EOPT (Ease of Paying Taxes Act) Law and Its Impact on Accounting and Tax Practices in the Philippines

The EOPT Law (Ease of Paying Taxes Act) was enacted on January 5, 2024, and took effect on January 22 of the same year, with the aim of promoting “greater convenience in tax payment” and “advancement of digitalization” as set forth by the Philippine government. Subsequently, in April 2024, the specific implementing rules—Revenue Regulations (RR) 3-2024 and 4-2024—were issued, along with RMO 37-2024, which clarifies taxpayer classifications. As a result, all companies operating in the Philippines—including Japanese local subsidiaries, branches, and representative offices—are directly affected.

The purpose of this document is to clearly present the changes brought about by the EOPT through four steps—“understanding the system → comparison of old and new rules → practical workflow → response procedures”—and to provide this information as practical knowledge that can be directly applied in the field. It focuses on the key points that Japanese accounting personnel may find difficult to grasp by simply reading the legal text.

In particular, this article focuses on explaining the differences in the treatment of the invoicing system (Invoice) and Official Receipts (OR), the new rules for VAT processing, and the changes in the penalty framework, providing practical guidelines that readers can implement in their own companies as early as the next day.

Five Key Changes to Note under the EOPT

① Unification of Invoices (Invoices Required for Services as Well)

The biggest change under the EOPT is the “unification of supporting documents for the sale of goods and the provision of services.” Previously, transactions were recorded using Invoices for goods and Official Receipts (ORs) for services. However, under the EOPT, all transactions are now required to be documented using Invoices. As a result, ORs issued from 2024 onward are treated as supplementary documents and, in principle, can no longer be used as supporting documents for VAT deductions.

However, a subsequent directive allowed the conversion of ORs into Invoices by deleting the words “Official Receipt” and instead stamping or printing a name that reflects the nature of the transaction, such as “Sales Invoice,” “Service Invoice,” or “Billing Invoice.” Furthermore, Revenue Regulations No. 11-2024 (RR 11-2024) stipulated that such converted ORs may continue to be used until they are fully consumed.

Item	Before	After EOPT
Sale of Goods	Invoice	Invoice
Provision of Services	Official Receipt	Invoice
VAT Deduction Evidence	OR also acceptable	Invoice only

② Redefinition of VAT and Percentage Tax

After the implementation of the EOPT, the timing for recognizing VAT has been clarified. For service provision, the “date of invoice issuance” is treated as the tax base date instead of the “date of receipt of payment.” Similarly, Percentage Tax (applicable to non-VAT registrants) is now calculated based on invoices, which may result in the tax processing timing being brought forward.

Under the previous system, VAT for services was recognized on the “date of cash receipt,” but under the EOPT, the date of invoice issuance becomes the basis. The timing of invoice issuance now corresponds with the timing of VAT occurrence. Japanese companies that issued only ORs need to restructure their accounting system’s document settings and internal approval workflows. Additionally, VAT may be incurred even when payments are outstanding, which is an important consideration for cash flow management.

③ New Definitions of Taxpayer Classifications (Micro/Small/Medium/Large)

Under RMO 37-2024, taxpayer classifications based on revenue and number of employees have been updated. Specifically, they are subdivided as follows: Micro (₱3 million or less), Small (₱3 million–₱20 million), Medium (₱20 million–₱1 billion), and Large (over ₱1 billion), with each category having different filing frequencies, document formats, and audit thresholds.
Consequently, even for Japanese companies, EOPT-related practices may vary depending on their size.

④ Revision of the Penalty Framework

Previously, penalties for late or underreported filings were applied uniformly to all companies. Under RR 6-2024, penalties for micro and small taxpayers have been reduced. Conversely, higher fines are imposed for false declarations or intentional omissions.

Item	Before	After EOPT
Underreporting (as a percentage of the amount)	25%	10%
Late Payment Interest (annual rate)	20%	10%
Compromise	1,000~25,000 Peso	12,500 Peso or less

However, separate from the relief measures for micro and small taxpayers, in cases of “willful neglect” or “false or fraudulent” filings, a heavy penalty of 50% continues to apply, or the treatment remains equivalent to the pre-amendment rules.

⑤ Allowance for Deducting Costs from Withholding Tax Defaults

Previously, expenses for which withholding tax had not been deducted were not allowed as deductible expenses. With the implementation of the EOPT, such expenses can now be deducted under certain conditions. However, the withholding obligation itself is not waived, and penalties still apply in cases of nonpayment. Therefore, ensuring consistency between book deductions and withholding tax payments has become even more important.

Additionally, under the EOPT, the obligation to issue an Invoice is waived for transactions under ₱500. However, an Invoice must be issued if requested by the buyer. Furthermore, this threshold is explicitly stated to be reviewed every three years based on the inflation rate, so companies need to prepare for future automatic adjustments.

