax changes.

RMC 12-2024 is on Tax Treatment clarification of Foreign Currency Transactions for Financial Reporting and Internal Revenue Tax Purposes, and RMC 13-2024 on Tax Treatment of Retirement Benefits Expense for Financial Reporting and Tax Purposes.

Contents

What are the tax changes under these Revenue Memorandum Circulars?

RMC 12-2024 (Tax Treatment clarification of Foreign Currency Transactions for Financial Reporting and Internal Revenue Tax Purposes)

On January 22, 2024, the BIR issued RMC 12-2024 for the Tax Treatment clarification of Foreign Currency Transactions for Financial Reporting and Internal Revenue Tax Purposes. This concerns anyone who deals or has a business that deals with foreign currency. Foreign exchange (forex) rates and conversions for taxes will be based on several rules.

First, foreign currency will be converted into Philippine Peso (PHP) using the spot rate of exchange on the transaction date based on the Banker’s Association of the Philippines (BAP) published rate. In case these rates are not feasible, other rates may be used such as that from the Bangko Sentral ng Pilipinas (BSP), Bloomberg, Reuters, and the like. 

If the latter is used, the taxpayer should provide the BIR a notarized sworn statement stating why the specific source was used instead of the BAP published rates. They must also provide a statement allowing the bureau to access the day-to-day forex rates used during BIR audit for the taxable year.

The source of the rates used to convert the foreign denomination (i.e. URL/source) and other supporting documents should also be available for presentation and/or submission to the BIR during audit.

Election of forex rates is irrevocable and must be used consistently for all financial accounting and tax reporting purposes for at least one taxable year. Any changes to these rates must be reported to the concerned BIR office through a new notice and will be applicable at the start of the next taxable year. 

Given that BAP only publishes USD/PHP exchange rates, taxpayers with transactions in other currencies are permitted to directly convert the non-USD currency to PHP using the BSP published rates, but must provide the following information during the BIR audit: date of transaction, amount of foreign currency transactions, nature of the transaction, forex rate used to convert to PHP, and PHP converted amount.

RMC 13-2024 (Tax Treatment of Retirement Benefits Expense for Financial Reporting and Tax Purposes)

RMC 13-2024, issued on January 22, 2024, concerns companies and entities that offer retirement packages for their employees. It states that the amount of expenses that can be claimed for the deduction of Income Tax is dependent if the entity has a BIR-registered retirement benefit plan that is declared reasonable within the ‘Tax Qualified’ section of the Tax Code.

Entities that have retirement benefit plans that qualify under these conditions may deduct the following from the retirement fund: contributions to the Retirement Fund during the taxable year to cover the pension liability accrued during that year (‘Normal Cost’) and contributions to the Retirement Fund during the taxable year in excess of the Normal Cost. 

However, the latter may only be deducted if the amount has not been allowed as a deduction and is apportioned in equal amounts over ten consecutive years, starting with the year when the transfer of payment was made. 

If the employer does not have a Tax Qualified Plan, rules under RA No. 7641 shall

apply. With this, only the actual amount of retirement benefits given to the employees under RA No. 7641 can be deducted from the gross income.

For tax exemptions on the retirement benefit plan, an employer must apply with the BIR through the Legal and Legislative Division at the National Office. The employer shall request for the

issuance of a Certificate of Qualification as a Reasonable Employee’s Retirement Benefit Plan. This shall be made within thirty days from the effectivity of the plan. The Certificate is likewise valid until the BIR revokes such a document.

How can CloudCFO help

Given the changes in several tax concerns, taxpayers may find it tedious and challenging to go about their reports for the BIR. CloudCFO, with its team of tax experts, can assist you in all things financial and tax reporting. 

Should you need any assistance in performing these tasks, we are one call away. You may check out our list of services on our website www.cloudcfo.ph and book a call with us today. You may also sign up for free consultations on tax-related concerns.

DISCLAIMER: This article is strictly for general information purposes only. Nothing in this article constitutes or intends to constitute financial, accounting, regulatory or legal advice and must not be used as a substitute for professional advice. It is still necessary to consult your relevant professional adviser regarding any specific matter referenced above.

Get In Touch

If you want to know more about our tailored services and processes, drop us a line to discuss how we can help you to grow your business. We will respond to you within 24 hours.

Get In Touch

If you want to know more about our tailored services and processes, drop us a line to discuss how we can help you to grow your business. We will respond to you within 24 hours.