Practical Workflow for the Accounting Department in Response to the Mandatory Invoicing Requirement

Step 1 | Inventory of Supporting Documents and Conversion from ORs to Invoices

The first step is to check the inventory of unused Official Receipts. If there are printed ORs in stock, an “Inventory Report” must be submitted to the BIR, followed by either disposal or a final usage request.

Step 2 | Adjustment of Accounting System and Document Templates

Next, update the document layouts in your accounting software or ERP to comply with EOPT requirements. Pay special attention to mandatory Invoice fields, such as VAT classification (standard/zero/exempt), TIN format, and electronic signature fields.
If using the electronic invoicing system (eIS), updating the XML format for EOPT compliance may also be necessary.

Step 3 | Review of Internal Operations

Conduct training for accounting and sales staff on the new Invoice issuance workflow. Since the invoice issuance date determines the VAT recognition date, it is important to clearly define the sales → accounting → approval process and establish a double-check system.
When coordinating with the Japanese headquarters, it is also necessary to adjust the timeline between the monthly closing date and the invoice issuance date.

Step 4 | Verification of Filings and Registrations with the BIR

With the implementation of the EOPT, changes have occurred in taxpayer classifications and registration details at the BIR. First, verify your company’s registration category (Micro/Small/Medium/Large) at the RDO (Revenue District Office) and submit updates if necessary. It is also recommended to review access rights and authorized signatory registrations for eFPS and eBIRForms.

Common Pitfalls and How to Address Them

Timing of Service Revenue Recognition

For companies that recognized revenue based on delivery or acceptance, the earlier invoice issuance date may advance the timing of revenue and VAT recognition. For progress-based contracts, it may be necessary to revise contract terms so that invoice issuance aligns with milestones. It is important to distinguish by invoice date rather than payment date and to clearly define journal entry classifications in accounting.

Consistency with eIS and SLSP

Under the EOPT, the consistency between electronic invoices and the Summary List of Sales and Purchases (SLSP) is strictly monitored. If the issuance date, amount, TIN, or VAT rate do not match, the BIR may require discrepancy reports during an audit.
Implementing a system to automatically reconcile “Invoices vs. SLSP” on a monthly basis can help reduce this risk.

Industry- and Scheme-Specific “Pitfalls”

Manufacturing and Wholesale Industries

In manufacturing, frequent invoice adjustments occur due to returns, discounts, or free-of-charge supplies. Under the EOPT, new requirements for Credit/Debit Memos have been established, and failing to recalculate VAT during adjustments can create discrepancies.

BPO and IT Industries

In the BPO industry, many service transactions are conducted with overseas parent companies, requiring correct identification of the three scenarios: “zero-rated VAT,” “withholding tax exemption,” and “export of services.” Misclassifying these as domestic transactions can result in the risk of double VAT taxation.

SaaS, Advertising, and Cloud Service Fees

In cases where a Philippine subsidiary uses cloud services or advertising provided by its Japanese parent company, the determination of non-resident taxation (DST/VAT reverse charge) becomes complex. Whether the transaction is taxable must be assessed on an “economic substance” basis, so it is necessary to keep the contract, payment details, and the counterparty’s TIN together for record-keeping.

Conclusion

The EOPT Law represents a major reform, shifting accounting and tax practices in the Philippines toward an “invoice-based, transparency-focused” system.
For Japanese companies, this requires not only changes in invoice formats but also a comprehensive review of accounting timing, supporting document management, and internal approval workflows.

As highlighted in this article, it is recommended to start with the following three steps:

1. Check the inventory of Official Receipts and submit the required filings
2. Update invoice formats and the accounting system
3. Re-educate internal staff on VAT recognition timing and filing processes

If EOPT compliance is not fully implemented, the risk of a tax audit increases. If there is any uncertainty about your company’s preparedness, it is advisable to consult a professional accounting or tax advisor and undergo an EOPT compliance assessment.

✅ Key Takeaways from This Article

• Under the EOPT, invoices are now required for service transactions as well
• VAT is recognized based on the invoice issuance date
• The penalty framework has been made more flexible, but risks have also increased
• Practical compliance follows the sequence: inventory → system updates → staff training → filings

Tax reforms such as the EOPT Law involve numerous implementing regulations, and the new rules apply at different times from previous tax regulations. In particular, many local accounting firms have limited understanding, leading to incorrect tax processing, so Japanese companies are likely to face a high probability of findings during BIR audits.

As outlined above, it is crucial to understand the changes, work with accounting professionals to ensure proper compliance, and remain vigilant in responding appropriately to tax developments.
Our firm conducts monthly and quarterly accounting and tax reviews to verify that Japanese companies’ tax matters are being properly managed. Companies with any concerns are welcome to contact us.